Keep Your Tenants and Properties Safe During Hurricane Season

Hurricane season is June 1 through November 30, so you know what that means: time to batten down the hatches and prepare yourself – and your tenants – to weather the storm. While the Insurance Information Institute’s 2019 hurricane season outlook is relatively mild in comparison to 2017, it’s still a good idea to remind your tenants of the best ways to stay safe in the event of a storm.

Here’s what you and your tenants need to know to keep calm in the chaos of severe weather, as well as what to do when a hurricane hits and your rental properties.

Before a Hurricane

While no one would likely choose to live through a hurricane, as natural disasters go, they have one advantage: forewarning. Luckily, you and your tenants prepare for these storms before they come through. As such, there are few things to keep in mind in the build-up to a storm to make sure your tenants and rental properties remain as secure as possible.

Know the Difference Between Watch and Warning

The amount of time you and your tenants have to plan/prepare depends on which one is issued. A watch gives you more time and usually means that the storm will arrive within 36 hours. A warning, however, only gives you about 24 hours. Be sure to get moving quickly if the latter comes along.

Brush Up on Your Insurance Knowledge and Encourage Your Tenants To Do the Same

As a landlord, you should double-check to make sure your landlord insurance covers flooding and any potential damage to the structure of the rental dwellings that could be caused by water or high winds. Do you know what you need in order to file a claim? Be sure to keep an inventory of the property for these purposes, as well as know what you’ll need in order to be covered.

And if you don’t include renters insurance as a condition of your lease – or even if you do – now would be a good time to send a friendly reminder to your tenants that your landlord insurance will not cover any damage to their personal belongings. Encourage your renters to review the terms of their renters insurance to make sure it covers any potential damage to their personal belongings due to floods.

Provide Instructions on How to Create an Emergency Kit

Most of the things your tenants need they probably already have on hand, but the trick is to make sure everything is in one place. That way when they need it, they can simply grab and go. In your communication with tenants, include tips for how to create an emergency kit, which should include things like non-perishable food items, water, flashlights and batteries, a battery-powered radio, cash, some clothing items, basic tools, and a first aid kit – just to name a few items.

During a Hurricane

While you can prepare to some extent for a hurricane, what you and your tenants do during the storm is also crucial to ensure their safety. No matter the severity of the storm, communication is key.

Encourage Tenants to Follow Directions and Evacuate if Necessary

If the area housing your rental properties is hit with an evacuation order, don’t ignore it! People often think that these are not as serious as they actually are, but it’s always better to be safe than sorry. Make sure all your tenants are aware of the evacuation, and actively encourage them to leave the property and seek a safer location. After all, no one wants to be stuck in an apartment when a hurricane does hit. But, if your tenants are…

Advise Tenants to Stay in Small, Windowless Areas

Recommend they stay in a bathroom, closet, or hallway on the lowest possible floor as their safest bet. The emergency kit they created previously will come in handy here, especially if the power goes out. If they have a battery-powered radio, they should to listen for updates on the storm, and try to remain as calm as possible.

Keep Tenants Up to Date

Let tenants know they can keep up with the storm on their phones (if they still have service) through the National Weather Service or listen for updates on the local radio station.

After a Hurricane

Once the hurricane has passed, communicate as needed with your residents to make sure they’re safe and to make sure they have all the necessary services (e.g. water and electricity) in the wake of severe weather. If their belongings have been damaged, for instance furniture, there are interim resources available that are often covered by their insurance – such as furniture rental – that they can utilize to ensure they remain comfortable as things get back to normal.

While hurricane season can be a stressful time everyone, with these tips, you and your tenants will be well-prepared to successfully weather the storm.

https://www.american-apartment-owners-association.org/property-management/landlord-quick-tips/tips-to-keep-your-tenants-and-properties-safe-during-hurricane-season/

Making Stadium Design An Urban Mixed-Use Home Run

Now is the golden age of stadium-anchored mixed-use development — or at least sports stadiums as important components of urban mixed-use developments. A proposed stadium project surrounded by a sea of parking, so common in the late 20th century, would probably be a nonstarter these days. According to experienced stadium designers, there is no single formula for putting together a mixed-use project with a stadium component. Urban settings vary too much from place to place, and so does the configuration of the stadium, depending on the sport played there and other uses. Even so, as developers and designers are busy trying to get mixed-use right in each setting, patterns are emerging.

Courtesy of Jeremy Bittermann & Allied Works Architecture

Providence Park Stadium Expansion in Portland, Ore.

For one thing, the stadiums themselves are being made as experiential as possible, above and beyond the entertainment provided by the game. Also, stadium exteriors aren’t being designed to come across as separate from their surroundings, and the other development in conjunction with the stadiums is far more sophisticated than tacking on a few nearby bars and restaurants. Entire communities are being invented or at least upgraded with a live-work-play spectrum of properties.

The payoff promises to be big: more revenue for teams not only from increased attendance, but also from their share of the development.

“If you look at venues going forward, they’re going to anchor mixed-use developments, especially but not only baseball stadiums,” Populous Design Director and principal Byron Chambers said. Chambers, in the firm’s Dallas office, has designed a wide variety of stadiums, including Major and Minor League ballparks, NFL stadiums and collegiate facilities.

