All I want for Christmas is to shop online

Making an online purchase

As the holiday season descends, shoppers around the globe are prepping their gift checklists and mapping out where they can shop the best bargains.

According to the National Retail Federation’s annual survey conducted by Prosper Insights, 137.4 million, yes, million, Americans are planning to shop or considering shopping during Thanksgiving weekend. That is nearly six in 10 Americans.

What’s even more eye-opening is that those 137.4 million American consumers plan to spend an average of $935.58 during the holiday shopping season this year, with an average of $139.61 spent on themselves, up 4 percent from 2015 and marking the second-highest level of personal spending.

But with the crazy Thanksgiving and Black Friday shopping mayhem, are Americans willing to go out and possibly be trampled in actual brick-and-mortar stores, or will they turn their attention toward online shopping and Cyber Monday spending?

According to Nielsen’s 2016 holiday trend report, e-commerce retailers stand to benefit from shoppers’ continued affinity for online shopping because consumers across all generations are spending more online, and millennials are leading the way, with 25 percent of millennials planning to increase their online expenditures this holiday season. Overall, there is expected to be a 2 percentage point increase in online holiday shopping, up from 17 percent in 2015 to 19 percent in 2016. Jordan Rost, vice president of consumer insights at Nielsen, notes:

“With a growing appetite for all things digital, online platforms will have a more significant role in helping consumers both research and purchase gifts during this holiday season. Retailers take note, virtual environments present opportunities and unlimited growth potential for merchants — especially with the millennial, digital consumer.”

One thing that could put a damper on holiday spending is the presidential election. According to an analysis released Nov. 17 by Adobe Marketing Cloud, of 18.1 billion visits to retail websites, online sales rose 1.3 percent between Nov. 1 and Nov. 14, well under the 7.8 percent that had been forecast. Most of the decline happened after Republican Donald Trump’s upset victory over Democrat Hillary Clinton. By Adobe’s reckoning, businesses lost out on more than $800 million in sales. Tamara Gaffney, principal analyst and director at Adobe Digital Insights, notes:

“Instead of the expected 11 percent year-over-year increase, we expect growth to fall to single digits this year. Sales on Thanksgiving Day and Black Friday will be an important indicator of how much sales expectations need to be adjusted this shopping season.”

Here’s hoping turkey, dreidels and jingle bells get consumers in the holiday spirit, so sales are boosted and the economy is supported. I know I’m looking forward to shopping the deals from the comfort of my own home.

For more information on the rise in e-commerce and how it is affecting the industrial industry, see “The new retail” in the December issue of Institutional Real Estate Americas.


DenisewebfinalThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Denise DeChaine is special projects editor of Institutional Real Estate, Inc.

Where do interest rates go from here?

cherrytreesfederalreserveFed watching is a perennial pursuit for the commercial real estate industry: reading the tea leaves of the chair’s opaque statements and speculating whether the target federal funds rate will lifted, lowered or held steady.

Prior to last week, the consensus seemed to be for a 0.25 percent increase the target federal funds rate at the Federal Open Market Committee meeting in December, and perhaps one or two additional quarter-point increases in 2017. But that was before Donald Trump was elected president.

Now, Fed watchers are expecting a more inflationary environment (as a result of proposed fiscal stimulus plans), and that could mean additional rate increases in the year ahead. JLL notes, in its 2016 Election Impact report, some of the monetary policy implications of the election:

“The initial expectation was that a Trump victory would create more volatility and take the expected rate hike by the Fed in December off the table. However, if the markets remain stable, the Fed will instead focus on the underlying fundamentals of the economy (e.g. market at or near full employment, wage growth, stable pricing). There is some question about whether Federal Reserve Chair Janet Yellen will resign or be replaced given the new regime. Trump’s fiscal plan seems to point to a rise in the deficit, which could lead to higher inflation and interest rates expectations.”

While markets have remained stable in the wake of the unexpected election results, considerable policy uncertainty remains, and the potential for volatility is high. PGIM Real Estate’s report, U.S. Election Results and Implications for Americas Real Estate, points to four key adjustments to the status quo, with restrictive trade and immigration policies — building on Trump’s divisive campaign promises — as “likely to have a net negative impact on U.S. commercial real estate tenant and investor demand.” These would be partially mitigated by increased infrastructure spending and reduction in taxes. PGIM Real estate notes:

“While some of these policy shifts may be significant, it is unclear how strong Trump’s mandate is, and perhaps more importantly whether some of his policy priorities are shared with Congressional leaders in his party. This may prolong the policy uncertainty period well into next year and potentially longer, and possibly result in legislation that is mostly incremental rather than abrupt.”


LorettawebfinalThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Loretta Clodfelter is editor of Institutional Real Estate Americas.

