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Industry Trends

NAIOP Industrial Space Demand Forecast | 3Qtr-2017

Demand for Industrial Space Will Remain Robust

Based on over 40 economic and real estate factors such as employment, GDP, exports and imports, and air, rail and shipping data, the NAIOP Research Foundation forecast suggests that net absorption of industrial space could increase slightly through 2018.   Overall, market consensus seems to be that the latter half of 2017 may benefit from a release of pent-up demand due to the election of Donald Trump.

While stories about the “death of retail” are assuredly overblown — with REIS reporting recent quarters of positive net absorption of retail space and the U.S. Census Bureau posting all-time record highs in retail sales — it is increasingly clear that more physical goods will pass through multiple distribution warehouses before reaching consumers’ hands.

New orders of goods are growing, manufacturing activity still appears to be increasing steadily in the U.S. as of the second quarter 2017 which require more industrial facilities, thus the demand for industrial real estate.

Read more: Qtr3 2017-Industrial Space Demand Forecast
In 2009, the NAIOP Research Foundation awarded a research grant to Anderson and Guirguis to develop a model for forecasting net absorption of industrial space in the United States. That model led to successful forecasting two quarters out. A white paper describing the research and testing behind the model for NAIOP’s Industrial Space Demand Forecast is available at naiop.org/research.
For more info about the NAIOP Research Foundation, contact Bennett Gray at 703-674-1436 or gray@naiop.org.

TCN Worldwide Ranks in Top 10 Brokerage Firms | by H. Ross Ford III

TCN Worldwide Ranks in Top 10 Brokerage Firms in NREI’s 2016 Top Brokers Survey
Commercial real estate brokerage firms posted another strong year, growing both leasing and investment sales volumes, according to data provided to National Real Estate Investor as part of their annual ranking of top commercial real estate brokers.
We are pleased to announce TCN Worldwide was recognized as one of the industry’s top brokerages, ranking 8th (by Deal Volume at $58.6 Billion), in National Real Estate Investor’s 2016 Top Brokers Survey.
The top commercial real estate brokerage firms posted robust year-over-year gains in deal volumes in 2015. National Real Estate Investor reported that the firms that ranked in the top 20 in each of the past two years posted average transaction volume growth of 15.0 percent from 2014 to 2015.
The NREI ranking reaffirms TCN Worldwide’s position as an industry leader, and one of the top brokerages in the commercial real estate industry.
See TCN’s Top 10 Member Deals for 3rd Quarter 2016.
Read more: TCN Worldwide’s Commercial Focus Newsletter | 2016_Q3
—H. Ross Ford III
President & CEO, TCN Worldwide

High-End Amenities Not Just for Office Buildings | RE Journal.com

Industrial spaces with high-end amenities

High-End Amenities Make Employees More Productive
More and more industrial spaces are becoming “the place” to work.  The amenities offered in newer industrial buildings rival those of modern office buildings.  Natural light, shower facilities, work-out rooms, beautifully landscaped grounds are becoming more common in warehouse buildings.  Dan Rafter’s RE Journal post discusses industrial companies need to be more competitive in the labor force.  They do this by considering not only location but higher-end amenities that make warehouse employees happier and more productive.
READ MORE: High-end amenities no longer just for office buildings — Industrial Spaces Offer Perks Too
By Dan Rafter, RE Journal.com, October 6, 2016

Why Corporate America is Leaving the Suburbs | The New York Times

Companies are leaving the suburbs for downtown.
Corporate America is changing.  Companies like General Electric and McDonalds are joining a long list of companies that are leaving the suburbs and returning to the city.  Cities provide tax incentives and young people want to live and work in the city.  The structure of companies is changing as well.  The executive offices may be in the city, but various other departments of the company may be in different other states or other countries.    States compete for companies to locate there by offering tax incentives.
Where you work matters.
Employees want to work in an energetic, vibrant and diverse atmosphere. Motorola Solutions executives will be locating 1,100 employees in downtown Chicago.  The response to job postings for positions located downtown are much higher than those located in suburban areas.
Advance communication tools are making it easier for headquarters and other corporate functions to be in separate locations.  Corporations also encourage employees to use public transit because corporations with downtown locations have eliminated parking lots and security gates.
Other corporations attempt to have an urban atmosphere in a suburban location to be avoid the cost of moving.
READ MORE: Why Corporate America Is Leaving the Suburbs for the City
By NELSON D. SCHWARTZ  AUG. 1, 2016

