Newswatch 7/27

Commercial Real Estate’s Digital Disruption

Digital start-ups have yet to make a substantial impact in the Commercial Real Estate Market, but these firms are clearly making headway in the residential housing world, so CRE early adopters will gain a significant advantage over competitors.

One need only look at Rocket Mortgage, Ten-X, Zillow, and others to see that buying properties on the internet is quickly becoming a reality. And no doubt each one of these particular applications is greatly expanding the market reach to interested parties, and in many cases is also expanding the visibility of the associated real estate and mortgage brokers beyond historical forms of local media.

Is Commercial Real Estate next?

“The CRE industry has been less receptive to technology than the residential or banking side of the business,” says Situs CEO Steve Powel. “There are clearly some efficiencies to gain, but the commercial real estate industry in general has not invested in technology at the level of other industry sectors.”

For example, says Situs’ Powel, “In the CRE lending space, there are a number of loan underwriting systems (LOS) that have been developed over the past 10 years. Most of LOS have been targeted at one lending group or another (i.e. GSEs, Portfolio and/or CMBS); however, others have focused on multiple lending strategies, realizing that banks typically offer multiple financing options. Regardless of the loan execution type, these lenders are faced with similar risk modeling and regulatory reporting requirements that have becoming infinitely more efficient with the implementation of LOS systems, such as CLOSERTM, Rockport and BackshopTM.

Further, many of these LOSs have built front-end user interfaces that allow borrowers to access their lender customer bases, similar to what Lending Tree did in the residential space. And they have expanded functionality to support asset management and surveillance activities through the ‘full-life cycle of the loan’. Situs has worked with lenders on system selection, because efficiency gains are enumerable, significantly reducing underwriting, processing and reporting time, which results in real savings for the lenders.”

“Despite the proceeding, what is going to have more impact on the CRE lending space, especially in the short-term, is the adoption of a set of data standards, such as MISMO (Mortgage Industry Standards Maintenance Organization), the standards development body sponsored by the Mortgage Bankers Association,  …full disclosure I’m directly involved in MISMO,” adds Powel.

MISMO standards, which are voluntary to follow,  are intended to reduce processing costs, increase transparency and boost investor confidence in mortgages as an asset class, while creating cost savings for the consumer.

LOS systems are driving process efficiencies in the CRE finance industry, where the benefits are clear to the participants.  As others learn more about the benefits of data standardization efforts such as MISMO, it is easy to see how other sectors of the CRE industry will benefit.

Brexit Bill of $66,000 per U.K. Employee Moved Abroad

The cost for banks wanting to move their U.K. staff abroad after Britain decided to leave the European Union is 50,000 pounds ($65,660) per employee, according to consulting firm Synechron Inc.

Synechron’s analysis, which was published Monday, included the cost of relocating staff, hiring and firing other employees and setting up new offices in cities that could include Amsterdam, Dublin, Paris or Frankfurt.

Executives at Citigroup Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc have all said that Brexit would require them to relocate employees to the continent to maintain unfettered access to the EU’s single market. If JPMorgan Chase & Co.’s Jamie Dimon follows through on his warning that as many as 4,000 staff may need to depart Britain, that could cost the U.S. bank as much as 200 million pounds.

The cost for banks wanting to move their U.K. staff abroad after Britain decided to leave the European Union is 50,000 pounds ($65,660) per employee, according to consulting firm Synechron Inc.

Synechron’s analysis, which was published Monday, included the cost of relocating staff, hiring and firing other employees and setting up new offices in cities that could include Amsterdam, Dublin, Paris or Frankfurt.

Executives at Citigroup Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc have all said that Brexit would require them to relocate employees to the continent to maintain unfettered access to the EU’s single market. If JPMorgan Chase & Co.’s Jamie Dimon follows through on his warning that as many as 4,000 staff may need to depart Britain, that could cost the U.S. bank as much as 200 million pounds.

read more: http://www.bloomberg.com/news/articles/2016-07-25/banks-face-brexit-bill-of-66-000-per-u-k-employee-moved-abroad

Why the WTC Mall Could Look Like a Ghost Town on Opening Day

When Westfield Corp. signed a deal in 2012 to create a glistening new shopping center in the belly of Santiago Calatrava’s $4 billion World Trade Center transit hub, co-CEO Peter Lowy promised that the Australian developer would sign world-class tenants and create a new standard for retail in New York City.

“We’re going to do something that no one can imagine,” Lowy said.

But as the World Trade Center Mall buzzes with the sounds of jackhammers and saws, at least four retailers have already walked away from their leases and a number of other shops won’t be open for business by mid-August.

Such a scenario would slice into Westfield’s profits during a critical stage of development and could give rise to the belief that the project won’t be a success.

“If a large percentage of the center doesn’t open, there’s a good likelihood there will be less traffic, which means less business and less sales,” said one source familiar with the way operators like Westfield TRData LogoTINY negotiate their leases. “If a tenant is promised 85-percent occupancy when the mall opens, and you only have 60 percent or 70 percent, [the tenant] is only going to pay a percentage of their business and not the base rent.”

