Mortgage Rates and Home Prices Favor Buyers—but How Long Will This Christmas Miracle Last?

Christmas has arrived early for America’s homebuyers! And it’s not just one gift, but two that should make them giddy.

Gift No. 1: lower mortgage rates, which have been falling for the past four weeks.

“Housing data in the week that followed the Thanksgiving holiday showed that the recent dip in mortgage rates may already be having an impact,” explains® Chief Economist Danielle Halein her weekly analysis.

Gift No. 2: Home price growth “slowed notably” for the week ending Dec. 3, according to Hale.

We unwrap the latest real estate statistics and what they mean for homebuyers and sellers in our weekly column “How’s the Housing Market This Week?”

Mortgage rates dipped again

Not too long ago, it had been a grim picture: Mortgage rates had more than doubled over the past year and reached a 20-year high of 7.08% for a 30-year fixed-rate loan in late October.

Yet since then, for the past month, rates have been in a free fall, hitting 6.33% for the week ending Dec. 8, down from the previous week’s 6.49%, according to Freddie Mac.

Even this singular one-week decline comes with major savings on a typical house, amounting to $185 saved per month.

Yet with rates in flux, there may be little time for home shoppers to waste.

“With far more consumers still generally expecting higher rates rather than lower rates, those hoping to make a purchase may have some urgency to capitalize on what may be a temporary dip,” warns Hale.

Home price growth is tapering off

In November, the median price of a house hovered at $416,000. Yes, that’s high, but nowhere near the record high of $449,000 in June.

Furthermore, although the cost of a home has grown by double digits year over year for the past 49 weeks straight, the good news for homebuyers is that this growth is steadily ratcheting down.

For the week ending Dec. 3, the median listing price grew by 10.3% compared with the same week last year. So prices are still higher than a year earlier, but this was a steep decrease from the prior week’s growth rate of 12.2%.

And if the slowing continues, home price growth could move back into single-digit territory before the end of the year, giving buyers even more purchasing power.

Where are all the new homes?

While homebuyers might be thrilled by these sudden good tidings on the mortgage and home price front, the downside is that they’ll have fewer fresh listings to shop.

For 22 consecutive weeks, the number of new home sellers willing to list has dwindled, dropping for the week ending Dec. 3 by 8% compared with this same week last year.

Yet the silver lining is that this is the smallest decline since July.

And overall, the total number of homes for sale—both new listings and old—shot up an eye-popping 53% compared with one year ago.

This spike in overall homes for sale is largely a result of homes spending more time on the market. For the week ending Dec. 3, home shoppers had nine more days to scroll through listings compared with the same time last year.

“Homes are sitting on the market for longer, as buyers take their time to decide,” says Hale.

Buyers may need to act quickly

While lower mortgage rates, tapering home price growth, and more properties to choose from are all excellent news for homebuyers, there are still plenty of challenges and unknowns looming in 2023.

“Affordability continues to be a challenge compared to a year ago,” says Hale.

Home shoppers eager to make the most of their sudden boost in buying power should look to Northeast and Midwest markets for well-priced, affordable homes.

“Looking ahead, we expect midsized markets that offer affordability and are home to a mix of domestic manufacturing, government, health care, and education employers to have some of the top housing markets of 2023,” says Hale.

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Large Indoor Parks Show the Value of Office Greenspace

As we inch towards the third year alongside the existence of COVID-19, the pandemic’s impact seems more visible in some places than others. Restaurants and bars are crowded again, air travel has rebounded, and mask mandates have eased save for specialized facilities. Yet the dreaded virus has forever changed how people work, which means it has caused us to reconsider what the ideal office should look like. Even though by now, many of us (myself included) are tired of mentioning the pandemic, there continues to be a lot of talk about what amenities office owners and operators should incorporate into their buildings in order to remain competitive in a post-pandemic market, and rightfully so.

