Situs Newswatch 4/12/2017

It’s Not Easy Being CRE Green … But It Is $$$ Profitable

Go green when buying, investing in or building your next commercial project. It’s good for the environment — and Situs research finds you can make more money as a result.

LEED (Leadership in Energy and Environmental Design) is the most widely used green building rating system in the world. From new construction to interior fit-outs and operation and maintenance, LEED provides a framework for virtually all building types that project teams can apply to create healthy, highly efficient and cost-saving green buildings. Projects pursuing LEED certification earn points across several areas that address sustainability issues. Based on the number of points achieved, a project then receives one of four LEED rating levels: Certified, Silver, Gold and Platinum.

LEED certification does incur additional costs, including higher construction costs and LEED certification fees. These costs generally increase as one achieves higher LEED rating levels. Yet despite the increased costs, the benefits are usually well worth it.

Situs RERC President Ken Riggs says, “Going green can translate into lots of green money for savvy investors in LEED-approved buildings. They have proven to be properties that produce solid results. Investors can get a nice economic return — and the good feeling that they are doing their part for the environment.”


Situs Green Report

Competitive Differentiator

  • These buildings experience a good value in the market by differentiating themselves from other competitive properties in the immediate neighborhood. Based on a recent research, approximately 61 percent of corporate leaders believe that sustainability leads to market differentiation and improved financial performance.
  • LEED-certified buildings with lower operating costs and better indoor environmental quality are more attractive to a growing group of corporate, public and individual buyers. High-performing building features will increasingly enter into tenants’ decisions about leasing space and into buyers’ decisions about purchasing properties and homes.
  • A recently published, peer-reviewed study has demonstrated that LEED has a consistent and strong signaling effect that helps shape the competitive price scale for the real estate market.
  • Recent researches has noted that improved health and productivity benefits are playing a larger role in driving companies to invest in buildings. In this scenario, green buildings become the area of interest for the investors.
  • EPA studies indicate indoor levels of pollutants may be up to 10 times higher than outdoor levels. LEED-certified buildings are designed to have healthier, cleaner indoor environmental quality, and they provide health benefits for their occupants.

Increased Rental Rates

  • In general, a building with LEED certification is in high demand. LEED-certified properties usually record much fewer vacancies and increasing rental rates, thereby justifying their demand in the market.
  • A business case study examining the San Diego real estate market showed that the overall vacancy rate for green buildings was 4 percentage points lower than for non-green properties — 11.7 percent, compared to 15.7 percent — and that LEED-certified buildings routinely commanded the highest rents.
  • Lux Research’s found that buildings with LEED Gold certification significantly outperformed their peers. In one prominent California example, LEED Gold certification resulted in $4.1 million in higher rental income to a model 80,000-square-foot commercial building in Los Angeles.

For the Residential Market

  • LEED certification has deepened its roots even in the residential markets. For people looking for eco-friendly, pollution-free, green houses, LEED-certified homes would be a boon.
  • It is to be noted that multifamily green residential projects were one of the earliest sectors to recover after the 2009 downturn, with 23 percent growth in 2010. A high level of growth has been sustained since, with the market forecast to rise 11 percent annually to $86.6 billion in 2017. This represents high market resiliency even in the face of severe economic challenges, underscoring the high degree of consumer demand for green residential spaces.
  • As of January 2017, the market demand for houses with green certifications is 10 to 14 percent more than for comparable homes without them.
  • About 15 percent of the single-family home projects and 15 percent of multifamily projects that are newly constructed are designed as per LEED framework. This is likely to increase by 84 percent by the end of 2018.
  • Companies that do not begin making preparations for a significant uptick in the green residential market risk being locked into an increasingly uncompetitive segment of the residential market.