A representative for Westfield declined to comment.

read more: http://therealdeal.com/2016/07/25/why-the-wtc-mall-could-look-like-a-ghost-town-on-opening-day/

WeWork Ups Broker Commissions to Extend Real Estate Reach

As WeWork reportedly takes steps to cut costs amid weakening financials, the coworking giant has launched a broker referral program to entice brokers to bring clients to sign leases at one of WeWork’s 87 spaces in the U.S. and the U.K.

With the week-old program, WeWork has already attracted brokers from firms like CBRE, Cushman & Wakefield and London-based Instant Offices.

Brokers, who traditionally work on commission, can now get a 10 percent take from WeWork for bringing in a tenant that signs a one-year lease. That payment is made upfront. Under the new program, brokers can get paid for renewals and expansions, depending on the type of tenant. Finally, WeWork will pay brokers a 2 percent commission, on a monthly basis, for deals up to three years long, from month 13 to 36.

read more: https://commercialobserver.com/2016/07/wework-ups-broker-commissions-to-extend-real-estate-reach/

‘Whole Foods Effect’ Shines On

The surge in health-conscious retailers is evident wherever one shops. In the space of a few years, the likes of Lululemon, Fresh Market, and Orangetheory Fitness have proliferated in shopping centers. But Whole Foods, arguably a chief driver of the trend, has transformed its own business as well as that of centers.

 In the past five years, Whole Foods increased its store count nearly 50% to a total of 450 in three countries. The $15 billion juggernaut of organic food shows no signs of slowing, nor do competitors such as Sprouts and Trader Joes. Whole Foods’ growth has helped forge a value proposition that is reshaping the commercial real estate market. People who once came to a shopping center simply to shop today come to spin, to eat better foods, or to learn how their dog food affects the environment. 

 The result has been a surge in health-conscious retail real estate, with tenants spanning grocery, restaurants, fitness concepts, and pet stores. It’s a trend peopled by educated and accelerated Millennials who are acutely conscious of what goes in and on their bodies and the effects those products have on the earth. Not to be forgotten are Baby Boomers, who are getting older and more health-conscious, too. 

read more: http://www.chainstoreage.com/article/whole-foods-effect-shines

Food is Ruling Real Estate, Watch out for Food Trucks

or the first time nearly two decades, restaurant sales surpassed supermarket sales last year. The turnaround is now showing up in retail real estate, as landlords seek to not only profit from the new normal, but reinvent the now-suffering retail mall. E-commerce may be driving consumers away from shopping centers, but food is pulling them back in.

“It changes the landscape of retail real estate fundamentally, because what we have is a really fundamental shift in the different categories that are performing well and those that are struggling,” said Melina Cordero, CBRE’s head of retail research in the Americas. “With restaurants that are coming in with strong, high growth, they’re sort of the saving grace for landlords of these retail spaces to come in and drive traffic and sales.”

Landlords are doing this in four distinct categories, cited in a new CBRE report: Food trucks, ‘grocerants,’ food halls and celebrity chef restaurants. While food trucks are mobile and don’t necessarily pay rent, they are an estimated $2.7 billion business, and landlords are starting to make deals with vendors, even creating food courts at the mall out of the trucks.

“Food trucks are basically the pop-ups of the restaurant business. They come in, they can set up, low cost, and they’re constantly changing,” said Cordero, who emphasizes the high demand from consumers for diverse food options.

read more: http://www.cnbc.com/2016/07/22/food-is-ruling-retail-real-estate-and-food-trucks-are-moving-in.html

Mall of the Future Will Offer Dinner, Movies, and a Colonoscopy

The Runway at Playa Vista in Los Angeles recently added a Whole Foods, a movie theater, and upscale shops and restaurants—retail center staples intended to attract affluent shoppers, condo-buyers, and tech companies to the mixed-use development. The next big tenant slated to move in, however, is a little different: A 32,000-square-foot doctors’ office, where the Cedars-Sinai Health System plans to house outpatient services, including cardiology and orthopedics.

While urgent-care centers have been strip-mall staples for decades, the chance to catch dinner, a movie, and a surgical procedure under the same roof is new—and coming soon to a mall near you. The reason is commerce: Mall operators are looking for tenants that trade in entertainment and services to replace the brick-and-mortar retailers slowly being strangled by Amazon.com and its online competitors. Rents, particularly at older malls, are a bargain. 

The health-care industry, meanwhile, is moving away from centralized campuses to bring services closer to patients at a time when two key demographics are entering prime years for consumption. Boomers are hitting an age when they can expect to use more health-care services; millennials are starting families and beginning to make doctors appointments for their kids.

Put those factors together, and voila: You can get your blood pressure checked just steps from the steakhouse.

read more: http://www.bloomberg.com/news/articles/2016-07-25/the-mall-of-the-future-will-offer-dinner-movies-and-a-colonoscopy

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