Even with the recent wave of layoffs and a recession due to appear any minute now, office workers continue to have significant leverage, and offices need to adapt to meet that new demand. Now that hybrid work has taken over, and employees have more flexibility to work where they want whenever they want, offices need to make a positive impact in order to entice a workforce out of their homes. From JLL’s point of view, one way to create an impactful workplace is to lean into the sustainable design—which means lots of plants. Owners and occupiers usually respond to this trend by installing a living wall or adding any other design element that has a natural aesthetic flair, but not many have gone so far as to make a new amenity altogether: an indoor park.

Outdoor space on an office property is extremely desirable, especially from a leasing perspective. A recent report from the University of Oxford, among several other studies, shows that outdoor space is a huge value driver of office space and offices with outdoor spaces where employees can wander get leased faster and command higher rents. In fact, outdoor access is such a hot commodity that Blackstone Properties constructed a 1-acre slab of grass in their massive Willis Tower renovation in hopes that it would help reignite occupancy levels and spur leasing activity. But does the idea of an indoor park have the same pull? Well, not every piece of office real estate has the luxury of outdoor square footage. That’s why developers are taking great pains to build outdoor respites on rooftops and terraces wherever possible.

Offices have placed a lot of emphasis on greenery as of late, so the inception of an indoor park seems almost inevitable. After all, an indoor park has all of the benefits of an outdoor park—fresh air, stress relief, and even an improvement in property values—but doesn’t lose its appeal when inclement weather strikes. Since so many companies are still mulling over whether or not to offload some of their office footprints since hybrid work schedules have fewer people in the office every day, there’s a case to be made that an indoor park would be a better use of real estate than an empty desk. Yet an indoor park is such an uncommon amenity that it’s not really prevalent in Class A buildings, but one mega-project nestled in the Lower East Side of Manhattan has an inside park to brag about.

The 9,000-square-foot indoor park, known as The Broome Street Gardens, is one of the many amenities inside Essex Crossing, an ambitious development nearly a decade in the making. Essex Crossing was built on one of the last remaining expanses of unused land on the Lower East Side, as the full-block lots that the complex sits on were once used as parking lots.

The Broome Street Gardens, Source: Essex Crossing

Before we can even get on the topic of the indoor park, we should probably touch on the sheer scale and impact of the development around it. For years, abandoned buildings and decaying vacant lots riddled the neighborhood’s litter-strewn streets, especially during the city’s housing crisis in the 1980s and ‘90s. But by the 2000s, gentrification efforts began increasing in speed as luxury developers realized that the area was only a 15-minute train ride from almost every corner of Manhattan. The area became a hot spot for high-rise bids for an affluent demographic that didn’t reflect the residents who lived there, much to their ire. But there was a relative lack of vocal opposition when it came to Essex Crossing’s development, and that’s because the biggest draw of the complex was an integration of a mixed-income housing model to accommodate a desperate need for affordable housing options in New York City.

Essex Crossing is part of a nine-building project that runs along Delancey Street. The individual building features a mix of residential and commercial space with apartments, offices, communal facilities, an urban farm, a hospital, and an indoor retail market. The full project was developed by Delancey Street Associates, a joint venture of developers Taconic Partners, L+M Development Partners, BFC Partners, the Prusik Group, and the Urban Investment Group within Goldman Sachs Asset Management. Handel Architects and the husband and wife duo behind CetraRuddy were behind the complex’s design. The entire project is expected to be fully completed by 2024, but the property buzzes with an air of excitement from recent lease signages that it almost feels like it’s open already. At least, that was the sense I got when I visited it. As of now, Retail at Essex Crossing is 90 percent leased. On the residential side, the rentals are completely sold out.

