Race for Amazon HQ2 Narrows; Questions Arise

Atlanta is seen as a favorite for Amazon HQ2 given its low cost of living and strong talent pool.

Jan. 29, 2018

The race is still on for the Amazon HQ2 project — a potential $5 billion construction bonanza that would bring 50,000 jobs. After 238 cities and regions in 54 locations (US and Toronto) submitted bids, Amazon recently announced the short list of 20 cities still in the running.

Before we get to the finalists, let’s take a look at some contrarian views coming out:

It’s all a sham, as the Washington, D.C. area (which has 3 finalists) has already been chosen, according to a recent Bisnow story.  The story points to Amazon founder Jeff Bezos’ new mega-mansion in the area as the critical link to those sites. Executives do like to live near their offices, after all.

Others say it could all be a publicity stunt by Amazon. Look at all the good publicity and the scramble by government officials to appease Amazon.com. See more on that at axios.com.

Time will tell where the Amazon HQ2 goes and what the motivates are. Meantime, the official list of contenders includes Atlanta, Austin, Boston, Chicago, Columbus, Dallas, Denver, Indianapolis, L.A., …and several others. Here are a few snapshots of those that made the cut:

Atlanta

This southern city with $5.8M residents is considered a top contender due to its cost of living, strong talent pool and access to the world’s busiest airport. Traffic was cited as one negative issue, however.

This is how a Chicago Amazon HQ2 might look. Image from Goettsch Partners.

Chicago

Chicago made the cut and here’s what is pushing the city ahead, according to this Bisnow story. The proposal included 10 sites, many with large land areas for development. From Lincoln Yards to the old Michael Reese Hospital site to 700 W. Chicago (pictured here), the city proposal includes many land masses.

The incentives package included about $2B. One frontrunner, according to the story, is the old Chicago Tribune printing plant in River West, as it would connect downtown, River North, the Fulton Market and other neighborhoods.

 

Dallas

Dallas and Fort Worth are gaining attention for their strong supply of tech talent. And, the cost of living is much lower than other tech hubs, such as New York or San Francisco.

Columbus and Nashville are in, but neither has a major airports, which seems like a liability.

For a detailed look at which cities made the list — and why — see this money.com story.

Office REIT Movement and Other Commercial Real Estate Updates

January 15, 2018

Here’s a quick look at what’s going on in commercial real estate news, along with the retail and industrial sectors.

Office REITs Moving Away From Acquisitions

According to National Real Estate Investor, some office REITs are shying away from acquisitions for 2018. Citing rising interest rates as a factor, the story notes that REITs will now be focusing more on development opportunities. Another factor at play is the shortage of high quality commercial real estate assets in some markets — given the strong investment cycle over the past several years and the desire by institutional investors to hold on for a longer term.

New York Investor Likes Chicago’s Uptown

Chicago’s Uptown neighborhood, with its growing transit-oriented-development corridor, has caught the eye of

Image from Great Global Holdings, which acquired the retail holdings in this Uptown development.

a New York investor, reports Bisnow. Great Global Holdings paid $8.9 M of the retail portion of the Wilson Yards mixed-use development. This is the firm’s fifth Chicago retail acquisition. What’s driving this activity?

Click here for more.

Amazon HQs Update: Residents Look Beyond Economic Stats

The race to lure the Amazon HQ2 continues, with more than 200 locations across North America vying for this prize. According to this Business Insider story, some residents are worrying about the problems associated with adding up to 50K employee into one area. Traffic, souring housing prices…you name it. Check out the story for more on who’s in the running and what this all could mean in terms of economic growth.

Grocery Anchored Centers Losing Luster?

Image courtesy of REJournals.com

Once the darling of the commercial real estate investment world, grocery anchored shopping centers are losing some of their luster, reports rejournals.com. Citing research from Morningstar Credit Ratings, the story details how the food buying landscape is changing. While grocery stores that offered a full line of goods and has at least $2 M in annual sales were once considered “e-commerce resistant,” that appears to be changing.

How will this play out for investors in 2018? Stay tuned!

 

Amazon HQ2 focus: real estate, tech talent

Amazon image

Real estate and tech talent are key for Amazon in its HQ search.

October 2017

The commercial real estate industry is abuzz as bids were submitted for the hometown of Amazon’s HQ2, a 50,000-employee, $5 billion second headquarters. With more than 50 cities in the U.S. and Canada vying for the company’s attention, competition is fierce, with some cities getting creative to make their case.

According to this Bisnow article, Tucson, Arizona, sent Amazon a 21-foot cactus to remind the company of the city’s growth and resiliency while Stonecrest, Georgia, offered to change its name to Amazon.

Where’s the Best Real Estate and Tech Talent?

While the right commercial real estate is important, Amazon is looking for a city that will attract young talent, a city with good connectivity, and a city that will offer tax incentives. Along with those requirements, the company will potentially bring 50,000 people, along with their spouses and children, to the city, raising the need for housing, schools and retail—and hoping the city can keep up. Here’s a recap of some of the pitches:

Multifamily predictions

Atlanta

Atlanta is pitching several sites including real estate along the Atlanta Beltline, GID’s High Street site in the Central Perimeter, the Gulch in downtown Atlanta, Integral Development’s Assembly Project, the former GM plant in Doraville and the redevelopment of Fort McPherson.

