With the new year rapidly approaching, what can we expect for the CRE Market? We've taken a look around the internet and collected some of the possible market conditions for your reading pleasure!
Mixed-Use: Investors are starting to see mixed-use property types as a safer bet in this economic climate. However, this may require compromises from investors and tenants. REITs! REITs! REITs!: Because of the uprise in the work, live, play mentality, the demand for office space may decrease; however, retail, multifamily, and industiral demand should remain high. In addition to this, transactions may continue to decline and upward momentum in pricing is likely to slow down due to modest economic growth and ongoing political uncertainty. What investors are being cautious about are potential interest rate rises and credit availability going forward. Labor in the Construction Indusrty: Changes in the job market have put some pressure on the labor force of the construction industry. This worker shortage means a longer development timeline and more delays. Construction companies may also be more selective about which projects they choose to take on. Global Markets: Unforseen political issues and conflicts make for a less stable global economy. Implications could be economic deceleration and less investment in real estate. New Types of Goods/Services: We've written several posts about the growing virtual/sharing economy, and there's no doubt that it will play a huge part in the economy in 2017. With this burst of new economic growth will come new types of regulations; the implications of which are unforseen at the moment. Next year will hopefully give us a more solid look at the sharing economy and the impact on the CRE market. How do you think the CRE market will look in the New Year? Let us know in the comments below! Sources: Top 10 Emerging Trends Shaping Real Estate in 2017 The Future of Mixed-Use Development A Look at Coworking Spaces in KC, and Why it Matters to You 2017 Commercial Real Estate Outlook Fed Raises Key Interest Rate, Citing Strengthening Economy 10 Construction Industry Trends to Watch in 2016 The CRE 2016-2017 Top Ten Issues Affecting Real Estate How the Shareconomy Affects Commercial Real Estate
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Last Friday we attended the Midwest Real Estate News’ Real Estate Investment and Finance Summit where our own Daniel Kann, MAI sat on the Financing Market panel! Here are five takeaways from the panelists' discussion: 1. Interest Rate Increases Will be Slow and Steady: It seemed to be consensus among the panelists that if interest rates increase, it will be at a glacial pace. Additionally, seller pricing could take interest rate increases into account if this does happen. 2. Kansas City is Attractive to the Coasts: Panelists agreed that the low cost of living and increased opportunity for yield is partially responsible for the influx of out-of-state property investors we've been seeing in KC as of recent. 3. CMBS Defaults Could Spike: This could cause CMBS lenders to be eager to close, according to the panelists. 4. Watch Out for TIF: When the discussion turned to Tax Increment Financing, panelists were concerned that there would be no incentive to continue to redevelop if we lean too much on TIF. 5. Kansas City is in a Good Place: Panelists predicted that Kansas City will become more and more desirable as time goes on. If the city continues to increase job growth and accommodate the desire for urban living, we will see an influx of people to the city. What do you think about the panel discussion? Anything to add? Sources: Cost of Living in Kansas City, Missouri, United States What are the Best Cities for Out-of-State Investors to Buy Rental Properties? The New American Dream Is Living in a City, Not Owning a House in the Suburbs
When it comes to appraising commercial real estate, you never know what you'll get to work on! Our work on complex projects includes everything from space rocket facilities to RV parks, and everything in between. Listed below are some of the most unique projects we've been able to assist with and the challenges that came with them. Challenges like these are what we encounter on a daily basis, which is why we highly recommend hiring an experienced appraiser for special-use projects like these. 1. Crude-By-Rail What it is: Trains transport crude oil all over the country and unload it onto barges, tankers or pipelines for onward delivery. Challenges of this property type: - Estimating Construction Costs - Economic obsolescence -Market analysis 2. Steel Mill What it is: Steel mills are industrial facilities where steel is manufactured. Challenges of this property type: - Estimating construction costs - Economic obsolescence -Market analysis 3. RV Park What it is: A campground for recreational vehicles or caravans. Challenges of this property type: -Type of user (recreational versus work related) -Forecasting demand What it is: A structure used to hold airplanes in protective storage. Challenges of this property type: Typical leases on hangars include varying rents that depend on the amount of fuel that is purchased (which is business value as well), so finding a market rent due solely to the real estate can be difficult to identify. What it is: An industrial facility for manufacturing space rockets. Challenges of this property type: It is rare that these sort of buildings sell on the open market, therefore the identification of comparable properties for a specialized facility like this can be difficult. Our contributor for this post was Jason Roos, MAI. Jason is an MAI designated member of the Appraisal Institute, and former President of the Appraisal Institute's Kansas City Chapter. He is a State Certified General Appraiser licensed in Kansas, Missouri, North Dakota, Nebraska, Illinois and Iowa. Jason is focused on providing clients with up-to-date, relevant and accurate market information as a director at Valbridge Property Advisors | Kansas City. Valbridge Property Advisors | Kansas City provides unbiased commercial real estate valuation for local, regional, and national clients. In business for over 38 years, the firm is led by five MAI-designated members of the Appraisal Institute. Here (in no specific order) are several mixed-use projects we're eager to see come to fruition in Kansas City. Check out our list and let us know what you're most excited to see in the comments below!