Essex Crossing has so many bells and whistles attached to it, but admittedly an indoor park is such a niche amenity, especially during a prolonged period of lower occupancy levels. With so many occupiers opting to shrink their office footprint, an indoor park sounds suspiciously experimental; as if the whole thing is more of a temporary placeholder for desk space that would be put to use in a future where office workers would finally lose their footing on their market leverage, and the 5-day, in-person workweek would come creeping back. The plants Essex Crossing had strategically placed in the garden seemed to have confirmed my suspicions. Snake Plants. Calatheas. Philodendrons. Peperomias. These were all incredibly low-maintenance plants recommended to brown thumbs that can’t seem to keep anything alive (…don’t ask me why I know that).

But it seems that the team behind Essex Crossing learned from the infamous debacle behind the Qiyi City Forest Garden development, an eight-tower apartment complex in Chengdu, China, that was advertised as an “eco-paradise” with individual gardens on every floor. The project sounded like a dream on paper, so much so that all 826 had been pre-sold before the ribbon was cut. However, only a handful of people moved in. Why? Because the developers had such a tragic lack of understanding when it came to the local horticulture that the property was swarmed with mosquitoes.

However, you’re not going to find a blood-sucking horde at the park in Essex Crossing. The developers clearly did their research on what plants would thrive in an indoor environment, would need maintenance from a gardener on a semi-regular basis, and not attract pests that would dissuade people from ever stepping into the property.

Admittedly, the indoor park is stunning. It’s a little oasis where employees can take a meeting or have a coffee break a stone’s throw away from their desks. Jane Luger, Vice President of the real estate company Taconic Partners, and my tour guide told me that the indoor park is a permanent fixture of the building. Ironically, it’s a permanent fixture built to suit a flexible need. “The park was designed to offer the buildings’ office employees a literal breathing space,” she said, pointing to one of the focuses.

But the business case for the park is a little broader than offering people a plant-laden reprieve. When Essex Crossing does open, Broome Street Gardens will be accessible to the public five days a week, as will the outdoor park outside the building that’s currently under construction. The park sits in an atrium on the market level, a spot that will get quite noisy once the property fully opens up to the public. The plants in the park have a crucial sound absorption role to play, so that park isn’t going anywhere.

Again, the park is only one of a laundry list of amenities that Essex has to offer, but according to Luger, the park is a little luxury that serves as a value-add for the office tenants’ company culture. “Amenities are what make culture,” she said, “and if the pandemic taught us anything, it’s that landlords are the ones who need to provide that.”

The ideal post-pandemic office, as far as we know, is supposed to emphasize the health and wellness of the people who use it. We already know that plants clean the air, boost morale (and, to an extent, productivity), and increase aesthetic value because, hey, they’re nice to look at. However, the developers at Essex Crossing didn’t cluster a few houseplants together in one spot and call it a “park.” The indoor park at Essex Crossing is a central fixture of the building with an intentional design behind it to serve multiple purposes, from a health booster to a noise buffer to a tiny little oasis during the workday. It remains to be seen whether or not an indoor park will really catch on as the next big office amenity, but it certainly is for one building in the Lower East Side.

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Atlanta Is the Best Place to Live in the U.S.

Money’s Best Places to Live list has been around for 35 years and counting. And if you’ve come across it in any one of those years, you know that Atlanta is very different from the kinds of places that usually make the cut. Especially at the very top.

This is no accident. At a time when people are becoming much more introspective about their role in society (see: the rise of “quiet quitting,” union organizing and the recent wave of teacher, nurse, and railroad worker strikes), our goal this year was to name a number one where anyone can feel like they belong.

And for that, Atlanta is hard to beat.

Atlanta isn’t a massive city. Population-wise, it hovers right below 500,000, on par with Kansas City and Omaha. But both culturally and economically, the Georgia capital punches way above its weight.

It’s the fourth-largest Black-majority city in the U.S., and the proud hometown of Martin Luther King Jr. It has some of the best universities in the country, including Georgia Tech — which ranked 6th on Money’s 2022 list of Best Colleges — and a culinary scene that champions steakhouses and greasy spoon diners in equal measure. It has America’s largest puppetry museum, and America’s only trap music museum. It has professional baseball, and it has drag shows. (Sometimes, it even has baseball-themed drag shows).

