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What’s Next with Commercial Real Estate?

Commercial Real Estate has never been in a better spot but you have to ask the question, what’s coming next?

MBA Vice President of Commercial Real Estate Research Jamie Woodwell expressed his opinion for the sector at the MBA Commercial/Multifamily Servicing & Technology Conference.

“We’re currently in the longest economic expansion ever,” Woodwell said. “There have been a couple negative quarters here and there, but not two in a row, which is the definition of a recession. So there’s been an incredibly long run of economic expansion.

Woodwell quoted multiple record-setting metrics: Commercial property cap rates are at record lows; MBA accounted a record $574 billion in multifamily and commercial mortgage bankers originations last year; plus loan delinquency rates are at or near record lows.

So, there are a lot of phenomena going on, putting us in a place we’ve never seen before,” Woodwell said. “Thus, the question becomes what’s next?

That answer is dependent on your outlook on life.

People on the optimistic spectrum may say they don’t see anything likely to change the current thriving situation. While others may say, “it’s been a great run, so I’m going to get ready for what comes next,” Woodwell said.UES Consulting Services, Phase 1 Environmental Site Assessments, Phase I Environmental Site Assessments, Phase 1 Environmental Site Assessments KC, Phase 1 Environmental Site Assessments Midwest, Phase 1 Environmental Site Assessments US, Phase I Environmental Site Assessments KC, Phase I Environmental Site Assessments Midwest, Phase I Environmental Site Assessments US, Phase I ESA, Phase I ESAs, Phase I ESAs KC, Phase I ESAs Midwest, Phase I ESAs US, Phase 1 ESAs, Phase 1 ESAs KC, Phase 1 ESAs Midwest, Phase 1 ESAs US, leader in environmental consulting and engineering services, engineering services Kansas City, environmental consulting Kansas City, Phase I Environmental Consulting, Phase 1 Environmental Consulting, Phase I Environmental Consulting Kansas City, Phase 1 Environmental Consulting Kansas City, Phase II Environmental Consulting, Phase 2 Environmental Consulting, Phase II Environmental Consulting Kansas City, Phase 2 Environmental Consulting Kansas City

So let’s get into the details…

Woodwell used the first quarter’s 3.2% real GDP growth rate to back the current strength of the U.S. economy. Unemployment rate dropped to its lowest point in 50 years and job growth has averaged above 200,000 per month thus far in 2019. “That’s boosted wages, which economists had expected would happen well before now,” said Woodwell.

On the other end, our economies great performance could guide some inflation pressure. “But that has not yet materialized,” Woodwell said. “Some think trade tariffs could start to bring more inflation on.”

With this economic situation, each commercial property type has a unique story to tell…

Multifamily sector: Moving fast in terms of both supply and demand for apartments. The younger generation is filling the shoes of their parents, which supports high demand for multifamily properties. The main surge is in Millennials since they’re beginning to demand apartments and form households; mainly high-quality urban newly developed apartments.

Office sector: Shows a long steady run of positive job growth, but on the flip side, companies are using a smaller space per employee; which leads to the recent fairly stable market. Nevertheless, wage pressure increases while employers struggle to keep their top employees in the middle of an extended strong job market.

One tool employers could use would be to reverse the recent trend of shrinking office space and increase the room given to employees in an effort to compete for talent,” he said.

Retail sector: Definitely has witnessed the largest changes, mostly due to E-commerce, which has taken over almost 10% of all retail sales and persists to grow 3 basis points each quarter.

“But consumer consumption is strong enough that both E-commerce and brick-and-mortar stores can grow–as long as consumer spending continues, Woodwell said. “But if consumer spending should slip, which will lose more?,” he asked.

Industrial Sector: Has experienced positive evolving changes that have rarely been seen in the past such as new warehouse properties with a second or third story. With manufacturing shipments and E-commerce growing at record highs, the industrial sector continues to thrive–and evolve.

In conclusion…

When I think about what’s likely to happen, I come back to the idea of a plateau,” Woodwell said. “Coming off a record year of originations, I don’t see much pulling those numbers down, and I also don’t see much pushing those numbers much higher, so we generally see a plateau for originations for the next few years. If we continue to run at this level, that still means growth in mortgage debt outstanding because of maturities, and that means there will likely be more need for servicers like you to service these loans.”