“Mixed-use is the way the stadiums are going to succeed, and the way the developments in their neighborhoods are going to succeed,” Chambers said.

The real estate industry is responding to the integration of sports into the fabric of mixed-use districts. Earlier this year, Chicago-based Cushman & Wakefield established a Sports & Entertainment Advisory Group to facilitate the design, building and operations of athletic and entertainment venues as parts of a whole, rather than isolated entities

“The sports and entertainment industry is changing rapidly, and the traditional revenue model has evolved and expanded,” Cushman & Wakefield Executive Managing Director Craig Cassell said. “As a result, there’s a tremendous opportunity to serve the sector.”

Cassell, along with Executive Managing Director Michael Sessa, is leading the group.

“Within the last couple of years, we identified this as an opportunity to grow within this vertical market of sports and entertainment,” JLL Senior Vice President Megan Pawlowski told Bisnow.

Pawlowski oversees JLL’s D.C.-area Venue Engineering Services team, which manages a variety of services and equipment at four sports venues, including Capital One Arena in Washington, D.C.

In the ideal stadium-anchored mixed-use development, visitors shouldn’t feel that stadium stands apart from the surrounding area.

“The stadium experience has to be incredible, but more than that, it has to connect to the surrounding area,” Chambers said.

This is being done at the oldest and newest ballparks. Wrigley Field in Chicago is an example of a venerable old ballpark undertaking new development to enhance its neighborhood — in recent years there has been a slew of new office, retail, entertainment and hotel space built in the vicinity of the storied early 20th-century stadium.

A new stadium that in some ways is setting the tone for integration into its neighborhood is the facility for the Atlanta Braves, Chambers said. SunTrust Park opened in 2017 in Cobb County as the home of the Atlanta Braves with a mixed-use community called The Battery at SunTrust Park developed simultaneously that includes retail, entertainment, office and residential space.

“The spaces in between the stadium and the surrounding urban fabric are key,” Chambers said. “They have to allow people to work and play in the same area.”

The connections between the stadiums and their surroundings are taking a number of forms. At SunTrust Park and The Battery at SunTrust Park, that connection includes one-network wireless infrastructure that provides 200 gigabytes of bandwidth, and more than 800 hot spots to facilitate fans’ upload of streaming video and photos to social media.

The connection can also be thematic. The NFL’s Detroit Lions’ home stadium, Ford Field, was renovated in 2017 with lighting, materials and other details inspired by the surrounding neighborhood and urban setting, according to Rossetti, which did the original design as well as the renovation. Detroit’s history inspired the southern side of the project, while the auto industry and midcentury design influenced the northern side.

Or the connection can be physical, as was implemented with the expansion at the MLS Timbers’ historic home of Providence Park, in Portland, Oregon’s Goose Hollow neighborhood. Designed in 1925 but only partially completed, the stadium had direct visual access from the street on its more public, eastern edge. Allied Works Architecture recently designed an expansion of that part of the stadium and focused on opening it up to the neighborhood.

“Our 4,000-plus seat Eastside Expansion provides dramatic views, atmosphere and fan experience while maintaining an open public arcade and street-level concourse,” Allied Works Director of Research Keith Alnwick said. “Where the original concrete and timber structure is heavy and inwardly focused, the expansion engages the city. The arcade over the public sidewalk gives the feeling of being inside the stadium and connected to the energy of the game.”

Brad Cloepfil, Allied Works principal and lead designer, describes the expansion as a new urban stadium type.

“It’s a civic platform, revealing the life of the game both on the field and in the stands, inviting at street level and alive on the floors above,” he said.

Courtesy of Rossetti

Part of the new interior at Ford Field, Detroit

The latest stadium developments are aiming to be as experiential as possible. That was a driving consideration for Detroit’s Ford Field. Rossetti’s Kirk Phillips, the project’s design lead, said the recent renovation strengthens the viability of Ford Field in the context of the entertainment district that surrounds it.

“The renovation provides new amenities that enhance the vibrancy of the district, providing a platform for top-tier national and international acts to perform in the core of a major urban city,” he said. “The flexibility and scalability of hospitality options opens opportunities for Ford Field to host mega-events, such as championship games and drafts, as well as a variety of regional, non-sports events.”

LA Rams Chief Operating Officer Kevin Demoff said during a Bisnow event that the Rams’ stadium and nearby mixed-use developments will be a place where fans can cheer LA’s two NFL teams — the Rams and the Chargers — but it will also be a major sports tourist destination. Though it is still under construction, the stadium has been tapped to host the 2028 Los Angeles Olympic Games’ opening and closing ceremonies, and was awarded host duties for the Super Bowl in 2022 and college football national championship in 2023.

For the Orlando Magic’s new development, the experiential parts are so important that the team created a tourism department, one of the only NBA clubs with a marketing team charged with marketing to tourists, especially from outside the U.S., including potential attendees from Europe, Brazil and the Middle East.