No matter what kind of person you are, Atlanta is a place where you can feel at home. And, just as important, it’s also a place where you can find a job.

Our data and reporting show that Atlanta’s labor market — the number of jobs available in a range of different occupations — is exceptionally strong. It’s still a job seeker’s market no matter where in the U.S. you happen to live, but Atlanta’s unemployment rate is lower than the national average. Better yet, the city’s job growth has been consistently outpacing the U.S. for more than a year, according to the Bureau of Labor Statistics.

Tech jobs are driving much of that growth: Atlanta also has a flourishing startup ecosystem, fueled by a growing number of tech incubators and venture capital firms stationed there. Silicon Valley behemoths like Apple, Microsoft and Alphabet (Google’s parent company) have all recently opened up shop in Atlanta, as have new, popular startups, like the inclusivity-centric marketing platform We Are Rosie and the meeting scheduling app Calendly.

“Over the last decade, we’ve seen a lot of growth in terms of being able to scale a company here,” says Aaron Hurst, founding director of Endeavor Atlanta, a startup accelerator that caters to entrepreneurs in underserved markets. “Now, people are starting to view Atlanta as a good place to launch their career.”

Like every place on this list, Atlanta is not perfect. Rising prices have had an outsized impact on the city’s most vulnerable residents, and have made it increasingly hard for legacy Black families to afford to live comfortably. An incoming wave of new residents—the 11 counties that make up the city’s commutable area are expected to gain 2.5 million people by 2040, bringing it to a total of 8 million—stands to exacerbate the problem.

Still, Atlanta stands out not because of its shortcomings (these are issues facing every major city in the U.S.), but what it’s doing to solve them.

‘A Deep-Seated Recognition’

Crystal Thomas knows how to hustle.

For nearly 10 years, the professional event planner climbed the ranks of Atlanta’s social scene, decorating parties and designing sets for a seemingly endless stream of photo shoots throughout the city. Until early 2020, when — well, you know what happened next.

As COVID-19 snaked through the country, Thomas started to experience the same quarantine claustrophobia as the rest of us, amplified by the anxiety of no longer having an income. So she decided to start offloading what she had in abundance: one hell of a houseplant collection.

What started as an impromptu, card-table-in-a-parking-lot sort of operation turned into an indoor popup shop, which led to a bunch of Instagram followers, and custom online orders, and then another popup.

Eventually, Thomas landed where she’s at today: a brick-and-mortar store on Atlanta’s Westside. Tropical Express, her dual plant shop-event space, is open every Wednesday through Saturday.

Thomas is no stranger to the small business grind — and all the handshaking/email swapping/happy hour networking that comes with it. But Atlanta came through for her in a big way, she says. Neighbors offered her temporary spots in their bars, offices and art galleries — and her sudden, surprisingly devoted customers followed her to all of them.

“Atlanta is a space where everyone is uplifting each other,” she says. “People had their arms open.”

Small, community-centered economies have long been a part of what makes Atlanta Atlanta — this is a city that helped catalyze the Civil Rights Movement, after all. But in 2022, as the city draws in flocks of tourists, wealthy real estate developers and expats from more expensive cities, there’s an undercurrent of shared responsibility that feels very of-the-moment.

Atlanta has cooperatively owned food manufacturersbuildings and bike shops. It has a seven-acre food forest that gives free fruit, vegetables and herbs to all its volunteers. There are 21 farmers markets in Atlanta proper, the vast majority of which accept food stamps as payment, and at least one “pay what you can” grocery store.