Need help with any Commercial Real Estate transactions?

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What’s Next with Commercial Real Estate?

Commercial Real Estate has never been in a better spot but you have to ask the question, what’s coming next?

MBA Vice President of Commercial Real Estate Research Jamie Woodwell expressed his opinion for the sector at the MBA Commercial/Multifamily Servicing & Technology Conference.

“We’re currently in the longest economic expansion ever,” Woodwell said. “There have been a couple negative quarters here and there, but not two in a row, which is the definition of a recession. So there’s been an incredibly long run of economic expansion.

Woodwell quoted multiple record-setting metrics: Commercial property cap rates are at record lows; MBA accounted a record $574 billion in multifamily and commercial mortgage bankers originations last year; plus loan delinquency rates are at or near record lows.

So, there are a lot of phenomena going on, putting us in a place we’ve never seen before,” Woodwell said. “Thus, the question becomes what’s next?

That answer is dependent on your outlook on life.

People on the optimistic spectrum may say they don’t see anything likely to change the current thriving situation. While others may say, “it’s been a great run, so I’m going to get ready for what comes next,” Woodwell said.UES Consulting Services, Phase 1 Environmental Site Assessments, Phase I Environmental Site Assessments, Phase 1 Environmental Site Assessments KC, Phase 1 Environmental Site Assessments Midwest, Phase 1 Environmental Site Assessments US, Phase I Environmental Site Assessments KC, Phase I Environmental Site Assessments Midwest, Phase I Environmental Site Assessments US, Phase I ESA, Phase I ESAs, Phase I ESAs KC, Phase I ESAs Midwest, Phase I ESAs US, Phase 1 ESAs, Phase 1 ESAs KC, Phase 1 ESAs Midwest, Phase 1 ESAs US, leader in environmental consulting and engineering services, engineering services Kansas City, environmental consulting Kansas City, Phase I Environmental Consulting, Phase 1 Environmental Consulting, Phase I Environmental Consulting Kansas City, Phase 1 Environmental Consulting Kansas City, Phase II Environmental Consulting, Phase 2 Environmental Consulting, Phase II Environmental Consulting Kansas City, Phase 2 Environmental Consulting Kansas City

So let’s get into the details…

Woodwell used the first quarter’s 3.2% real GDP growth rate to back the current strength of the U.S. economy. Unemployment rate dropped to its lowest point in 50 years and job growth has averaged above 200,000 per month thus far in 2019. “That’s boosted wages, which economists had expected would happen well before now,” said Woodwell.

On the other end, our economies great performance could guide some inflation pressure. “But that has not yet materialized,” Woodwell said. “Some think trade tariffs could start to bring more inflation on.”

With this economic situation, each commercial property type has a unique story to tell…

Multifamily sector: Moving fast in terms of both supply and demand for apartments. The younger generation is filling the shoes of their parents, which supports high demand for multifamily properties. The main surge is in Millennials since they’re beginning to demand apartments and form households; mainly high-quality urban newly developed apartments.

Office sector: Shows a long steady run of positive job growth, but on the flip side, companies are using a smaller space per employee; which leads to the recent fairly stable market. Nevertheless, wage pressure increases while employers struggle to keep their top employees in the middle of an extended strong job market.

One tool employers could use would be to reverse the recent trend of shrinking office space and increase the room given to employees in an effort to compete for talent,” he said.

Retail sector: Definitely has witnessed the largest changes, mostly due to E-commerce, which has taken over almost 10% of all retail sales and persists to grow 3 basis points each quarter.

“But consumer consumption is strong enough that both E-commerce and brick-and-mortar stores can grow–as long as consumer spending continues, Woodwell said. “But if consumer spending should slip, which will lose more?,” he asked.

Industrial Sector: Has experienced positive evolving changes that have rarely been seen in the past such as new warehouse properties with a second or third story. With manufacturing shipments and E-commerce growing at record highs, the industrial sector continues to thrive–and evolve.