1. Armour Boulevard and Troost Avenue Redevelopment: Antheus Acquisitions, LLC was just granted redevelopment rights for three parcels near Armour and Troost. This project is calling for a total of 300 to 320 residential units over a total of 25,000 square feet of retail space at the four corners. Why we're excited: Not only will this development create much needed housing, but it will help mitigate the 'dividing line' affects that Troost is known for. 2. Woodside Village: A mixed-use development, Woodside Village will house 330 luxury residences and 35,000 square feet of retail shops. Why we're excited: Woodside Village will increase the walkability of Westwood by providing a grocery store and gym, as well as create a stronger community bond. 3. Commerce Tower: A "vertical village"; Commerce Tower in Downtown Kansas City will be improved by a $139 million renovation to create a mixed-use oasis for city-dwellers. Why we're excited: Commerce tower will employ smart design techniques with LEED Silver sustainability. This project will not only create much-needed housing, but essentially become a virtual neighborhood within a building. What's not to love about that?! 4. Plexpod Westport Commons: You may remember Plexpod Westport from a previous post we published about coworking! Plexpod will be the world's largest coworking facility housed inside Westport Middle School. Why We're Excited: As a coworking facility, this development will be an incubator for start-ups and small businesses, while also paving the way for innovation in the workplace. Aside from this, the development will be an asset to the community itself and contain a neighborhood urban farm. Sources: Armour Boulevard and Troost Avenue Redevelopment Troost/Armour Developer Throws in 300 Apartments to Dilute Risk Woodside Village Woodside Village Brochure Commerce Tower Aims to Solve Downtown Living Woes Commerce Tower Returns to Village Concept Development Group Announces Worlds Largest Coworking Facility A Look at Coworking in KC and Why it Matters to You 10 Tips for Beginners in the Appraisal IndustryValbridge | Kansas City understands how difficult it can be to land your first job in the appraisal industry and in light of our recent opening for a Research Analyst, we've decided to give you our best tips for beginners to the field.
1. Be UTD on the Latest Commercial Real Estate News We spend a great deal of time pouring over real estate blogs, business journals, and scholarly articles in order to do our jobs to the best of our ability. Things can change in an instant in this field, so we have to make sure we are up to date on what's going on in commercial real estate. 2. Get to Know the Competition Not only do we know our competitors, but we are friends with many of them! In real estate appraising it's important to know the firms in your area in order to gain better footing in the industry. There are instances when we will refer work to outside firms, and they will do the same for us. 3. Be Personable Whether we're doing field work for a client or chatting with associates at a networking event, people skills are extremely important in the CRE world. In many cases, being personable goes a long way in getting the information you need for an assignment. 4. Be Committed to Continuing Education The work doesn't stop once you land the job. In appraising, we have to continuously maintain certifications and take classes to make sure we have the most timely information and training. For example, a General Certified license requires 300 hours of education. 5. Find a Firm that's Right for You It's incredibly important to get to know yourself and your needs in training. Some firms employ a "sink-or-swim" method of training, while others (like us) employ very thorough practices in getting our employees up to speed. 6. Find a Mentor in the Industry Having an industry insider for advice really helps get you through those first few months. We promote a team-like atmosphere here in our office and find that it's incredibly helpful to new hires. 7. Have a Sense of Humor It's easy to forget to not take things so seriously sometimes. Most of the time we're hard at work here at Valbridge, but we also love to send funny emails, prank each other, and go on fun office outings! 8. Have a Passion for Development and Real Estate Many of the people who work at Valbridge come from different backgrounds, but all share a passion for commercial real estate. Doing something in the field you love makes everything worthwhile. 9. Have a Passion for your City! One of the reasons our appraisers enjoy their jobs so much is because they love getting to work on projects in the Kansas City area. Imagine getting to work on a property you've always loved, or for a local client you admire. Getting to know Kansas City so well is an awesome perk; it's like having a backstage pass to the city! 10. Have a Fire in your Belly This career path is not for the faint of heart. Motivation is key in being a successful appraiser, and many people do not make it past the six-month mark. There will definitely be humps in the beginning (as with any job), but the end result is an extremely rewarding and well-paying career. We hope these tips help! Was there anything else you would like to know? Do you have tips yourself that you would like to share? Be sure to comment below this post! Have you considered a career in commercial real estate appraisal? In the video below, several of our Valbridge colleagues share why appraising is a great profession, and why it may be the perfect fit for you! Once you've decided appraising is the career for you - the same Valbridge colleagues share with you why Valbridge Property Advisors is a great place to work! Do you have an appraisal question you want to ask, but feel like you’re the only one with it? For the New Year we caught up with our Senior Managing Director, Laird Goldsborough, on frequently asked questions he received in 2015, and the answers he gives. Check out the list below to see if your question is answered. 