North America is ready to build

CG-LA Infrastructure hosted its North American Infrastructure forum in Denver in October. The theme was Blueprint 2025, a working document that was developed before and during the event.

“Note that Blueprint 2025 is very different from think tank and other inside the beltway initiatives because the themes and 19 specific recommendations aren’t invented out of thin air, but are the results of your insights based on your experiences. It is inductive, from the ground up,” says Norman Anderson, CEO of CG/LA Infrastructure.

The Blueprint helped CG/LA and its conference guests develop several objectives, including:

  1. Make infrastructure a top three priority of the next U.S. administration.
  2. Double the level of infrastructure investment in the United States and invest in the right projects, increasingly including projects that will make a difference in our long-term competitiveness.
  3. Help policymakers to develop a sophisticated and practical understanding of infrastructure, especially at the beginning of the next administration.

CG/LA also released its eighth annual Strategic 100 North American Infrastructure report, which details the top 100 North American projects, including the top 10. The report notes:

“In moving to specific country trends, one notes how average project value has remained relatively consistent in Canada while witnessing major increases in both Mexico and the United States. This in part reflects the effects of lower oil and gas prices, which has affected the short-term financial viability of some of Canada’s most expansive (and expensive) projects. While much has been made by both presidential candidates in the recent election about the poor state of infrastructure in the United States, total project value has increased by around 50 percent from last year.”


DrewWebsiteThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Drew Campbell is senior editor of Institutional Investing in Infrastructure.

Can’t beat ’em? Ban ’em

If you need a room in the Big Apple, no worries — its plentitude of hotels range from the fabulously expensive and sumptuous to the economical and utilitarian. After all, New York City attracts about 50 million visitors per year and has about 100,000 hotel rooms to accommodate them, and many more slated for construction. That’s not counting the additional 35,000 properties available for rent through Airbnb, which counts the city as its largest market.

Now we can rephrase that statement in past tense after New York Gov. Andrew Cuomo ratified a law that levies major fines on those who do business with Airbnb.

The political power of the city hotel business is manifest. Hoteliers have seen the statistics: Airbnb users spent $2.4 billion on U.S. lodging during 2015, and no doubt much of that money otherwise would have gone to hotel coffers.

Rent your New York City residence via Airbnb and get slapped with a $1,000 fine if you’re a first-time offender. Do it a second time, and you owe the city five grand. Recidivism gets even more expensive, with a fine of $7,500 for third and ensuing offenses.

It’s not that you absolutely cannot do business with Airbnb, but the strictures applied to renting your living space are so limiting that the new legislation will effectively gut Airbnb’s operations there. The law specifically targets short-term rentals, which it defines as lease deals of less than 30 days, which is Airbnb’s meat and potatoes. People can list spaces for rent for less than 30 days only if they’re also living or staying on the premises during the visitors’ stay. Not exactly an optimal situation for either party.

New York City put these rules into effect in 2011, but the law had no real enforcement mechanism. The new law gives government the power to flog violators’ bank accounts.

Airbnb reportedly offered a list of concessions to the state in an effort to head off the law, but got brushed aside in what it claims was “backroom dealing.”

Airbnb has threatened to sue. In the meantime, there will be lots of room at the Airbnb inns in New York.


MikeCfinalwebThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Mike Consol is editor of Real Assets Adviser.

The demographics reshaping communities

Rising numbers of female executives, affluent immigrants, younger and older workers, and retirees will have a huge influence on community building in the United States over the next 10 years, according to a new Urban Land Institute report, Demographic Strategies for Real Estate by John Burns Real Estate Consulting LLC.

Being able to accurately predict how and where people will want to live and work in upcoming years is critical real estate investing success. The report states, “actionable intelligence on the ways American society is evolving is critical for real estate decision makers in all areas of the business.” Demographic trends will affect real estate investment and development through the next 10 years and are what real estate investors need to be keeping an eye on.

According to the report, these demographic drivers present beneficial opportunities for real estate professionals:

  • The continued rise of working women — Women now earn 58 percent of all college degrees in the country, and 38 percent of the time earn more than their spouses. By 2025, the number of women in the workforce will rise to 78 million, 8 million above the level in 2015.
  • A rising number of affluent immigrants — Immigration will account for more than half the U.S. population growth by 2025, assuming current trends continue. Contrary to some perceptions, many immigrants coming to the U.S. are highly educated middle- and upper-class families with substantial purchasing power.
  • The graying of America — By 2025, 66 million Americans will be over age 65, which is 38 percent more than in 2015. This will create lucrative opportunities for customer segmentation, given the widely varied needs and lifestyles of younger retirees versus older ones. The outpouring of retirees also will create more opportunities for workers, increasing incomes for many occupations.
  • Young adults driving household formation — 44 million 18- to 27-year-olds born in the 1990s will lead the majority of new household growth over the next decade, despite forming households more slowly than their predecessors. They are expected to create 14 million households by 2025.