Baltimore feels that its Port Covington, home to UnderArmor’s headquarters on Sagamore Development’s property, is a good choice for Amazon, especially as it may see a transit stop in the near future. And, several Bay Area cities have teamed up to put in a bid for the 5,000-acre Concord Naval Weapons Station, which is within 45 minutes of an airport, has two nearby BART stations and convenient highway access. Also:

  • Boston has proposed its Seaport neighborhood as the Amazon HQ2 site and has committed to building a $100 million cable-operated gondola system to shuttle Amazon employees to work.
  • Brooklyn real estate developers are highlighting their neighborhood’s tech talent and proposing Industry City, a massive complex of former industrial buildings, for the project, which will eventually need to be 8 million square feet. 

Could Chicago land Amazon?

In the Midwest, Chicago’s Old Main Post Office is currently the largest redevelopment in the U.S. at 2.8 million square feet and offers 250,000 square foot floor plates just steps from the Loop. Here’s more on that Amazon proposal.

And, if the U.S. sites are not the answer, Amazon can always go a little north. Teaming up with its Canadian neighbor, Windsor, Ontario could mean an international headquarters in Detroit.

Which city the internet retail giant will choose will remain a mystery for a while longer, but the promise of such a major real estate development has brought out each city’s competitive side over the past several months.

Commercial Real Estate Trends for 2017

Commercial Real Estate Trends for 2017

The commercial real estate industry has been on a strong cycle for several years. The big question is: How long will it continue? The latest Emerging Trends Report by PWC (PricewaterhouseCoopers) and the Urban Land Institute, has the long view on the market. Here’s the latest.

The Strong Investment Sectors for 2017?

pjp_interior-industrial-center

Supply chain and e-commerce growth continues to drive Industrial real estate leasing and investment.

Industrial — continues to top the charts, due to the growth in e-commerce and the general supply chain.  Well located, institutional quality distribution space has been in short supply for several years across the country. While new construction has been strong, it will take time to lease and sell the buildings and, thus, fill all the demand. Bottom line: investors like the stability and long-term growth of this sector and will continue to seek strong assets in primary, secondary and even outlying markets.

Senior Housing/Retirement Homes — these will continue to be in favor, due to the aging population and need for community residences and related services.

 

oakland-urban-retail-centerUrban Mixed-Use Developments — these vibrant, urban developments that combines residential, retail, offices and more continue to draw Millennials and Baby Boomers alike — and should guide development going into 2017 and beyond.

The Emerging Trends report also predicts:

nyc skyline

Global commercial real estate should be stable in 2017

More stability in market cycles — Look for less volatility, as lessons learned from the global financial meltdown will guide decisions moving forward. While construction still lags during this post-recession era, it should continue at a tempered pace.

Multi-Use– or “Optionality” is in — the trend toward developers and investors seeking flexible, multi-use projects. In this commercial real estate market, buildings that can be adjusted to satisfy multiple tenants and changing neighborhoods are ideal. It lets owners maximize rents and seek the highest and best use.Bisnow multifamily yardi

Construction costs to rise due to labor issues — Workers who left during the recession have been slow to return, slowing production and increasing costs. With vacancy rates at record lows in many markets, construction has been a big factor in filling long-term demand. Without an adequate number of workers, costs will rise.

Cap rates could go lower in 2017 — As investors continue to chase deals and limited supply and tempered construction present continued challenges.

 

 

What’s Behind Manhattan Land Sales Slowdown?

What’s Behind Manhattan Land Sales Slowdown?

According to The Real Deal, Manhattan land sales slowed during the first part of 2016.  Data and analytics firm Real Capital Analytics (RCA) shows that there were only $90 million worth of development deals in January and zero on record in February. Land sales slow

What’s going on? Looks like three main factors are at play–stringent financing, lackluster luxury condo sales and the termination of the 421a tax abatement program. Another key factor is that buyers are not willing to pay the high prices sellers are touting. This is having a ripply effect on development sites. Click here for more.

(Somewhat) Affordable Housing

(Somewhat) Affordable Housing

March 2016Affordable housing

Nearly every day, we hear news of a new high-end apartment complex being built in a major metropolitan area. But new construction with lots of amenities is not what every renter is looking for, says David Schwartz, CEO and co-chairman of Waterton. His investment firm has spent much of the last few years looking for Class B and Class C value-add apartment properties, and renovating them for middle-income renters seeking affordable housing.

Industry experts see more of this from private investors on the horizon.

One current project for Waterton is the Vida Hollywood, a 25-year-old apartment complex in Hollywood, California. The company is renovating its 345 units, but rents in the building will still remain about $800 less than they would be at a Class-A building in the same area.

Barbara Byrne Denham, an economist with New York City research firm Reis, Inc., urges redevelopers not to interfere with Class B and Class C apartment buildings that are already fully occupied. In areas with high job growth and salaries to match, the existing renters might pay the higher prices to live in the renovated building. But in areas where people are just staying stable in their careers, the tenants looking for affordable housing might move out.