In conclusion…

When I think about what’s likely to happen, I come back to the idea of a plateau,” Woodwell said. “Coming off a record year of originations, I don’t see much pulling those numbers down, and I also don’t see much pushing those numbers much higher, so we generally see a plateau for originations for the next few years. If we continue to run at this level, that still means growth in mortgage debt outstanding because of maturities, and that means there will likely be more need for servicers like you to service these loans.”

Need help with any Commercial Real Estate transactions?

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UES Investing in the Next Generation

UES employees were excited to sponsor a local event that raises support for youth in low income regions. We are passionate about empowering and equipping the next generation for success.

The event, Power of Words, was held in the Power and Light District in Kansas City, Missouri by Youth Ambassadors(YA). YA is a not-for-profit organization that empowers undeserved youth with important life skills, soft job skills, creative expression, and adult mentors who help them become future community leaders willing and able to work for positive change. UES Consulting Services, Phase 1 Environmental Site Assessments, Phase I Environmental Site Assessments, Phase 1 Environmental Site Assessments KC, Phase 1 Environmental Site Assessments Midwest, Phase 1 Environmental Site Assessments US, Phase I Environmental Site Assessments KC, Phase I Environmental Site Assessments Midwest, Phase I Environmental Site Assessments US, Phase I ESA, Phase I ESAs, Phase I ESAs KC, Phase I ESAs Midwest, Phase I ESAs US, Phase 1 ESAs, Phase 1 ESAs KC, Phase 1 ESAs Midwest, Phase 1 ESAs US, leader in environmental consulting and engineering services, engineering services Kansas City, environmental consulting Kansas City, Phase I Environmental Consulting, Phase 1 Environmental Consulting, Phase I Environmental Consulting Kansas City, Phase 1 Environmental Consulting Kansas City, Phase II Environmental Consulting, Phase 2 Environmental Consulting, Phase II Environmental Consulting Kansas City, Phase 2 Environmental Consulting Kansas City

 

There were original works from the programs students that attendees could enter to win in a raffle. Here’s an example of one of the students work. Students presented impressive poems and writing excerpts during the dinner. It was an amazing event aimed to paint a brighter future for some of Kansas City’s most vulnerable and at-risk youth.UES Consulting Services, Phase 1 Environmental Site Assessments, Phase I Environmental Site Assessments, Phase 1 Environmental Site Assessments KC, Phase 1 Environmental Site Assessments Midwest, Phase 1 Environmental Site Assessments US, Phase I Environmental Site Assessments KC, Phase I Environmental Site Assessments Midwest, Phase I Environmental Site Assessments US, Phase I ESA, Phase I ESAs, Phase I ESAs KC, Phase I ESAs Midwest, Phase I ESAs US, Phase 1 ESAs, Phase 1 ESAs KC, Phase 1 ESAs Midwest, Phase 1 ESAs US, leader in environmental consulting and engineering services, engineering services Kansas City, environmental consulting Kansas City, Phase I Environmental Consulting, Phase 1 Environmental Consulting, Phase I Environmental Consulting Kansas City, Phase 1 Environmental Consulting Kansas City, Phase II Environmental Consulting, Phase 2 Environmental Consulting, Phase II Environmental Consulting Kansas City, Phase 2 Environmental Consulting Kansas City

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Everything to know about Qualified Opportunity Zones in the United States

So… what exactly is an Opportunity Zone?

Opportunity Zones are economically-distressed communities where new investments, under specific conditions, might be eligible for preferential tax treatment. Districts are eligible to be Opportunity Zones if they have been submitted for that classification by the state and that submission has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.

What is the purpose of Opportunity Zones?

Opportunity Zones serve as an economic development tool. Furthermore, they are modeled to stimulate economic development and higher the job rate in distressed communities.

Have Opportunity Zones been around for a long time?

No, they were added to the tax code by the Tax Cuts and Jobs Act on December 22, 2017. The first set of Opportunity Zones, covering sections of 18 states, were selected on April 9, 2018. Opportunity Zones have now been appointed covering sections of all 50 states, five U.S. territories and the District of Columbia.

What is a Qualified Opportunity Fund?

A Qualified Opportunity Fund (QOF) is an investment vehicle that is designed as either a partnership or corporation for investing in qualified property that is in a Qualified Opportunity Zone.