Resource Efficiency

  • LEED-certified buildings support well-defined and efficient use of resources. A satisfying example would be the District of Columbia’s 2012 Private Building Benchmarking Disclosure, which reported that LEED office buildings have a 13 percent lower average site energy use intensity (EUI), 11 percent lower average electricity usage, and 16 percent lower average water usage compared to non-LEED-certified office buildings.
  • Washington, D.C., can be particularly considered as a lead to the nation in the amount of LEED space certified per resident every year, and is one of only four cities in the world to certify over 100 million square feet of LEED space.

Quips Situs’ Riggs, “Finally, D.C. is talking the talk and walking the walk. That doesn’t happen too often, so we should take it when we can!”

Brexit Exit for Bankers 

Tired from months of wondering whether their jobs will be moved or cut, foreign employees at some of London’s biggest banks are taking the initiative and asking to be moved back home, according to people with knowledge of the requests.

Staff at Citigroup, Goldman Sachs and HSBC have volunteered to return to their native countries inside the EU should their employers need to relocate staff after Brexit, said the people, who asked not to be identified as the discussions are private. At Societe Generale, at least two traders have already moved home — to France and Italy — in anticipation that the bank might start dispersing its London-based employees across the continent, one of the people said.

Global banks have begun the process of moving some UK-based operations to new or expanded trading hubs inside the EU after Prime Minister Theresa May triggered the formal mechanism for quitting the 28-nation bloc. Firms are preparing for a hard Brexit — the loss of their right to sell services freely around the region from their bases in the City — and want to have offices up and running elsewhere before the end of the two-year negotiation period between the UK and EU.

read more: The Independent

Situs is pleased to welcome Russell Foster. He is a well-known expert in Multifamily and has significant experience with Fannie Mae. You can learn more by clicking here.

German Military Unit to Fight Cyberattacks

German Defense Minister Ursula von der Leyen launched a new military department aimed at defending against a growing number of cyberattacks.

“The cyber and information space has become a separate domain of security policy, in addition to land, air, sea and outer space,” said Ms. von der Leyen at the inauguration ceremony.

Germany’s armed forces, the Bundeswehr, faced more than 280,000 cyberattacks in January and February, said Ms. von der Leyen in a prepared speech for the event in Bonn, the former capital in western Germany, where her ministry still resides. Attacks include espionage, data theft, destruction and manipulation. The new division, dubbed cyberspace and information command, initially has about 260 staff. Departments tasked with reconnaissance, communications and geographic information will join the new command in July, expanding its head count to about 13,500 staff.

read more: Wall St Journal

Mall Madness: Vornado’s Roth Sees Chance to ‘Feed on the Carnage’ in Retail

Steven Roth, Vornado Realty Trust’s chief executive officer, said it may take more than five years for U.S. brick-and-mortar retailers to downsize enough to reflect new consumer preferences, creating potential buying opportunities for companies with enough cash.
Retailers are struggling because the U.S. is “grossly over-stored” with at least 24 square feet of shopping-center space per capita, Roth said in his annual letter to shareholders of his company, one of the largest property owners in Manhattan. Roth also cited decreasing foot traffic and the rise of online shopping as reasons for the sector’s decline, which he said may need to be tackled by shuttering as much as 30% of the weakest retail space.

The pace of store closings this year is already ahead of 2008, that measurement’s most recent peak, according to Credit Suisse Group AG. In the past year, companies including American Apparel and Limited Stores have begun shutting down retail operations, while dressmaker BCBG Max Azria, discount shoe seller Payless Inc., and department store operator Gordmans Stores have filed for bankruptcy.

Roth, 75, said his company remains committed to its portfolio of stores on Manhattan’s Fifth Avenue and in Times Square. New York-based Vornado owns the properties where retailers such as Forever 21 Inc., Walt Disney Co. and Planet Hollywood International Inc. have flagship stores, according to the CEO’s letter.