Thomas’ new plant store is on Jefferson St. NW, an industrial stretch that’s a perfect microcosm of the city’s many competing loyalties: a Greyhound bus depot and rival bail bond companies neighbor a new bike path, a froufrou wedding space and an art gallery that was once a Baptist church. The building is owned by the Westside Future Fund (WFF), a nonprofit that partners with the city to provide low cost office and retail space to small businesses battling ever-rising commercial rents. (WFF does a lot of other things too, like paying the annual property tax increases of legacy homeowners, and providing Black-owned businesses with favorable term loans, to name a few. )

It belongs to a growing network of grassroots and government efforts — and often a combination of the two — working to ensure that when corporations like Microsoft roll into the city, and buy up entire blocks worth of(historic) real estate, or when the construction of a $1.6 billion football stadium creates new demand for chain restaurants and hotels, there are still pockets of opportunity for moms and pops … and stores like Tropical Express. Nearby, there are groups that help place seniors in affordable homes, and those that help low-income residents build credit, manage a budget and save for a down payment on a home.

This is a line Atlanta has been toeing since the 1990s; an economic boom time for the city that started, by most accounts, when it was chosen to host the 1996 Olympics. The Dot Com bubble of the early 2000s followed, with a wave of new tech talent that poured into the city, driving up prices, and pushing thousands of Black residents to Atlanta’s outskirts.

Today, though, Atlanta is armed with lessons learned, and two consecutive mayors that have made affordability the city’s top legislative concern.

Over the last two years, the Metro Atlanta Chamber of commerce (MAC) has started to implement a series of strategic, city-wide policies purposefully designed to keep history from repeating itself. At the ground level, that means investing in Black-owned businesses, aggressively retooling corporate diversity standards and creating “strategic partnerships” with companies relocating to Atlanta that go beyond a press release pat on the back.

It’s a work in progress, but it has led to measurable results.

WFF, for one, gets a large portion of its operating budget from corporate foundations like the James M. Cox Foundation, the Chick-fil-A Foundation and the Arthur M. Blank Family Foundation; the last of which was founded by the billionaire owner of the Atlanta Falcons (the NFL team that plays at the football stadium WFF was created, in part, to offset the ramifications of).

“We have not been perfect in this city,” says Katie Kirkpatrick, president and CEO of MAC. But against the backdrop of its history, and the legacy of the Civil Rights Movement, its leaders are eager to “address the systemic issues that are deeply held here.”

“We’re a unique community in Atlanta,” she says. “There’s a deep-seated recognition that if we can’t get this right, then who can?”

‘The Perfect Blend of Culture’

From a cultural standpoint, Atlanta isn’t all that different from the other places that made our list this year.

It’s got ample greenspace (Denver, Colo.; Salt Lake City, Utah) historical relevance (Milton, Mass.; Alexandria, Va.), a food and music scene with global influences (Rogers Park, Chicago; Columbia, Md.) and an ever-expanding network of bike and walking trails (Carmel, Indiana; South Burlington, Vermont).

The thing about Atlanta, though, is that it has all of this in spades. Lots of places have tree-lined streets, but Atlanta has a canopy of trees so dense it’s been nicknamed the “city in a forest.” Most cities have an airport, but Atlanta has — if you believe the hype — “the most efficient airport in the U.S.”

Entertainment-wise, the city has more “things to do” than even the most social of butterflies could ever find time for.

For gamers, there’s Battle & Brew. Fans of rare, Black-authored books have For Keeps. There’s opera, street art and — for the discerning toddler — a playground designed by Isamu Noguchi. There are four professional sports teams, an underground ping pong league and a LGBTQ+ water polo team.

“I went to the symphony the other day, and they were playing Beyonce music,” says Crystal Thomas of Tropical Express. “We have the perfect blend of culture … it just bleeds through Atlanta.”

The city is getting more expensive (that’s the case for basically everywhere in the U.S. right now), but compared to other fast-growing metros like Austin, Texas — where the cost of living is higher, and the salaries are lower — Atlanta is far more frugal. (ChooseAtl, a website designed to entice millennial job seekers, has a literal “choose your own adventure” interactive for comparing living expenses in Atlanta to cities like Austin, New York and Chicago. Spoiler: Atlanta wins.)