How do Opportunity Zones stimulate economic development?

They are designed to boost economic development by providing tax benefits to investors. First off, investors can postpone tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026. If the QOF investment is held for more than 5 years, there is a 10% exclusion of the postponed gain.  If held for longer than 7 years, the 10% becomes 15%. Next, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor is qualified for growth in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.

Do I have to live in an Opportunity Zone to gain the tax benefits?

The answer is no. You may get the tax benefits, even if you don’t work, live or have a business in an Opportunity Zone. You just need to invest a recognized gain in a Qualified Opportunity Fund and elect to defer the tax on that gain.

Is there a list of Opportunity Zones obtainable?

Definitely. This list can be found at Opportunity Zones Resources and in the Federal Register at IRB Notice 2018-48.  In addition, a visual map of the census tracts designated as Qualified Opportunity Zones can be found at Opportunity Zones Resources.

I want to form a Qualified Opportunity Fund. Can  I access a list of Opportunity Zones available in which the Fund can invest?

Yes, this list can be found at Notice 2018-48.

Is it possible for a limited liability company (LLC) to be an Opportunity Fund?

Absolutely. A LLC that decides to be treated as a partnership or corporation for federal tax purposes can classify as a Qualified Opportunity Fund.

How does a partnership or corporation get certified as a Qualified Opportunity Fund?

An eligible partnership or corporation self-certifies by filing Form 8996, Qualified Opportunity Fund, with its federal income tax return. Early-release drafts of the form and instructions are posted, with final versions due in December. The return with Form 8996 has to be filed timely, taking extensions into consideration.

How can I get more information about Opportunity Zones?

Check out this article for more details on Opportunity Zones.

The Treasury Department and the Internal Revenue Service will be giving more details, including further legal guidance, on this new tax benefit.

Need help with environmental consulting, Phase I Environmental Site Assessments, Property Condition Assessments or Phase II Subsurface Investigations?

UES Consulting and our diverse team know how thorough, time-sensitive Phase I Environmental Site Assessments and Property Condition Assessments are and can help the affair run effortless and finish on time. If you are searching for a company to partner with on your commercial real estate transactions of any sort, look to our in-house engineers and environmental consultants to relieve the stress of environmental issues and mitigate risks.

The What, Why, and How of a Phase 1 Environmental Site Assessment

So, what is a Phase 1 Environmental Site Assessment?

A Phase 1 Environmental Site Assessment, commonly called an ESA, or Phase 1 ESA, is an assessment done to research the historical and current uses of a property as part of a Commercial Real Estate transaction.

Why do Commercial Real Estate transactions require a Phase 1 Environmental Site Assessment?

Phase 1 ESA is needed to assess if historical or current property uses have impacted the soil or groundwater beneath the property. If so, this could pose a threat to human health and a major issue for the environment. If these problems exist, then a potential liability is present for the owner and/or lender. This also affects the value of the property.

If a Phase 1 Environmental Site Assessment is finished pre-closure of a real estate transaction, it can be used to fulfill the requirements of CERCLA’s (Comprehensive Environmental Response, Compensation and Liability Act) innocent land owner defense under All Appropriate Inquiries (AAI).

Finally, how are Phase 1 Environmental Site Assessments completed?

First, it’s important to note that Phase 1 ESA’s can be done on all types of properties; industrial, multi-family residential, commercial, vacant land, and agricultural. But all Phase I ESA’s must comply with ASTM E1527-13. (exception being properties comprised of large primarily undeveloped land, which can be researched under ASTM E2247-16).

