Category: Office
Some WeWork Landlords May Be Left Holding the Bag if WeWork Decides to Exit Their Buildings
The company was in the habit of structuring some leases through LLC entities that featured no long-term guarantees.
Troubled co-working operator WeWork has structured some leases under LLCs that are not guaranteed by its holding company, which will leave those landlords holding the bag for the free rent and TIs they provided to help get the spaces up and running. The landlords will also be left with vacant spaces, which may be backfilled with former WeWork tenants or another co-working operator at a lower price.
“WeWork (founders) attempted a paradigm shift in the tenant-landlord relationship,” says David R. Pascale, Jr., senior vice president with Los Angeles-based real estate advisory and brokerage firm George Smith Partners. “I believe they overreached.”
WeWork’s unprofitability and its derailed IPO reflect management’s failure to focus on the profitability of the core real estate business, Pascale notes.
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Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.
Australian Pension Fund Eyes U.S. Offices, Apartments
QSuper, the second-largest pension fund in Australia, wants to invest in U.S. office and apartment buildings.
(Bloomberg)—Australia’s second-largest pension fund is betting on U.S. real estate while avoiding overpriced infrastructure assets as it chases returns in the face of a fragile global economy.
QSuper wants to buy more office buildings and apartment developments in the U.S. after purchasing Chase Tower in Texas in August, Chief Investment Officer Charles Woodhouse said in an interview. The A$110 billion ($76 billion) fund a large chunk of its assets in cash, giving it more firepower than many other funds to write big checks when it sees opportunities, he said.
“We’ve got several other transactions in the U.S. that we’re looking at very closely right now,” Woodhouse said, without elaborating. “The more of these opportunities that we can find in the unlisted asset classes that generate these high single-digit, low double-digit returns, the better.”
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Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.
Flexible Office Space Operators Focus on Add-On Services to Develop New Revenue Streams
Going forward, the success of co-working operators may rely partly on their ability to generate new revenue sources.
Looking for ways to create a better tenant experience and boost their bottom lines, flexible office operators are generating new revenue streams by offering additional on-site services and establishing new business lines.
LiquidSpace, a digital marketplace—a sort of an Airbnb of flexible office space that partners with co-working operators, serviced office operators, office landlords, and office tenants with sublet space, provides flexible office options to its clients. The company has also partnered with Steelcase to provide turn-key design and fit-out of tenant spaces within traditional lease structures.
“We’re the one platform where tenants can reach the entire flexible office market,” says Mark Gilbreath, LiquidSpace founder and CEO, noting that his company simplifies the discovery and transaction process.
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Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.
HNW Investors Are Giving Preference to Multifamily and Office Properties, AppFolio Survey Finds
The survey, conducted in April, found 68.3 percent of respondents were looking at multifamily acquisitions.
If a new survey is an accurate barometer, two words—modernization and multifamily—sum up the key issues weighing on the minds of high-net-worth (HNW) individuals and other property investors.
The survey, conducted in April by AppFolio, a Goleta, Calif.-based provider of real estate and investment management software, showed that the No. 1 challenge facing accredited property investors is finding a good investment manager to handle fund and syndicate allocations.
And it’s not that these investors are laboring to find an investment management firm that’s good at what it does. It’s more about working with an investment manager that fully embraces technology. In other words, they’re seeking an investment manager that’s up-to-date rather than old-school.
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Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.
Where Are Cap Rates Going in the Four Core Property Sectors?
Experts predict little change in either direction in the first half of the year.
With late 2018 jitters gone and investor optimism returning, the commercial real estate market should experience mostly steady cap rates through the first half of 2019, although there are particular market segments and geographies that could experience some bumps.
“On the interest rate side, I think everybody has dismissed, at least for the time being, the inflation threat so that kind of stress on pushing cap rates higher isn’t there right now,” says Manus Clancy, senior managing director of applied data, research and pricing with Trepp. “We went through a tough period in December when people were jittery. Now everybody has taken a deep breath; they don’t feel like the wheels are falling off either the U.S. or the global economy.”
Still some changes, although potentially muted, could be in store. Recent trends suggest there is little room left for cap rate compression, according to Matthew Schreck, quantitative strategist with online real estate marketplace Ten-X. “We expect increases to both interest rates and spreads to drive some loosening in cap rates in 2019 across all property types,” he says.