The current median sales price for a home in the area is $395,000, according to ATTOM housing data, which is less than the median of all the places that qualified for our ranking this year ($425,000). All told, housing costs in the Atlanta metro are lower than more than half of the places to make Money’s 2022-2023 list.

Looking forward, one of the biggest priorities for Atlanta’s city planners is turning it into a place that can handle an influx of the millions of people expected to move there. That means rolling out a host of infrastructure development projects (especially as it pertains to traffic and mass transit, two perennial punching bags) and making sure there are enough workers — everyone from engineers to electricians — to get the job done.

Georgia got a massive grant from the 2021 bipartisan infrastructure bill, and some of the funds are specifically earmarked to make this plan come to fruition. Atlanta, for its part, is “hyper-focused” on building out the workforce that will support the city’s growth, says Anna Roach, executive director of the Atlanta Regional Commission.

Roach is an Atlanta transplant herself. Born in the Caribbean, and raised in New York, Roach says she first set foot in the city in 2005, while visiting a friend who lived there. She was a young lawyer with a new husband (and baby) at the time, and says she fell so deeply in love with Atlanta that her family picked up and relocated to the city less than a year later.

“I immediately felt a sense of thriving among Black, middle-class individuals who have made a life for themselves in Atlanta,” she says. “I felt like I was part of the fabric of the community because people all around me that were successful looked just like me. It was the best decision I’ve ever made.”

Today, Roach heads the Atlanta agency tasked with maintaining the Atlanta metro’s prosperity across all of its industries — and for all its residents. It’s a tall order, but the entire city — politicians, business leaders and community members alike — are working in tandem to see it through.

“We are very focused on the tremendous opportunity … in almost every sector,” she says. “We are also very sensitive to the needs of the community, and preserving its fabric while we embrace this progress.”

An earlier version of this story overstated the Arthur M. Blank Family Foundation’s financial contribution to the Westside Future Fund (WFF). WFF has several benefactors.

The Strong Dollar is a Double-Edged Sword for Real Estate Investors

While the dollar won’t get you as much in the U.S. these days, in most other places in the world, a dollar can buy more than ever. As a result of the Federal Reserve’s hawkish stance on interest rates due to continued inflation, overseas markets in turmoil due to the war in Ukraine, and Europe’s energy crisis, the U.S. dollar is stronger than it’s been in decades compared to many other currencies in the world. That can mean a lot of things for the commercial real estate market, perhaps most notably when it comes to foreign investment. But while the strong dollar bodes well for stateside investors looking at global markets, there are downsides too. The major push to bring more manufacturing back to the U.S. could be pressured, rising cap rates could lead to falling property values, and U.S. investors who earn profits from overseas investments may see revenues fall as the dollar rises in value. “It’s a decidedly double-edged sword in the current environment,” said NYU Clinical Assistant Professor Tim Savage, who teaches at the Schack Institute of Real Estate.

Pressure points

The value of the U.S. dollar has risen sharply since May 2021 and is up 17.1 percent this year as of mid-October, the highest it’s been in 20 years. Meanwhile, foreign currencies like the Euro, British Pound, and Japanese Yen have plummeted in value over the last year. Savage pointed to two independent effects happening due to the rise in value: the direct impact of the stronger dollar and the 10-year interest rates, which are also rising. Both have an effect on cap rates because as the dollar rises, cap rates rise. There’s a lot of pressure on cap rates right now, which is generally something the commercial real estate community doesn’t like because it implies the value of a property has fallen. Given the environment, it’s imperative that owners and investors focus on growing NOI, which mainly means figuring out ways to cut expenses.

In his previous role as an economist and data scientist at CBRE, Savage worked on a study that looked at environmental effects on cap rates. He found that for every 100 basis point increase in the U.S. treasury, cap rates rise about 50 basis points. He’s seen a 350 basis point move in the 30-year treasury since the depths of the pandemic. That factor, combined with the value of the dollar and the Fed’s announcement that it won’t engage in any more asset purchases, suggests there is upward pressure on cap rates, something he expects will continue for at least a year, if not longer. “Absent a very rapid resolution in Ukraine, I just don’t see anything changing over the next year,” Savage said.