1. How much does a standard commercial report cost? Answer: It depends. What the report will be used for, interest appraised, property type, etc. all come into play. 2. Can you send me a copy of the report (prepared for a bank, for example)? Answer: We can, but only if you are our client or if we get permission from our client - per regulations (USPAP). Client = person who engaged us. If you are the property owner, but did not engage us we must have permission to send you a report copy even though it’s your property. 3. Can you get the appraisal completed in two weeks? Answer: Mostly likely no. The appraisal process is threefold: gather, analyze, report. To go through all three steps and arrive at a reliable value the average time it takes for a report is three weeks, but often longer. 4. Can you just tell me what the value is? I don’t need much in writing - maybe a page ... Answer: No, per regulations (USPAP). As stated in the question above, to come to a reliable value you must go through the appraisal process of gathering data, analyzing the data and reporting the findings. Depending on your needs, a restricted appraisal may work for you. It is a shorter report. The appraiser does the same amount of data gathering and analysis, but much of the information is retained in the appraiser’s work file instead of written into the report. 5. Can I just get an update (of a report written five years ago)? Answer: No. The market changes, and with it real estate values change as well. Click here to learn more about the Uniform Standards of Professional Appraisal Practice (USPAP). We looked back through our Valbridge Advisor newsletter archives to find the most popular CRE articles of 2015. Take a look below to see the most prevalent in order: 1. 2015 and 2007: A Sense of Déjà Vu 2. Which Generation is Really Driving the MF Market? 3. Developers May Backfill Dead Metcalf Shopping Centers 4. Why the Apartment Cycle is Good for Five More Years 5. Kansas City's Office Market: A Look at the Latest Stats 6. Is Multi-family Rent Growth Hitting a Slowdown? 7. Time to Worry About Speculative Construction? Not Yet, Experts Say 8. Renner Commerce Center Sells for $13.15 Million 9. Walgreens in Shawnee Mission Sells for $7 Million 10. Land South of Kansas City Purchased to Prevent Future Development Below is an article from the latest National Valbridge newsletter featuring our Director of Multifamily Valuation, Daniel Kann, MAI: Sherlock Holmes could very well have become an income-property appraiser. Valbridge professionals act as detectives with every market and feasibility study they perform. Most often the mystery is to deduce the highest and best use of a property; in other words, the use that would produce the highest net return on investment. Valbridge's Daniel Kann, MAI, a multifamily valuation expert, undertook such an exercise when he performed a market and feasibility study for the owner of a 14-acre suburban site. His analysis began by determining what was physically possible for the site, what uses were permitted under zoning laws and deed restrictions, and what was economically feasible. Then his examination got really interesting. To estimate demand for different potential product types, he analyzed employment and income data, other demographic information, and existing and future inventory and supply in various stages of production. He studied market occupancy, projected absorption, and estimated sales prices and asking rents for various multifamily options. Daniel and his team evaluated 31 comparable properties in addition to the overall market, and analyzed the option of holding the site for future development versus developing it immediately. The market and feasibility study concluded that the area in which the site is located could not support additional rental housing. In fact, depending on the timing of additional phases at other developments, the market could become even more overbuilt — with increased vacancy, declining asking rents and additional concessions necessary to capture tenants. Rather, the analysis revealed, a for-sale residential use would be maximally profitable. The target market: professionals and empty nesters without children who have a higher median household income. The highest-return on investment type: a patio/villa home project. Daniel’s study illuminated even more, including the optimal mix of floor plans and unit sizes. Sherlock Holmes couldn’t have produced a more revealing result. |
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