The Ideal Office Floor Plan, According to Science | Bloomberg

The open office plan is here to stay.
Where you sit matters.  According to Harvard Business School, in an open floor plan the idea is for co-workers to sit very close to one another.  What changes, however, is who sits next to whom.
Research conducted at one technology company shows, the denser an area is with productive people, the better nearby worker’s productivity, effectiveness, and quality of work.  The study measured proximity and productivity of 2,000 workers.   The converse is also true for “toxic” workers causing disruptions.  People rub off on each other, for good and for bad.  The open office floor plan  started as a way to for employees to share creativity and productivity.  Both Google and Pixar specifically have successful work places because of a collaborative office space.
Optimize Open Office Efficiency.
Employees tend to dislike open office floor plans claiming it is disruptive, distracting and stressful.  The thought is that workers with different strengths should be grouped together, mixing high-productivity employees with lower-quality work with slower people generating high-quality work.
READ MORE:  The Ideal Office Floor Plan, According to Science
By: Rebecca Greenfield – August 1, 2016

Economic and Real Estate Market Snapshot-Q2 2016 | Shenehon Co.

Shenehon Company has released the 2nd Quarter 2016 Economic and Real Estate Market Snapshot.  The report highlights the following topics:

U.S. economy continued to expand in the first half of 2016
The energy industry continues to be hamstrung by a glut of supply and tepid demand
Leading indicators suggest economic growth at a modest pace through at least the immediate future
Tighter unemployment rates are putting upward pressure on wages
Home sales in the Twin Cities increased by 6.2% through May and sale prices rose by 5.6%
Twin Cities multifamily permitting activity is down

READ ENTIRE MARKET REPORT—Shenehon Twin Cities Market Report – Q2 2016

NAIOP Office Space Demand Forecast

New Report by the Research Foundation
Office Space Demand Forecast:
Second Quarter 2016
Key report findings:

The national office market is forecast to absorb approximately 34.6 million square feet of space in 2016, down from 62.1 million square feet in 2015, as economic growth flattens in the U.S.
GDP growth, which slowed to 0.5 percent in the first quarter of 2016, is forecast to remain low, near 1 to 2 percent annualized growth, with the lower boundary of the GDP forecast dipping into slightly negative territory.
The current forecast projects net absorption of office space to regain some strength in 2017, totaling approximately 46.2 million square feet. However, this figure could change, depending on how the economy fares throughout the rest of 2016.

 
Economic Flattening Points to Declining Demand for U.S. Office Space Through 2017 

The national office market is forecast to absorb approximately 34.6 million square feet of space in 2016, down from 62.1 million square feet in 2015, as economic growth flattens in the U.S., according to Dr. Hany Guirguis, Manhattan College, and Dr. Joshua Harris, University of Central Florida. Gross domestic product (GDP) growth, which slowed to 0.5 percent in the first quarter of 2016, is forecast by the model to remain low, near 1 to 2 percent annualized growth, with the lower boundary of the GDP forecast dipping into slightly negative territory. The current forecast projects net absorption of office space to regain some strength in 2017, totaling approximately 46.2 million square feet. However, this figure could change, depending on how the economy fares throughout the rest of 2016.
“Employment, both overall and in the office-using sectors, had maintained fairly steady growth until the most recent reading for April 2016, which registered only 160,000 net new jobs. This was well below the 200,000 jobs-per month threshold considered the minimum necessary for sustained economic growth,” says Harris.  “We expect the overall declines in macroeconomic output to continue to result in lower employment gains for the rest of 2016.
Read more:  Office Space Demand 2Q16
By: Dr. Joshua Harris, University of Central Florida and Dr. Hany Guirguis, Manhattan College

New Mandatory Lighting Codes May Contain Hidden Costs | NAIOP Development Magazine

New lighting code standards could have unforeseen consequences for both tenants and building owners.