In Boston, The Hub on Causeway is being developed near the new TD Garden Arena, home to the NHL’s Bruins and the NBA’s Celtics. The 2M SF mixed-use project will include multifamily, office, hotel and a 15-screen ArcLights Cinema with extra-wide seats and a full café and bar.

In Atlanta, though Battery at SunTrust Park has been open for two years, its experiential offerings are still being improved upon. This year the Battery added Burn by Rocky Patel, a cigar lounge; a vinyl records store called Waterloo Sunset Records; and a boxing gym, the Nashville-established Pepper Boxing. It all meshes together into a dense urban experience that will draw people whether they are attending a game or not.

“What goes on in the stadium has to complement its surroundings,” Chambers said. “It’s part of the trend toward urbanization in this country, which isn’t going to change.”

https://www.bisnow.com/national/news/construction-development/for-new-sports-stadiums-its-go-mixed-use-or-go-home-100588

Not Just China: Foreign Investors Net Sellers In U.S. Real Estate This Year

For the first time since 2012, more foreign capital is flowing out of U.S. real estate this year than into it. In the first half of 2019, foreign investors purchased $21.3B worth of real estate and sold $21.4B worth, according to a new report by Real Capital Analytics.

Although China’s pullback has led much of the discussion surrounding cross-border investment, RCA found that the change has been driven not by one region punting entirely on the U.S., but by every region investing moderately less.

The driving force behind the drop has been a lack of available deals large enough for sovereign wealth funds and their ilk, the study said. The percentage of cross-border investment that has gone to portfolio or corporate acquisitions has plummeted compared to single-asset transactions.

In the past four quarters, 42% of all foreign investment was spent in entity-level deals, but the number drops to 14% when the timeline is restricted to Q2, according to RCA.

Canadian Brookfield Asset Management remains a dominant force among foreign investors into the U.S. In the past four quarters, Brookfield has spent over six times as much on U.S. real estate as the second-most-active capital source, German-based Allianz, according to RCA data. Yet Canadian investment dropped the most of any region in the world in the first half of the year.

Courtesy of Real Capital Analytics

Investment from the Middle East this year has already matched the region’s U.S. spending from all of last year, led by Kuwaiti sovereign wealth investment vehicle Wafra. The firm has spent over $1B on just two deals, underscoring how influential large transactions are on the overarching numbers.

Manhattan remains far and away the most likely market for cross-border real estate investment (though Boston is reportedly starting to catch up), but the type of investments that have been made there this year are telling for the world’s current outlook. In the most recent four quarters, foreign money has been behind 53% of all construction starts in the borough, but not one cent of that has occurred in the first half of 2019.

Though recession fears have risen in recent weeks, especially with regard to foreign markets, RCA characterizes the current trend in cross-border investment as a “yellow warning sign rather than a red one” due to the investor class’ dependence on huge deals.

https://www.bisnow.com/national/news/capital-markets/foreign-investors-net-sellers-us-real-estate-not-just-china-100602

WeWork Buying Spree Continues As It Snaps Up Rival Spacious

WeWork has acquired a rival coworking company, Spacious, for an unspecified price. The deal bulks up WeWork’s coworking holdings in its own backyard — Manhattan — where Spacious has most of its locations, though a handful are in Brooklyn.

“WeWork is still in growth mode — they need to hit those growth numbers post-IPO, and a couple acquisitions would help them do that,” Renaissance Capital Senior IPO Market Strategist Matthew Kennedy told Fortune.

Spacious’ business model, though rooted in coworking, is a little different from WeWork’s, so the deal also represents an expansion of WeWork’s model. Spacious transforms restaurants during their off-hours into temporary workspace.

“Landlords have been super-interested in what we’re doing because we represent the ability to experiment and activate the retail storefront,” Spacious co-founder and CEO Preston Pesek told Bisnow. “That’s our angle and we found that landlords are at the table.”

The Spacious deal came almost immediately after WeWork parent company The We Company released the prospectus for its long-anticipated initial public offering. The prospectus noted that WeWork lost nearly $700M in the first half of 2019, and said it will likely lose more money “in the foreseeable future.” One way WeWork has been burning through its capital has been via acquisitions — the Spacious buy is only WeWork’s latest acquisition, and probably a small one at that, though WeWork hasn’t said how much it paid. (Spacious’ Series A funding last year netted it about $9M.)

WeWork’s buys have not only increased its market share, they have expanded its international scope. The company acquired Chinese coworking company Naked Hub in 2018 and Singapore-based Spacemob the year before. This year, WeWork has broadened its tech holdings as well, buying data platform Euclid, mobile access platform Waltz and real estate management platform SpaceIQ, among others.