In terms of land use and development, the report predicts the suburbs will draw about 79 percent of the coming wave of new households, despite the continued revival of urban downtowns, as younger individuals seek more communities that combine the best of urban and suburban living. Many will choose to rent rather than own homes, pushing up demand for single-family rentals in particular.


jody-webThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Jody Barhanovich is a reporter with Institutional Real Estate, Inc.

A different type of medical property

Innovative Industrial Properties has filed with the SEC to sell 8.75 million shares of common stock in an IPO with an expected initial public offering price of $20 per share. In addition, the REIT has applied to be listed on the New York Stock Exchange under the symbol IIPR. As one might expect with a such a firm, the REIT has an experienced management team, who previously were part of the management teams of BioMed Realty Trust and Alexandria Real Estate Equities.

So far, so expected. But, as the IPO filing notes:

“Innovative Industrial Properties, Inc. is a newly-formed, self-advised Maryland corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities.”

Is this the first REIT focused on the medical marijuana real estate market?

Considering that marijuana — even for medical use — remains illegal under federal law (despite a patchwork of legalizations in more than half of the states), a review of the risk factors outlined in the Form S-11 shows a mix of factors both general and specific. For example, the following is the sort of boilerplate that one might find in any IPO:

“We were recently formed and have no operating history and may not be able to operate our business successfully, or generate sufficient revenue to make or sustain distributions to our stockholders.”

While this is perhaps a bit more specific to Innovative Industrial Properties’ niche market:

“Current favorable state laws relating to cultivation and production of medical-use cannabis may be modified or eliminated in the future, and new laws that are adverse to the business of our tenants may be enacted.”

And this should raise concerns for investors, as real estate typically uses rather a lot of financing:

“We and our tenants may have difficulty accessing the service of banks, which may make it difficult to contract for real estate needs.”

Despite the risks, there may be a lot of potential investors who are interested in getting in on the ground floor, so to speak, of the multibillion-dollar cannabis industry. But I expect institutional real estate investors are likely to keep their distance.


LorettawebfinalThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Loretta Clodfelter is editor of Institutional Real Estate Americas.

Buyer beware

hugh-hefner-playboy-mansion

Commercial property fundamentals in the United States remain strong for the most part, although gains are moderating. That’s encouraging. Transaction volume has slowed compared with 2015’s high-water mark, but the amount of capital chasing quality assets continues to grow, fueled by increasing interest from cross-border investors. Fierce competition has resulted in record sale prices in many markets for most property types. Despite the frothy prices, the allure of real estate’s relatively high yield in today’s low interest rate environment is hard to resist.

The U.S. housing market also continues to heat up — home prices across the country have recovered and some major markets are seeing record deals.

For the past few years, headlines about record-setting transactions have become common. Whether it’s a penthouse apartment in Manhattan, a hotel property in Chicago, an office tower in Dallas or Hugh Hefner’s Playboy Mansion in Southern California, the real estate market is producing some eye-popping prices.

Recent headline grabbing, record-setting deals include:

  • Last year, The Blackstone Group acquired Chicago’s Willis Tower for $1.3 billion, the highest price ever paid for a U.S. office property outside of New York City.
  • Also in 2015, Hong Kong–based Gaw Capital Partners purchased the tallest skyscraper in the Pacific Northwest, Seattle’s 76-story Columbia Center, for $711 million, the highest price paid in a single-asset deal in the region’s history.
  • On the residential side, a penthouse apartment on 57th Street in Manhattan set a new record when it sold for more than $100 million in early 2015.
  • 2015 also saw the most expensive hotel transaction in New York City’s history, on a per-room basis, with the $230 million sale of the 114-room Baccarat Hotel (more than $2 million per room).
  • In April 2016, German investment manager Union Investment Real Estate paid $315 million for the 452-room LondonHouse, a boutique hotel on Chicago’s North Michigan Avenue. The $697,000 per room was the highest unit price ever paid for a hotel property in the Windy City.
  • Union Investment made another big splash earlier this year, acquiring the 17-story, 440,000-square-foot Seaport office tower in Boston for $452 million, establishing a per-square-foot record of $1,027.
  • In August, SL Green Realty Corp. sold a 40 percent stake in Manhattan’s 11 Madison Ave. to PGIM Real Estate that values the office tower at $2.6 billion. SL Green acquired the 2.3 million-square-foot property in 2015 for a record $2.29 billion.
  • In Dallas’ booming Uptown district, local real estate firm Gaedeke Group acquired 17Seventeen McKinney office property for a record $510 per square foot, a total price tag of more than $185 million for the 19-story, 361,000-square-foot high-rise.
  • Just recently, the 1,523-unit Breakers Resort apartment community in Denver sold for a record price of approximately $350 million.
  • And Hef’s storied Playboy Mansion found a buyer this summer, selling for a Los Angeles County record of $105 million. (In case you are wondering, a condition of the sale was that the 90-year-old Hefner would be allowed to remain at the residence for the remainder of his life.)