OPERATING COMMERCIAL  real estate is such a complex process that it can sometimes be overwhelming. Building owners and operators need to keep track of demand, interest rates, management, attracting and retaining tenants, lease negotiations and so many other things that it is easy for some things to fall through the cracks. Often, those things that are overlooked can result in very expensive consequences.
One such event recently occurred. At the beginning of July 2015, new standards were released, which took effect that same month. These codes deal with energy efficiency standards that are mandatory for residential and commercial building owners to follow. One aspect of the code changes that could have unforeseen consequences for both tenants and owners of commercial space is new mandates associated with lighting fixtures and switches.

Read more: New Mandatory Lighting Codes

By: Robert Hartley, director of research for Colliers International in the Greater Washington D.C. area.
This article is adapted from one that originally appeared in “Colliers Insights.” Winter 2015 2016

Five Trends That Will Shape the Industrial Sector in 2016 | NAIOP Development Magazine

Changes in the ownership, investment, retail, fulfillment center and supply chain landscapes will have big impacts on industrial real estate.
ALL EYES ARE ON the Industrial sector for a variety of reasons. Retailers and other warehouse occupiers are growing their distribution center footprints across the U.S., and e-commerce continues to stake its claim on the fulfillment and “last mile” landscape. The sector will also continue to see growing interest from foreign investors, and the Panama Canal expansion set to open in spring 2016 will help reshape supply chains and industrial development. Below are five themes to watch for in 2016:
More change in the ownership landscape. Thanks to a series of large-scale portfolio deals over the last few years, the overall ownership landscape for industrial and distribution properties in the U.S. is experiencing a significant shift toward institutionalization. That means that more Class A industrial and distribution center real estate will sit in the hands of increasingly fewer owners.
The evolution of the U.S. industrial segment toward institutionalization has been driven by a plethora of global forces.  It has particularly benefited from the mounting number of investors that are allocating increased amounts of capital toward investment in alternative assets like commercial real estate (CRE), as the U.S. industrial segment offers wider spreads over risk-free investments than other CRE segments. With an estimated $60 billion in completed and forecasted sales for 2015, current deployed capital is seeking the low-risk, higher return opportunity with which institutional investors have become increasingly comfortable in the industrial segment.
Read more–Five Trends That Will Shape the Industrial Sector in 2016.
By:  Aaron Ahlburn

Leveraging the Workplace: A Return to Value Through Better Design | NAIOP Development Magazine

Workplaces designed for the ways people will work in the future differ significantly from those that are handcuffed to saving money today.
SHIFTING DEMOGRAPHICS and evolving technology have created an untethered workforce for many industries. Why would a tablet-packing employee choose the beige hues of the corporate office over the comfort of his home or the heady aroma and Wi-Fi access of her local Starbucks? Such a question would not have troubled managers or designers even 15 years ago. It would have been laughed at before the advent of the Internet. Not so today.
More than ever before, today’s untethered workers have alluring options when deciding where their work gets done. This trend will only expand to include more workers in the future. But there are two strong reasons why those employees will keep commuting to the office: to connect to their colleagues and to contribute to the company culture. They recognize that collaboration is critical to their success as well as that of the business. These workers are also often drawn to the idea of being a part of something bigger than themselves. Real estate (RE) and human resources (HR) specialists are in a unique position to protect and promote these motivating factors.   Read More.
Written By:  Glenn Roby, AIA, and Tony LaPorte