The coworking industry has been growing along with WeWork. JLL predicts that by 2030, coworking will represent 30% of the office market.  Coworking operators in the U.S. accounted for a record 13.4M SF or 7.6% of total office square footage leased in 2018, according to CBRE. Leasing activity by coworking so far this year indicates that 2019 could surpass that record.  As of midyear, coworking operators have leased almost 7.1M SF in 2019 across all markets tracked by CBRE, or about 8.5% of all leasing activity nationwide. WeWork’s competitors remain bullish on coworking regardless of what happens to their mega-competitor or whether its IPO sputters. They also expect further consolidation in the market.

https://www.bisnow.com/national/news/coworking/wework-buying-spree-continues-snaps-up-rival-spacious-100598

IWG Reported Mulling U.S. IPO To Compete Directly With WeWork

With WeWork’s upcoming IPO drawing skepticism and criticism, one of its largest competitors is hoping to set itself apart by following suit. IWG, the international company formed in 2014 with the acquisition of coworking operator Regus, is considering an initial public offering of its American business on the New York Stock Exchange, Sky News reports.

IWG is already listed on the London Stock Exchange with a market capitalization of £3.64B, equivalent to $4.45B based on Aug. 26 exchange rates. Though discussions surrounding IWG spinning off and listing on the NYSE are preliminary, founder and CEO Mark Dixon hopes to hit a valuation of at least £3B ($3.67B) with the move, Sky reports.

Despite more total space for lease than WeWork and yearly profits rather than billion-dollar losses, IWG’s target valuation is almost 16 times less than that of The We Company after the latter’s most recent funding round.

IWG’s umbrella includes coworking operators that target different consumer bases: Regus, Spaces, Signature and No18.

Dixon founded Regus in the late 1980s and oversaw explosive growth around the turn of the century, thanks to the dot-com bubble. When the bubble burst, so did Regus, with its American business filing for Chapter 11 bankruptcy protection in 2003.

IWG has been on the hunt for outside capital for at least the past two years, first by trying (and failing) to sell itself to investors such as Blackstone and Starwood Capital. The company then attempted to sell Spaces, only to fail to come to terms with a buyer once again, Sky reports.

More recently, IWG sold all of its locations in Japan and Taiwan by TKP Corp. to be run as franchises. It is a move it hopes to replicate all over the world to expand quickly without taking on the massive costs and debt obligations that WeWork has. Dixon’s thinking is to behave similarly to some international hotel companies and fast-food operators, according to Sky.

Skeptics of WeWork’s valuation point to that bankruptcy as reason to be wary of a rapidly expanding coworking business as the economy heads into a downturn. Amid the public dissection of The We Company’s IPO prospectus, competitors have been eager to establish their business models as distinct from the industry leader’s perceived aggression and much-touted “spirituality.”

One week after the prospectus was published by the Securities and Exchange Commission, Industrious announced the completion of a $80M fundraising round that included backers like Brookfield and Wells Fargo. As part of that announcement, the company predicted that it would be profitable by the first quarter of 2020.

The next day, Knotel announced the completion of a fundraising round of its own, led by Kuwaiti investment arm Wafra, which pegged the company’s valuation at over $1B. Knotel CEO Amol Sarva has been a vocal critic of WeWork’s corporate strategies for years.

https://www.bisnow.com/national/news/coworking/iwg-maybe-ipo-compete-with-wework-100522

De Blasio pushes plan to restrict hotel development

Mayor Bill de Blasio has asked the city’s planning department to draft a proposal outlining how to implement a city-wide special permit for hotel development, just a few months after a major hotel union endorsed and financially contributed to de Blasio’s presidential campaign.

“The city continues to explore how to implement a citywide hotel permit,” a spokeswoman for the department said in a brief statement. A source at City Planning characterized the mandate as being in a “study” phase.

The request is the first step in crafting what would be a major change to land use policy that could restrict hotel development in the city at a time when tourism has surged, driving demand for new hotel rooms. If such a rule were to be adopted, new hotel projects anywhere in the 5 boroughs would be required to pass through the city’s costly and politically-fraught land use review process – a hurdle that many land use experts said would stymie hotel development.

“If the city is actually contemplating a ban on hotels, it would be a devastating blow to our remarkably resilient tourist economy, to the many service industries that are linked to hotels and to multiple neighborhoods,” said Mitchell Korbey, a land use attorney at Herrick Feinstein. “There is no land use rationale and absolutely no zoning or public policy justification for this.”

The new rule, if adopted, would make hotel development one of the most restricted use groups in the city – beyond even potentially hazardous operations such as petrochemical storage and other businesses that many city residents might find distasteful, including pornography stores, both of which are permitted as-of-right in specified areas.
Since the start of this Administration, we have examined ways to better regulate construction of hotels across the City, including the use of a special permit process city-wide. This pre-dates the June event.

The orders from City Hall to explore the policy change come just months after the Hotel Trades Council came out as the sole union backer of de Blasio’s presidential campaign – giving his sputtering bid a lift. A report in The New York Post revealed that about 70% of de Blasio’s presidential campaign contributions have come from the union’s members.

At a press conference with de Blasio in early June to announce the HTC’s support of de Blasio, Peter Ward, the HTC’s president, stated that he would like to see the city pursue a city-wide special permit for hotels, the Post resported.

The city sought to dispel the notion that the HTC endorsement and financial support for de Blasios presidential campaign spurred the decision to move ahead in the special permit.

“Since the start of this administration, we have examined ways to better regulate construction of hotels across the city, including the use of a special permit process city-wide,” Deputy Press Secretary Jane Meyer told Crain’s. “This pre-dates the June event.