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Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.
Which Office Markets Are Best Bets for Opportunity Zone Investment?
Investors have to keep in mind that to reap full tax benefits, the value of capital improvements has to match the value of the initial purchase price.
Opportunity Zone investments are a hot topic in the commercial real estate industry right now, but which office markets may be the best targets for this type of strategy?
The establishment of Opportunity Zones offers investors a way to defer and reduce taxes on capital gains, while building equity in real estate assets and improving low-income, distressed neighborhoods.
Common traits of Opportunity Zones certified by the U.S. Treasury are: a poverty rate of more than 32 percent, median family income about 37 percent below the area or state median, and an unemployment rate nearly 1.6 times higher than the U.S. average.
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Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.
Tech Job Growth Continues to Create Demand for Office Space
Growth in technology-related jobs—particularly computer and mathematics occupations—is expected to keep office leasing strong in certain markets over the next decade.
Overall, between 20 and 25 percent of current office leasing activity is related to technology jobs, particularly computer and mathematics occupations—a subset of STEM (science, technology, engineering and mathematics), reports Rebecca Rockey, Cushman & Wakefield’s economist, head of forecasting for the Americas, and lead author of a new Occupier Insights report on the impact of certain technology occupations on the office sector. This is a stark contrast to the previous office cycle, when leasing was primarily driven by new financial services and business analyst occupations, noted the report.
In total, 1 million new computer and mathematics occupations have been created over the last seven years, bringing the total to 4.1 million computing and 167,000 mathematics jobs in the United States today. STEM jobs are being created at a faster pace than other jobs with seven of the top 10 STEM occupations being computer-related and including jobs such as programmers, network developers and designers. Of these new jobs, 85.4 percent are in office-using industries, making it the largest occupational category driving growth in the office cycle’s current expansion, according to the C&W report.
Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.
One-Time Emerging Apartment Markets Are Becoming Emerging Office Markets
As multifamily rents in core markets have continued to climb, investors, office tenants and residents alike have turned their attention to secondary markets. According to JLL’s Investment Outlook report, secondary markets accounted for 50 percent of all U.S. office transactions last year, due to slowing demand and oversupply of product in core markets.
Renters
The San Francisco Bay Area, home to many of the top performing tech companies in the U.S., boasts some of the highest rents in the country. Several cities throughout the Bay Area were ranked in the top 10 for rent increases in 2017. San Francisco continues to lead the nation with an estimated median rent of $4,000 per month.
Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.
Exclusive Research: Investor Outlook Remains Stable for the Office Sector
Despite the overall consensus that commercial real estate is in the late stages of its current cycle, investors in the office sector continue to see strength in the sector. Expectations for rents and occupancies remain bullish. And while there is a general sense that cap rates will rise, respondents overall remain optimistic about the prospects for the space.
Those were among the findings in NREI’s fourth annual research survey aimed at gauging sentiment about the office sector for the coming year.
Respondents were asked to rank the relative strength of their region on a scale of 1 to 10. The West (8.2) led the way, followed by the South (7.9), the East (7.4) and the Midwest (6.8). The scores for the East, Midwest and South all rose from 2017, while the score for the West remained flat. The West has been the top market in each of the four surveys NREI has completed on the office sector.
Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.
How Lease Agreements Can Protect Against Risk in Single-Tenant Office Assets
Single-tenant office buildings present a greater risk for loan default than multitenant assets because the sole income stream is dependent on one tenant. But there’s advice experts can offer borrowers on structuring leases to help protect their interests if something goes wrong.
In recent years, there has been a rush by investors to acquire single-tenant office buildings, because this type of asset offers better yields than Treasury bonds, says Eric Entringer, vice president of capital markets and investor relations at Dornin Investment Group, a real estate investment firm with offices in Orange County, Calif. and Las Vegas.
He notes that these assets are attracting lots of 1031 exchange investors, as well as investors pulling out of the stock market, but suggests a question they should ask themselves before investing in single-tenant office assets: “Is the risk appropriate in terms of the returns they’ll get over Treasury bonds?”
Richard is our resident social media expert. He researches and writes about; the economy, marketing trends and all aspects of real estate investing.