The dollar’s strength could have a negative impact on foreign investment in U.S. cities, especially secondary cities. Gateway cities like New York City, San Francisco, and Chicago tend to fare better in uncertain economic times, as they are viewed as less sensitive to things like interest rate movements and the value of the dollar than markets like Miami, Austin, and Nashville, which are considered secondary markets to foreign investors. “In aggregate, we might see a slight decline in overall investments, but it would disproportionately affect secondary commercial real estate markets in the U.S. in a way it won’t affect places like New York,” Savage said.

Another potential impact of the dollar’s current strength is the effect it will have on one of the nation’s biggest initiatives: bringing back manufacturing. So far, it’s been going well, with the White House making big investments in the sector, notably in biomanufacturing and biotech, where it will allocate $1 billion over the next five years to help grow the sector. But the strength of the U.S. dollar relative to foreign currencies means international goods are cheaper to import. While Savage believes the strong dollar could help accelerate the country’s manufacturing rebound, some domestic manufacturers have reported declining sales as a result of the stronger dollar. “It has a debilitating effect on U.S. companies,” the president of the Reshoring Initiative, Harry Moser, told the Wall Street Journal.

On the upside is the underlying macroeconomics putting upward pressure on the dollar. Foreign investors want to invest in the U.S. because of the perception that they will get higher returns than in their own domestic markets. That, combined with the Federal Reserve tightening monetary policy faster than central banks in Europe and Japan, applies further upward pressure. Basically, the dollar’s value is rising because people want to invest in the U.S. “The joke is we are the least dirty shirt in the hamper,” Savage told me. “By which I mean much of Europe is in recession, and if I had to hazard a guess, Japan is in a recession. But we are not, so there is interest in investing in the U.S.”

Investment firepower

Despite the potential downside in revenue, favorable exchange rates in Europe and Japan at the moment make it a great time to invest in real estate, and that advantage doesn’t look to be going away anytime soon. The relatively strong performance of the U.S. economy, tightened monetary policy by the Fed, and the continued view of the U.S. as a safe haven for real estate will keep the dollar strong for the foreseeable future. “American capital has a lot of firepower in global markets,” said CBRE’s Global Chief Economist Richard Barkham.

U.S. real estate investors and firms are increasingly making plays in Europe and Asia, especially in logistics and multifamily, two of the hottest real estate sectors in recent years. London has drawn the bulk of European investment from North American commercial real estate companies, according to a recent CBRE report on global capital real estate flows. In the first half of 2022, nearly $4 billion was pumped into the major European city, almost double the amount invested from the same time period last year. Additionally, the German cities of Hamburg, Berlin, Dusseldorf, and Frankfurt received one-fifth of North American investments in Europe during the same period. Asia has also been a magnet for North American investors, particularly Singapore, where investments skyrocketed 817 percent year-over-year to $978 million.

Blackstone Bets on Logistics and SFRs to Continue Hot Streak

Internet giant Google led the way at the beginning of the year when it acquired a London office building for $1 billion, adding to its already planned $1 billion office development project nearby. Greystar, the largest multifamily property management company in the U.S., has been on an investment streak in Europe so far this year. The company announced a final close of its fund focused on European residential assets in July, with $1.55 billion raised. Greystar is using the fund to acquire and develop high-quality multifamily assets in major cities of Europe, including student housing and workforce housing properties. Greystar’s Wes Fuller said in a statement that the fund follows the model of the firm’s value-add strategy in the U.S. multifamily market. Houston-based Hines has been making big investments in Asia lately through its flagship core-plus fund, Hines Asia Property Partners (HAPP). Hines’ Chris Hughes, who leads the company’s capital markets group, said markets in Asia are experiencing “tremendous growth,” with a lot of future potential for office development.