What should they do instead? And, what are investors chasing? Click here for more.

Origin Investments Hits it Big with $35M Sale of Lux24

Origin Investments Hits it Big with $35M Sale of Lux24

Origin Investments

March 2016

Origin Investments and Randolph Street Realty Capital hit it big for investors this week with the $35 million sale of Lux24, a 73-unit condominium project they repositioned after the condo meltdown.

The JV purchased the project out of bankruptcy in 2013, after its original developers ran into financial troubles. With a $19 million total investment, the team converted the property at 24 S. Morgan into a rental building, tapping into the hot downtown apartment market and the West Loop’s revitalization.

As reported in Crain’s, the team invested about $2.3 million to finish construction, reconfigure unfinished units, and move the fitness center. They also bought back a few condos that had been sold and leased up the ground floor retail space.

This project shows:

  • Buying right is important, but creatively repackaging an asset can help create tremendous value
  • Timing is everything and a great location doesn’t hurt
  • The West Loop/Fulton Market just keeps on going
Ryan Companies Closes on Land in Prime Chicago Suburb

Ryan Companies Closes on Land in Prime Chicago Suburb

February 2016

Ryan Companies

The office market in Oak Brook is in high demand.

Ryan Companies is making a splash in a highly valued suburban Chicago office market.

GlobeSt.com has all the details of the Minneapolis-based CRE firm’s purchase of 11 acres at the I-88/I-294 interchange in Oak Brook. Plans call for a combined office and medical campus complete with structured parking.

As Tim Hennelly, president of Ryan’s Great Lakes region, told GlobeSt., “This acquisition continues our strategic approach for Ryan to be a leader in delivering complex, signature developments in proven markets and asset classes throughout the Chicago metropolitan area.”

Location is a key part of the transaction, which proves there are still strong suburban markets capable of attracting development. Vacancy rates for class A properties in Oak Brook are low (per NAI Hiffman’s year-end office market report), making the type of office space Ryan plans to develop extremely attractive.

2016 Outlook: Hotel Market Nears Peak

2016 Outlook: Hotel Market Nears Peak

What’s Ahead for Hotel Construction?

The new Four Seasons hotel in Fort Lauderdale is slated for completion in 2018

The new Four Seasons hotel in Fort Lauderdale is slated for completion in 2018

Hotel occupancy, construction and sales are approaching peak levels and 2016 could be the last strong year for this expansion cycle. Recent analysis from Marcus & Millichap and JLL provides these details:

  • Room occupancy rates are near an all time high, reaching 65.6 percent by December 2015, says a recent Marcus & Millichap report.
  • Room rents are on the rise, increasing 5.2% to $120.99 on average. With more tourists and business travelers occupying rooms, owners and investors are enjoying an average revenue per available room of $80. So, of course, an increase in interest is sparking near-record levels of new construction.
  • Hotel sector capital markets also remained strong, with global hotel deal volume rising by 10 percent to nearly $60 billion in 2014, says JLL. Both Wall Street and Main Street are currently lending on hotels and transaction volumes could reach $68 million in 2015. See JLL’s Hotel Investment Outlook Report for more.

Caution for investors

Analysts are also warning investors to think ahead when building new hotels: assets that takes three years to build could open after the demand for hotels starts to drop again. As a result, developers are focusing on select service hotels that are less expensive and faster to build than full-service hotels:

  • Courtyard by Marriott
  • Holiday Inn
  • Hampton Inn

These service hotels are making up a good portion of the 4,038 projects currently under construction, which will bring 507,221 new hotel rooms on the market in 2016. That may seem like a lot, but it’s a far cry from the 5,883 new hotels that came online in 2008. Also, cross-border transactions should account for one-third of deals in 2015, with the U.S., China, Singapore and the Middle East as the biggest capital exporters.

Millennials Are Shaping Multifamily, Office

Millennials Are Shaping Multifamily, Office

Atlanta

Strong multifamily growth supported by urbanization and continued job growth. Atlanta is reflecting the national trend of city migration. Millennials desire long-term renting in the city with access to trendy amenities and nearby city entertainment, and Baby-boomers are following suit. According to a CBRE report, the apartment vacancy rate is 4.8% with a home-ownership rate of 63.4%–the lowest since 1967.  Popular Atlanta submarkets for Millennials and other renters include Buckhead, Midtown, Old Fourth Ward, and Inman Park. Find out more here

Millennials are a target for this Buckhead development in Atlanta

Find out more on this Buckhead multifamily development. 

Orange County

Next-generation office developments are the trend in city centers like Orange County.

Irvine Co. is developing six next-generation office structures. Nicknamed “next-gen” office buildings, these developments intend to balance productivity and efficiency along with modern collaborative features in the workplace—features including cafes, wellness-centers, and other indoor and outdoor activities. The developers say the campuses they are building are not totally unlike college campuses. The “amenities race” is not limited to multifamily. Check it out in this office development story.

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