Below are the steps commonly followed for Phase I ESA’s.
1. Completing a site visit to observe uses of the property and adjacent properties along with past and current conditions of the property.
2. Reviewing federal, state, tribal, and local regulatory databases including, but not limited to, aboveground storage tanks (ASTs), underground storage tanks (USTs), known or suspected release cases, institutional and engineering controls, and the storage of hazardous substances and disposal of hazardous wastes including petroleum products.
3. Reviewing historical records, i.e. historical aerial photographs, fire insurance maps (Sanborn maps), historical topographic maps, and historical city directories.
4. Reviewing local and state agency records including, but not limited to, state environmental agencies, Fire Departments, Health Departments, and Building Departments.
5. Interviewing past and current property owners, occupants, operators, or others well known with the property.
6. Interviewing the Report User for judicial or title records for environmental liens and activity and use limitations (AULs); specialized experience or knowledge, actual knowledge; commonly known or reasonably ascertainable information; the reason for a significantly lower purchase price; and the reason for the preparation of the Phase I ESA. It’s the User responsibility to provide this information to qualify for the innocent landowner defense.
7. Finally, the Environmental Professional (EP) evaluates all of this information to identify potential environmental risks to the property. EPs highest concerns are with properties including, but not limited to, gas stations, dry cleaners, printing operations, manufacturing, and auto/vehicle repair.
8. Once the Phase I ESA is complete, the EP will summarize what issues were identified on the property and make recommended steps to address these concerns.

In summary, Phase 1 Environmental Site Assessments identify existing or potential environmental contamination liabilities. They are done to satisfy Commercial and Residential Real Estate transactions and ensure environmentally and human safety. They are completed on all varieties of properties but all comply with ASTM E1527-13. UES Consulting Services is ready and happy to help with any and all of your Phase I and Phase II ESA needs.

 

UES Consulting and our team of inspectors would be glad to help you with your Phase 1 Environmental Site Assessment.

Important Details to Note for Phase I Environmental Site Assessments…

While not part of ASTM requirements, Phase I ESA reports typically include a discussion of observed suspect asbestos containing materials (ACM), potential lead-based paint (LBP), and mold growth; as well as the potential for lead in drinking water and radon.  Sampling for these non-ASTM concerns is beyond the scope of a standard Phase I ESA, but can be included upon request.
ASTM E1527-13 provides the guidelines for a Phase I ESA report to meet industry standard, but there are other factors to consider when ordering a report.  Projects associated with Fannie MaeFreddie MacU.S. Department of Housing and Urban Development (HUD), and the Small Business Association (SBA) each have their own report requirements.  This is also true of other lending institutions.
A recognized environmental condition (REC) indicates known contamination or the potential for the subsurface to have been impacted by contamination (either from the subject property or possibly from an offsite source).  A controlled recognized environmental condition (CREC) identifies that the property has been impacted by contamination which has been investigated and remediated; however, contamination remains and would require additional work if redeveloped.  A historical recognized environmental condition (HREC) identifies a release impacted the subject property which has been investigated and remediated meeting unrestricted use criteria.

Women who are Inspiring the Commercial Real Estate Industry

Our Chief Marketing Director, Jamie Taylor, is a proud member of Commercial Real Estate Women (CREW) which is an industry networking organization. And according to a recent study published by CREW, women are advancing in commercial real estate, especially in the C-suite, and the shrinking salary gap. However, there are still areas for improvement to get more women intrigued in CRE brokerage, less of an income gap, and leasing and sales positions.

Here are 3 helpful pieces of advice to improve your professional career from respected female leaders in the Commercial Real Estate Industry.

This type of progress comes with lessons learned early on. The first few years of a career can be pivotal to future success.  Whether it is mastering the art of negotiation, relationship building, or finding your voice, these years can make or break any career.  Three women shared what they learned that helped them reach the success they have today and make their lessons work for them.

-Maryann Reid, Forbes Articles

1. Agree to Disagree

Advice given by Angele Robinson-Gaylord, President: IKEA Property, Inc.

  • As I began my career in commercial real estate, I had no idea how to build a career in this industry.  I did not study real estate in college or law school, had no family or personal connections to the industry, and was a female in a field that is overwhelmingly male. 
  • You have to be conversant in the language of real estate to do deals and build credibility.  
  • You have to recognize that every relationship is valuable. Your path will cross those of your peers time and again.  
  • When conducting transactions, you must be tough enough to get the deal done, yet you must learn to disagree agreeably to not gain a reputation as a deal killer.  
  • You must persevere in the face of any obstacle or naysayer to reach your goals.  In my case, it took 5 years to transition from practicing law to securing my first role on the business side of commercial real estate.  
  • Finally, I learned that you can’t do it alone.