Observers say that a special permit would, in most cases, essentially assure that new hotels use the HTC’s labor pool, because of the influence the union holds with City Council members through political giving and endorsements. The special permit process grants the City Council veto power over any project that passes through it, giving the political body the power to leverage concessions from developers on behalf of constituents or financial backers.

“This is pure politics under the guise of planning,” said Kenneth Fisher, a real estate attorney at Cozen O’Connor who served a decade as a City Councilman. “If you have a Councilmember that is supportive of the union, it’s unlikely a hotel project would get their signoff unless that project signed a neutrality agreement with the HTC at a minimum. There might be a district where that particular local Councilmember is immune to pressure from the union, but that would be the exception rather than the rule.”

https://www.infabode.com/hubs/general-new-york-hotel-market/hub_posts/120714

Blue Cross Plan Doubles Housing Investment, Eyeing Social Determinants

One of the nation’s largest Blue Cross and Blue Shield plans is more than doubling its investments in housing and related support to the homeless and those who cannot afford rent as health insurers intensify their efforts to address social determinants of health.

Blue Cross and Blue Shield of Illinois is investing $1 million in “housing and wraparound support services for members of Chicago’s homeless community to improve their health and reduce healthcare costs,” the plan, which is a subsidiary of Health Care Service Corp., the nation’s four largest health insurance company, said.

Though the investment is a fraction of what other health insurers like UnitedHealth Group, CVS Health’s Aetna health plan subsidiary and Anthem have made in recent years, the Illinois Blue Cross investment shows how housing is turning into a health insurer strategy to address social determinants of health.

“We know that factors outside the scope of healthcare — such as lack of access to housing, food and transportation — play a major role in a person’s ability to be healthy,” Health Care Service Corp. (HCSC) president Maurice Smith said in a statement. “They may also add to medical costs.”

Health insurers are investing in a variety of initiatives whether they be paying rent for Medicaid patients enrolled in their private health plans or partnering with a local health system to investigate the living conditions of health plan enrollees to make sure they have clean curtains free of harmful mold that could be deadly to a child with severe asthma.

The new housing strategies being launched by practically every health insurance company are also designed to increase profits as insurers figure a monthly rent payment is cheaper that a multi-day state in a hospital for a homeless man stricken with severe pneumonia or linking someone to a shelter where they can be screened for disease could prevent a costly illness down the road.

Already, UnitedHealth has invested more than $350 million since 2011 in affordable housing in more than a dozen states. And Anthem, the nation’s second-largest health insurer with Blue Cross and Blue Shield plans in 14 states, has committed more than $380 million to affordable housing over the last decade. And other insurers, such as Humana, are investing and partnering in certain communities as part of a “Bold Goal Initiative” that targets a variety of social determinants.

Executives at Illinois Blue Cross parent, Health Care Service Corp., say the insurer has invested several million dollars in housing in recent years in a five-state region. Health Care Service owns Blue Cross and Blue Shield plans in Illinois, Texas, Oklahoma, New Mexico and Montana.

In the case of Illinois Blue Cross, the health plan said it is among the initial private funders in Chicago’s Flexible Housing pool, a partnership between government and the private sector to better coordinate help for the city’s homeless.

“These social determinants of health are the reason we are developing and implementing strategies for health equity within the health care delivery system,” HCSC’s Smith said. “One solution is housing to improve health outcomes.”

The $1 million investment comes on top of $445,000 Illinois Blue Cross has invested since 2017 in other programs designed to support access to housing and improve health outcomes, the insurer said. The latest investment will help Chicago’s Flexible Housing Pool “secure quality, safe, affordable housing for people who are experiencing homelessness and have been frequent users of hospital emergency rooms and other crisis response systems.” The housing money is linked to case management and social services to increase the odds there will be better health outcomes for these homeless Chicagoans.

“The average life expectancy among America’s homeless is between 42 and 52 years old, much lower than the life expectancy for the general population at 78 years,” Blue Cross and Blue Shield of Illinois chief medical officer Dr. Derek Robinson said. “One estimate is that more than 80 percent of all homeless people have at least one chronic health condition. By taking away the obstacle of homelessness, we can empower individuals to better manage their medical conditions and avoid complex problems like kidney failure, heart attack, stroke or blindness.”

https://www-forbes-com.cdn.ampproject.org/c/s/www.forbes.com/sites/brucejapsen/2019/08/26/blue-cross-plan-doubles-housing-investment-to-address-social-determinants/amp/

Opportunity Zones Could Cost NY State, City Budgets Millions

The federal opportunity zone program, aimed at spurring growth in underserved areas, could cause major budget pain to New York City and state, according to a new watchdog report.

Passed as part of the Tax Cuts and Jobs Act in December 2017, the program allows investors to defer or avoid taxes on capital gains if they are invested in qualified opportunity zone funds and placed in low-income communities. Nationally, nearly 9,000 communities across the United States were nominated. In New York, there are 514 approved and designated census tracts in the program that include areas across the city, Long Island and rural parts of the state.