Vornado has spent the last five years selling businesses and properties it considered outside its core strengths as an owner and manager of New York office buildings and Manhattan stores. In October, the company announced plans to spin off its properties in Washington, D.C., and merge them with certain assets of JBG Cos. to create a publicly traded real estate investment trust focused exclusively on the region.

read more: Crain’s NY

Amazon’s Brands Threaten Department Store Labels

Amazon’s private label fashion brands are only a fraction the size of those sold at Nordstrom and Macy’s — but they’re growing rapidly.

According to new data from Slice Intelligence, Nordstrom’s dressy-casual Halogen line generated 11 times the digital revenue of Amazon’s best-selling private brand, Lark & Ro, from January 2016 through February 2017.

Macy’s Alfani label rang up online sales that were nearly 10 times greater over that same time frame, Slice said.

Yet while Amazon’s young brands have significantly smaller market share than its competitors’ well-established labels, sales of its private fashion designs grew 26 percent in the fourth quarter compared to the prior year. That was roughly in line with the rate of expansion among Nordstrom’s brands. Macy’s private label brands grew 18 percent over a comparable period.

Slice pulled its data by scanning the online shopping receipts of more than 68,000 U.S. consumers.

“Amazon’s new private label brands will need time to develop that familiarity,” Ken Cassar, principal analyst at Slice Intelligence, said in a statement. “Still, competitive apparel brands … should keep a close eye on Amazon.”

read more: CNBC

Housing Costs Are a ‘Barbecue Stopper’ in Sydney

Akhilesh Mehta flops into his bus seat and readies himself for the hour-and-a-half commute from his job in central Sydney to his home on the city’s outskirts.

As the bus crawls through bumper-to-bumper traffic, the 48-year-old accountant says he puts up with the journey for a simple reason: when it came to buying a family home, the city’s fringes were “the only place I could afford.” New South Wales has taken over as Australia’s economic engine as the mining investment boom tails off, with central Sydney contributing almost a quarter of the nation’s growth last fiscal year. That success has come with a price. As workers flock to Sydney, an under-supply of housing, coupled with record-low interest rates, has made the city the world’s second-most expensive property market. Home prices jumped 19 percent in the past 12 months, stoking concern home ownership is increasingly beyond the reach of younger people.

That’s a big political problem for the state’s new Premier Gladys Berejiklian, who made housing affordability one of her priorities when she took the job in late January.
Housing affordability is “a barbecue stopper,” Berejiklian, 46, said in an interview in her Sydney office on Thursday. “We are convinced if we put downwards pressure on prices through supply, that’s the best way we can solve it as a state government.”

read more:  Bloomberg

Rolling the Dice on Las Vegas CRE

A report released by Xceligent and the Commercial Alliance Las Vegas (CALV) shows the commercial real estate market in Southern Nevada to be a bit of a mixed bag, with the retail market leveling off in the first quarter of 2017 and the office and industrial markets absorbing space almost as fast as it’s being built.

CALV President Jennifer Ott, CCIM, and a longtime local commercial real estate broker, said most aspects of the industry in Southern Nevada continued to gain ground through the first quarter of 2017. One possible exception, at least during the first three months of 2017, may be the local retail market, which is her specialty.

“The retail market was showing good growth through 2016, and I still think it’s in good shape overall,” Ott said. “But these statistics for the first quarter suggest that growth has started to slow down a bit.”

According to the report, total vacancy for the local retail market dropped from 9.8 percent during the first quarter of 2016 to 9.6 percent in the first quarter of 2017. Total retail vacancy was also at 9.6 percent in the fourth quarter of 2016.

Tina Reith, director of analytics for Xceligent for the Las Vegas market, said the amount of retail space being absorbed in Southern Nevada “is expected to remain positive throughout the year, especially in the Southwest market, where over 180,000 square feet of space remains under construction.”

read more:

Have a safe Easter and Passover. Our Newswatch resumes on Monday, and a reminder for our U.S. readers: Tuesday is Tax Day; your IRS and state returns are due.

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