2. Find Your Voice

Advice by Robin Kennedy, Executive Vice President, Acquisitions & Development: Montage International

  • Early in my career, I was put on the spot in a senior level meeting.  My opinion was different than many in the room, but I had a reasoned response. Granted, it was not the path that they chose, but that moment has had strong impact on me and served me well throughout my career.
  • Voicing my opinion was not always appropriate, as many times I wanted to learn from those with more experience.
  • But having this mindset has helped me to think about and become very practiced in how to make decisions.
  • It has helped me to take proactive ownership and move strategically forward.
  • At this point in my career, while the final decisions are often on my shoulders, I value those that can provide me with thoughtful opinions along the way.”

3. Trust Yourself

Lesley Horton Campbell, Associate General Counsel: Tiffany & Co.

  • Never be afraid to step up and trust that you are smart enough to handle a stretch assignment.
  • I made the mistake early on in my career of not stepping up for an assignment because I assumed that I was too junior and that naturally it would go to a more senior experienced colleague.
  • The next time the same opportunity came around, I quickly stepped up without hesitation and ended up knocking it out of the park.

Need help with environmental consulting? UES Consulting and our broad team of inspectors are skilled in the demands of commercial and multi-family transactions. We know how in-depth and time-sensitive Phase I Environmental Site Assessments and Property Condition Assessments are and we can help the process go smoothly and finish on time.

If you are looking for a company to partner with on your commercial real estate transactions of any kind, we are here to alleviate the weight of environmental issues and minimize risks. 

CRE Investors! Here are 3 ways to quicken decisions in uncertain markets.

Over the last few months, news channels have been filled with stories about movements that are directly affecting the U.S. economy and real estate investments.

-Dan Dokovic Managing Partner, Co-Founder at Bamboo Equity Partners, a leading CRE investment firm.

What are the reasons for these movements?

The first is the news of rising interest rates, trade wars dominating the airways, government shutdown all leading towards business uncertainty. Second is the quick pace of advancing technology which affecting commercial real estate space. Lastly, as seen nationwide popular retailers are quickly closing down and declaring bankruptcy forcing shopping centers to clear out or shut down at rapid rates.

“The real estate industry has become the poster child for uncertainty and anxiety.”

How to overcome this as a CRE investor?

Get ahead of the curve with 3 practical applications below that will help you stay relevant and pivot quickly in response to the shifting industry movements.

1. Fill the space.

Real estate investment companies should reconsider their existing tenant mix. Long gone are the days of 10 to 15 year leases. With any uncertainty in the business market, corporations are often looking for a short-term lease.

Therefore, re-evaluate your long-term leases & business model.

While short-term leases may alter financial forecasting and real estate valuation, immediate increases in net operating income will outweigh the risk of carrying the vacant space.

A major trend is to start diversifying the tenant mixes for overall appeal of your property. An example is mall owners are lending their empty space to startup restaurants, co-working companies, or incubators in hopes it will lure more tenants into the property. These tenants don’t pay rent or nearly as much but will increase foot traffic, visibility, and popularity.

Practical First Step: Initiate partnerships with co-working companies, entice new-age tenants by enhancing your digital strategy, and enlarge your leasing capabilities.

2. Build Relationships

In uncertain times it’s important to focus on growth capital and support from partners and peers. For future stability and success it’s vital to build relationships.

While the industry is in the growth cycle, capital is bountiful. However, as soon as the cycle turns, having capital is the difference between muddling through and controlling destiny.”


Understanding and growing capital relationships comes in two forms: existing capital sources and new prospects with unrelated capital allocations.”

For existing capital relationships, constant communication is crucial. Banking relationships vary with the economic cycles change. Investment executives need to keep in step with bank’s directions and anticipate said direction would have on business.

Here are some examples…

  • Banks that focus on real estate lending might concentrate on commercial and industrial loans after a merger which, in turn, might diminish the negotiating power of borrowers in a downturn.
  • In addition to current capital providers, real estate managers should focus on acquiring alternative sources of equity and debt.
  • A multitenant office owner might want to seek a partnership with a single, long-term tenant equity provider in order to mitigate the risk of short-term leases.
  • Alternatively, office asset managers might want to connect with industrial capital sources in order to diversify high-cost risks, like retenanting office buildings.”