A Citizens Budget Commission report released this week, reported by Bloomberg, has found that the the program could result in the loss of $2B in tax revenue for the federal government. New York state and city budgets — because the state generates 14% of all capital gains nationally — could be disproportionately affected. The annual loss could be as much as $63M for the state and $31M for the city, per the CBC report, for the next 10 years. That figure could increase as opportunity zones participants begin to pull their money out.

“For investors and fund managers, the combination of deferring gains, reducing tax bills, and excluding future gains from taxation will boost returns on investment,” the CBC wrote in the report. “The program, however, may come at a high price to taxpayers.”

The programs could make up for the losses if the intended development does happen, in the form of higher property and payroll taxes from the jobs and projects created. But opportunity zone critics and advocates alike have criticized the lack of oversight or tracking written into the regulations, which could prevent any concrete evidence as to positive or negative effects of the program.

“Economic development spending in New York continues to increase without meaningful improvements in transparency, program design, or performance measurement,” the CBC report noted. “The state’s decision to conform to the federal OZ program without imposing additional transparency or accountability measures adds to this trend.”

The new zones have sparked a wave of excitement throughout the commercial real estate industry. Supporters of the program say it will push billions of dollars into low-income communities from investors who would have never invested there otherwise.

However, so far the main flurry of activity has occurred around events and marketing opportunities for the zones, as Bisnow reported earlier this month, not in investing in properties or businesses yet. Early data from CoStar shows funds are only bringing in about 10% of their targeted capital.

https://www.bisnow.com/new-york/news/opportunity-zones/opportunity-zones-could-cost-ny-state-and-city-budgets-millions-budgets-report-100462

WeWork, Industrious, IWG, by the numbers

The world’s introduction to coworking behemoth WeWork’s financials came via its initial public offering filed with the Securities and Exchange Commission last week.

There were a lot of figures to look at behind the company’s $47B valuation. The S-1 outlined everything from how many countries WeWork operates in (29) to its overall occupancy rate (90%) to how many of its clients have more than 500 employees (39%). Depending on how long it has taken you to read the beginning of this article, WeWork may have lost tens of thousands of dollars — since its disclosed operating loss in the first half of 2019 totaled $1.37B, we can break down their burn rate to $5,213 per minute.

What do all of these numbers mean? Are they all important in a market context? How does WeWork stack up to its competitors? Market data provider Thinknum put together a quick by-the-numbers look at some of the main numbers you may need and Bisnow has added to those with our own charts below.

Among them, how WeWork stacks up to direct competitors IWG (formerly Regus, and denoted that way here) and Industrious; its valuation compared to CRE’s biggest players; and how many workspaces each of these companies has. We also wanted to see how WeWork stacks up to the country’s largest REIT, Simon Property Group, for a sense of their proportional value.

First, we look at where WeWork has U.S. offices compared to up-and-comer Industrious, which just raised $80M last week and predicts profitability by 2020. Thinknum has done a deep dive on how the two companies are battling for market share and it is worth a read here, but for now we’ll just look at where both of them are operating. WeWork dominates in major cities, but Industrious appears to be gaining some ground in the smaller markets:

Next, we look at how WeWork compares to Industrious by per-seat price. Because both companies have shared their pricing, we can make both a side-by-side comparison here and a maximum and minimum price comparison:

Naturally, we are interested in how WeWork, a relatively new company, has grown its footprint compared to IWG/Regus, which has been around for over a decade and is both a public company and profitable. You can see the worldwide presence for both companies below:

https://www.bisnow.com/national/news/coworking/wework-by-the-numbers-100506

As Minimum Wages Rise, Hotels, Industrial, Retail Feel The Pressure

Cities, counties and states across the U.S. are increasing their minimum wage as advocates push for a $15/hour nationwide baseline, and the rising labor costs are forcing owners and occupiers of commercial real estate to rethink their business models.

D.C. last month increased its hourly minimum wage to $14 and it will reach $15 next year under a law passed in 2016. Seven states have also enacted laws to raise the minimum wage to $15, and these states — primarily large ones like New York, California and Illinois — include 30% of all U.S. workers.

The U.S. House of Representatives in January passed a bill to gradually raise the nationwide minimum wage to $15, and while it has not moved forward in the Senate, the issue has become a central topic in the Democratic presidential primary.

While business groups argue the rising minimum wage could cause employers to cut jobs and go out of business, some research indicates the overall effects of minimum wage increases on employment may be overblown.

Regardless of if it will have widespread effects on the nation’s unemployment rate, individual businesses in the restaurant, hotel and industrial sectors are taking a hard look at how the rising wage could affect their bottom line.

The rising minimum wage has had an especially meaningful impact on hotels, which employ large numbers of workers and haven’t experienced strong revenue growth in recent years.

The last three years have been the only years this century in which labor costs have surpassed revenue growth for the U.S. hotel market, according to hotel research firm STR. Labor costs grew by 3.9%, 3.1% and 4.1% during 2018, 2017 and 2016, respectively, STR found.  STR Senior Director Joseph Rael attributed the rising labor cost to a combination of local minimum wage increases and a more competitive market for workers. He said rising labor costs have been affecting every sector of the hospitality market from luxury hotels to economy chains.