Bottom line: It’s a good time to be a seller.


LarryFinalwebv2The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Larry Gray is editorial director of Institutional Real Estate, Inc.

A new way to use Skype

As many of you know, Institutional Real Estate, Inc. started conducting video interviews at our board meetings and conferences back in the beginning of 2013 to provide another platform for sharing industry insights and analysis.

Now, in addition to those videos, we have started to interview industry professionals via Skype, similar to what you see in mainstream media. This allows us to provide viewers with timely commentary and analysis at a more frequent rate.

In our latest video, Richard Kleinman, managing director of research and strategy and LaSalle Investment Management, discusses the current state of the U.S. marketplace.

Enjoy!


DenisewebfinalThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Denise DeChaine is special projects editor and video production specialist of Institutional Real Estate, Inc.

Positioning your message, positioning your fund

Real estate investment managers can learn a lesson from the use of music in television commercials when developing a strategy to bring a new fund to market.

For example, it is not uncommon to watch television or listen to the radio (for those of us who still do that) and hear an old song that accompanies the merchandise being marketed. The purpose of choosing these “oldies” is to connect us with a time we consider nostalgic and bring us back to our respective youthful times. It’s a tried and true method of creating a mood in the 30 to 60 seconds of airtime that have been purchased.

However, so often when listening to the music soundtracks and the products offered at the moment, the messages can often be classified as mixed at best and completely off the wall at the worst.

Two companies whose musical choices create the biggest question marks are Royal Caribbean Cruise Lines, which chose “Lust for Life” by Iggy Pop for an entire campaign a few years ago, and automobile manufacturer Kia, which recently chose “Dueling Banjos” by Eric Weissberg for its Kia Soul line.

As a reminder, the Iggy Pop punk classic refers to drug use, liquor and many physical acts that some may consider inappropriate, especially when promoting a family cruise vacation. And “Dueling Banjos” gained huge popularity as the main theme for the very dark 1970s canoe and camping trip movie Deliverance. (Nothing more needs to be said about this particular contribution to the wonders of cinema.)

One might ask, how does this happen? Who is control of matching this music to what may be considered wholesome family fare? My guess is the creative teams at these company’s advertising agencies were only children sitting in the backseats of their parent’s cars, remembering these songs but having absolutely no recollection of what they’re connected to.

This is something to think about when positioning your fund strategy when attempting to connect with your audience. One question to ask is, “Who in our organization has a true understanding of our product line? And who understands how to bring this message forward? Is this person or team able to succinctly describe that message to marketing and public relations professionals, whether internal or external?” In truth, it’s not an easy task at all.

There are certainly examples of funds that got hammered by the global financial crisis, and quite possibly properties from these funds might end up in your brochure a few years from now because the marketing team didn’t do their proper research when developing the creative collateral materials for the new strategy.

Innocent enough, yet this is where keeping your eyes and ears on the marketing message can get completely lost. You rarely get a second chance to capture a potential customer’s buy-in, and not being completely clear about your message can do immeasurable damage to your brand.

A company needs to be on point in all aspects of its message and the medium it is using to get this message across. Without it, you might find yourself at the end of a very bad camping trip, or worse.


Jonathan_Schein-NEWThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Jonathan Schein is senior vice president and managing director of global business development at Institutional Real Estate, Inc.

Guess which esteemed Big Apple address is suffering corporate defections

Park Avenue, New York

A series of upcoming departures by some of Park Avenue’s largest office occupants has real estate observers wondering if New York City’s premiere business address is losing its luster. Citigroup and Major League Baseball are moving, and the giant investment firm BlackRock is weighing an exit in the coming years, according to a report in Crain’s New York Business. Those moves and several others could leave more than 2 million square feet vacant, almost 10 percent of Park Avenue’s office market, as defined by its expanse between East 45th to East 59th streets. Mary Ann Tighe, CEO of CBRE’s New York office told Crain’s:

“We’ve always looked at Park Avenue as the No. 1 location for office space in all of Manhattan. But what you’re seeing is a migration to newer product. The age of these buildings is catching up to them.”

If you want to know more, click here for the full article.


MikeCfinalwebThe views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.

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Mike Consol is editor of Real Assets Adviser.