3. Diversify your assets.

According to past data, these changes in real estate are not hitting all markets. An example is the highs and lows of employment rates may affect the office market but the industrial market could flourish due to the increased shift towards e-commerce.

During the last cycle, manufactured housing and self-storage sectors performed better than other property types.

According to Trepp Bank Research’s April 2017 report of historical CRE losses, self-storage had the lowest average loan loss severity of all property sectors at 1.52%, while manufacturing housing loss was at 3.53%. Comparatively, in a different sector, retail had an average loss rate of 6.17% and office at 6.13%. While taking into consideration these examples, property sectors (per research completed by Nareit in December 2018) and manufactured homes provided total returns of 24.93% and 11.43% for the years 2017 and 2018, respectively.

Gaining property sector diversity can lessen risk across your business. But be cautious in your decisions. “While diversification can provide a footing to weather storms, businesses must be prudent as diversification efforts have their own risks.

What crucial questions do you ask before making final decisions in this ages industry?

What oversights can be pulled from current practices?

Who are the allies in this diversification process?

To stay relevant, future real estate leaders need to continue on the path of innovation. While transformation is tough, the only way to continue growing is to advance with the times. As it was in previous cycles, great things come to those who are able to pivot during the hardest times.

Multifamily Housing Market in 2019

Checkout a summary of 2019 trends in Multifamily Housing Markets…

In Freddie Mac’s Multifamily research, they found that “performance in the multifamily market remained healthy during 2018, despite high levels of new supply entering the market. We expect this trend to continue into 2019, but with more modest growth in comparison to recent years.”

2018 ended up with solid rent growth and only modest increases in vacancy rates despite an elevated level of new supply. There are some weakness’s in individual markets and submarkets.

New supply will remain elevated through 2019 and into 2020 but rents and vacancies will continue outperforming historical averages due to robust demand related to the rising cost of homeownership, changing demographics and consumer preferences.”

Cap rates have slightly fallen over the past couple quarters but they expect cap rates to rise in 2019 if Treasury rates increase.

“Multifamily origination volume is projected to grow to $317 billion in 2019 driven by solid market fundamentals and strong investor demand for multifamily properties.” This figure exceeds 2018’s statistic by 3.9 percent.In conclusion, “we expect 2019 to be another strong year for the multifamily industry. Homeownership affordability constraints and consumer trends will continue to drive demand, while strong rent growth will support property price growth.”

For full analysis click here.

Commercial Real Estate Industry Booming

Qualified Opportunity Zones in Kansas City

Did you know that 52 million Americans (1 in 6) live in economically distressed communities? This is a major problem that Congress recently took a step to fix. Thus, Opportunity Zones were created in the Tax Cuts and Jobs Act of 2017.

Opportunity Zones are an innovative, flexible, and bipartisan solution for catalyzing private sector-led economic growth. In addition, they aim to connect low-income communities with much-needed capital.

In exchange, investors get a graduated series of federal tax incentives tied to long-term holdings.

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Lastly, information provided by Ruben Alonso President of AltCap and Korb Maxwell with Polsinelli. 

UES Consulting and our team are experts in Phase I Environmental Site Assessments and Property Condition Assessments and can help your projects run smoothly and close on time. If you are looking for a company to join together with on your commercial real estate transactions of any type, look to our in-house engineers and environmental consultants.

 

End of the Year Swing is Here! We’re Ready…

You’re feeling it, because we are too. It’s the race to the finish line, the final cut of 2018 and, it’s HERE!

While you may not be ready for Christmas yet (*cough* 49 days), or the start of a new year (Hello 2019 in 56 days), the calendar says it’s time to finish those real estate deals. Close on the projects that need completion. And, if you’re like many of your colleagues, you may find yourself in need of an environmental assessment report (Phase I) or a property condition assessment (PCA).

The silver lining in the fast pace to the end of the year? UES is here… and, we’re ready for you. We have your environmental reporting and PCA needs covered. We specialize in quick turn-around times and like Santa’s elves, we work great under a strict deadline!

Don’t hesitate to take some of the pressure off by contacting us to help you close out 2018 strong!