“The big impact is going to be when revenues start going the other way,” Rael said. “When we start to see revenue declines, that’s when those wage pressures really affect the hotels.”

Some hotel owners and operators seeking new locations may favor parts of the country that haven’t increased the minimum wage to ensure they can keep making a profit, Rael said.

“When you’re looking at a market, you’re going to look at what are the costs, what kind of profit margins do you expect you can achieve long-term, and so [minimum wage] is certainly a factor when you look at some of these markets,” Rael said.

Robert W. Baird analyst Michael Bellisario, who covers hotel REITs, said he has heard many hotel owners express concerns about rising minimum wages.

“It’s happening across the board. Certain cities are worse than others, but because there are a lot of lower-price-point workers in a hotel, it’s impacting that part of the business,” Bellisario said. “Some hotel companies pay above the minimum wage, but when the floor gets raised everything above it has upward pressure, too.”

Apple Hospitality REIT named rising labor costs as one of the top risk factors associated with its portfolio in its 2018 annual earnings report. It said the company’s operating expenses as a percentage of revenue increased last year primarily because of rising labor costs.

“The company anticipates continued increases in labor costs due to government regulations surrounding wages,” Apple Hospitality REIT said in its earnings report, adding that the low unemployment rate also puts upward pressure on labor costs.

RLJ Lodging Trust, Pebblebrook Hotel Trust and Sunstone Hotel Investors have also named rising labor costs as an ongoing challenge in recent earnings reports.  Bellisario said hotel developers are finding it harder to make the math work for new projects in areas with rising labor costs and slow-growing hotel revenues.

“Anyone who’s evaluating a new development today, you’re not delivering it until 24 or 36 months from now, and there’s a lot of uncertainties,” Bellisario said. “So you model 3% to 5% cost increases on the labor side, and that becomes disproportionately impactful when you’ve got to be more conservative in your underwriting.”

The Walt Disney Co. and Wincome Group both threatened last year to pull out of projects in Anaheim, California, if a $15 minimum wage initiative passed, and voters then approved the ballot measure in November.

“How are we going to attract a hotelier or developer to Anaheim with an already difficult political environment and tell them that it is going to cost you 20% to 30% more to run your business here?” Wincome Group CEO Paul Sanford told Bisnow last year. “I don’t see this as a solution.”

Warehouses

Companies that occupy industrial real estate tend to employ large numbers of minimum wage workers, and the rising labor costs associated with minimum wage increases could lead them to relocate.  Colliers Research Analyst Dion Sorrentino, who is based in Boston, said Massachusetts increasing its minimum wage to $15 by 2023 is pushing some industrial users to look at cheaper markets.

“We have already seen quite a few users who don’t need to be in the area starting to look elsewhere, mostly at Pennsylvania and Ohio,” Sorrentino said. “That activity is happening … as [minimum wage] approaches $15 in 2023, we expect to see more and more pressure.” Sorrentino said he couldn’t disclose the names of the industrial users looking to relocate because they are his firm’s clients, but he said they are primarily small manufacturing companies that don’t need to be near population centers.

Luckily for the owners of industrial space near cities like Boston, e-commerce companies such as Amazon and Wayfair have gobbled up warehouse space near population centers to enable faster delivery times.  The large e-commerce users have helped keep industrial vacancy down, but they have also contributed to rising rents.

Because rents and wages are the two top costs for an industrial user, Sorrentino said these trends are forcing small manufacturing businesses across the country to relocate away from urban areas.

“A lot of the New York users will move right across the border to Pennsylvania, and in Los Angeles they’re moving further out from the city,” Sorrentino said. “Since California is such a large population center, it’s harder to leave the state, but moving away from the city helps reduce rent costs, which mitigates the increasing wage costs.”

Restaurants

The restaurant industry is one of the most frequently discussed sectors in minimum wage debates, but as many of the major cities increasing the wage also have booming restaurant scenes, it can be hard to discern the immediate impacts.

Some business groups argue that independently owned restaurants can’t keep up with the rising costs associated with minimum wage increases and are forced to cut jobs and close their doors, while other research indicates the overall impact on restaurant employment may be negligible.  Restaurant Association of Metropolitan Washington President Kathy Hollinger said D.C.’s rising minimum wage is putting pressure on small businesses in the nation’s capital.

“Do I think people are struggling a little bit with the increases? Yes, I do. I think they are and I think it’s harder to do business in the city,” Hollinger said. “These overall increases, coupled with new policies requiring money from small-business operators, the bottom line is it is really pushing on a pressure point.”

Hollinger said the minimum wage is one of several rising costs that D.C. has recently pushed on restaurants, including a 0.62% quarterly payroll tax to support paid family leave that went into effect July 1 and a 2016 law requiring businesses with over 20 people to offer commuter benefits.

“Small-business owners are having to find a way to identify pots of money when they have such very thin profit margins, that’s where the struggle is,” Hollinger said. “There are all of these things happening leading into 2020, and the business model just can’t be sustained because there’s not enough cash flow to account for all of these different increases.”

She pointed to restaurants that have recently closed in D.C., including Penn Commons, Proof and 701 Restaurant as examples of businesses that have shuttered as a result of rising costs, which also include market-driven factors such as rent increases.

Some restaurants are also choosing to cross the river into Virginia, where they don’t face the same minimum wage increases. When Meridian Pint closed its Columbia Heights bar and restaurant in April and announced it would reopen in Arlington, owner John Andrade cited D.C.’s minimum wage as one of the main factors.

“When you look at businesses in D.C., when employees are commuting from Virginia anyway, it makes sense for a business owner to say, ‘Why not just move across the border?’ especially with Metro and public transit,” the Employment Policies Institute’s Samantha Summers said.

EPI, a nonprofit research organization, released a study in January that found if a nationwide $15 minimum wage were implemented in January, it would reduce employment by roughly 2 million jobs.

“Businesses have no other options than raising prices, laying off employees, cutting back hours or closing altogether,” Summers said.

But research from other organizations studying the employment effects of states that have already increased the minimum wage has come to different conclusions.  A study released this month found that New York City’s restaurant industry is “thriving” despite raising its minimum wage in phases that reached $15 at the end of 2018. The study, from The New School and the National Employment Law Project, found New York City’s restaurant industry has experienced stronger job growth than 12 other large U.S. cities that didn’t increase the minimum wage over the last five years.  NELP Researcher Yannet Lathrop, who worked on the study, said that its findings were consistent with the majority of research on the effects of minimum wage increases.

“These studies in general have been concluding that as minimum wage increases take effect, even to a significant amount like $15, that they really do not have that much of an effect on employment,” Lathrop said.

Lathrop also pointed to an April working paper from the University of California Berkeley’s Institute for Research on Labor and Employment that studied six cities that have already increased their minimum wage above $10: D.C., Chicago, Oakland, San Francisco, San Jose and Seattle. The study found no significant employment losses in the cities.

Another IRLE study that Lathrop pointed to disputed the argument that businesses would move to neighboring jurisdictions with lower minimum wages. The 2010 study looked at 288 pairs of neighboring counties separated with different minimum wages, and found no adverse employment effects on the jurisdictions with higher minimum wages.

“These businesses and their customer bases tend to be local,” Lathrop said. “These businesses, even big-box, multi-state businesses, are not going to relocate to Virginia because D.C. and Montgomery County’s minimum wage is closer to $15. It’s just not going to happen.”

https://www.bisnow.com/national/news/economy/minimum-wage-increases-putting-pressure-on-hotel-retail-and-industrial-businesses-100509

Berlin could cap rents at 7.97 eur per square meter

Berlin’s city government plans to cap rents at 7.97 euros (£7.23) per square metre per month as part of a rent freeze agreed earlier this year, newspaper Tagesspiegel reported, citing a draft law.

Katrin Lompscher, Berlin’s Senator for Urban Development, plans to apply the cap to flats built until 2013, the report said, adding flats built from 2014 would be exempted.

The draft is still subject to discussions and could still change, the report said.

The Senate will prepare a bill to be sent to the city’s parliament by Oct. 15. It is intended to take effect in January.

Berlin’s city government in June decided to freeze rents for five years, heeding complaints from residents that their once famously affordable city was pricing them out.

Deutsche Wohnen is Berlin’s biggest landlord with more than 115,000 flats in the German capital while peer Vonovia owns more than 42,000.

https://www.marketscreener.com/DEUTSCHE-WOHNEN-SE-487040/news/Berlin-could-cap-rents-at-7-97-eur-per-square-metre-Tagesspiegel-29113449/

Amazon.com just opened its biggest office building in the world

Amazon just opened its biggest office building in the world in the Indian city of Hyderabad.The online retail giant’s new campus in the city’s financial district opened on Wednesday. It covers 9.5 acres and has 1.8 million square feet of office space, making it “Amazon’s single largest building in the world in terms of total area,” according to the company.The building can accommodate up to 15,000 employees, nearly a quarter of Amazon’s full-time India workforce of more than 62,000. The company also has 155,000 contract workers in the country, making India its biggest base outside the United States.The Hyderabad campus is the first office outside the United States that Amazon fully owns.

The new Amazon office buildings in Hyderabad can accommodate up to 15,000 employees. Amazon (AMZN) has poured billions of dollars into its India business in recent years. It is expanding its operations and reportedly looking for stakes in local retailers as it battles Walmart for an e-commerce market that Morgan Stanley estimates will be worth $200 billion by 2027.

“This new Amazon campus building is a tangible commitment to that long-term thinking and our plans for India,” Amit Agarwal, the company’s India head, said in a statement.

The prize is huge. India has over 600 million internet users, but the majority of its population still isn’t online. Amazon is trying to cash in on that potential by looking to expand its grocery business, creating more Indian content for its Prime Video streaming service and even making its mobile app available in India’s most popular language, Hindi.

https://www.livetradingnews.com/amazon-com-inc-nasdaqamzn-just-opened-its-biggest-office-building-in-the-world-150636.html#.XWKD1N5KjIU