While the strength of the dollar is expected to continue for at least the next year, many predictions about a recession, interest rates, and property prices could affect the timeline of its staying power. Geopolitical tensions could also make an impact. “It’s a very complex macro environment. If Putin deploys a nuclear weapon, who knows,” NYU’s Savage said. The strength of the dollar is also putting pressure on emerging markets, and if one ends up going bust, it’s anyone’s guess what will happen. There’s also concern from economists about debt burdens in developing countries, where debt is borrowed in dollars but repaid in local currency, so as the dollar rises, so does the debt burden.

Despite the downsides, it’s still a very good time to invest in foreign markets, especially in Europe and Asia. Major U.S.-based commercial real estate firms have continued to raise funds and expand their portfolios overseas. With the strong dollar expected to continue for some time, it looks like investors won’t be changing those plans anytime soon.

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The Silver Tsunami’s Impact on Real Estate

Long considered a niche real estate investment, the need for senior housing is stronger than ever. The Baby Boomers, which have had an outsized presence both by numbers and economic might compared to previous generations, are now comfortably within their golden years, the youngest being 58 and the oldest being 76 years old. Because of the sheer numbers of America’s aging population, senior housing could be an attractive real estate investment, with many going as far as to call it “recession-proof.” But while there’s an urgent need to build more senior housing developments, senior housing has been an intimidating asset class for a lot of investors.

Shifting demographics in the U.S. have positioned the senior housing sector for rapid growth over the next decade, but “senior housing” is more of an umbrella term that embodies multiple development types. There are independent living facilities, which are designed for seniors who want to maintain the advantages of living in a community without sacrificing their freedom. There are also age-restricted communities (where all residents are age 55 and older). Some senior living accommodations include some form of service, including residential care homes for tenants who need a little help with everyday tasks but don’t require round-the-clock care. Assisted living facilities keep tenants in small apartments attached to communal areas (like dining halls) and have staff available 24 hours a day to care for tenants. Then there are nursing homes that offer more specialized care for elderly adults who can’t take care of themselves due to debilitating mental or physical illnesses.

For people who fit the definition of a senior citizen, which at this point is every member of the Baby Boomer generation, there is a wide range of developments available to fit their unique lifestyle demands. Granted, it’s not just Baby Boomers who are responsible for the time-bomb ticking down to the sector’s explosion. The number of Americans 65 and older, also known as the “silver tsunami,” is expected to reach 72 million by 2030 and 83 million by 2050. This important demographic trend puts a lot more pressure on a system that already faces a senior housing deficit. For multifamily landlords, this kind of widening gap in the market is creating a huge opportunity for investment. After all, maintaining families and communities has a beneficial social impact, which is a compelling argument in and of itself for investing in this asset class. However, the wide array of development types indicates that senior living properties pose distinct challenges when it comes to managing them.

One of the reasons why senior housing has become more complicated as a sector is because of the tenants themselves. Humans are generally living longer, which means that seniors will be in the elderly stage of their lives longer than past generations. The life expectancy for 65-year-olds has steadily increased since the 1960s. Today, the average 65-year-old woman can anticipate living to 86 years old, whereas the average 65-year-old man can anticipate living to 83. Data from the CDC shows that as of 2019, a 65-year-old woman lived an additional 20.8 years on average and a 65-year-old man lived an additional 18.2 years.

Now, the increase in lifespan is adjusting metrics for senior housing developments in more ways than you would think. It’s not only extending senior housing stays, it’s also paradoxically delaying when senior citizens transition into senior housing, if they choose to do so at all. A 2021 study from AARP discovered that a growing number of senior citizens are remaining in their homes as they get older, presumably only switching to specialized senior living if their depleting health absolutely demands it.

Robert Ranieri, Managing Director at Northmarq (a provider of debt, equity, and loan services to real estate owners and investors) and chairman of the Board of Directors of Wartburg Home, a senior residential and health care provider in lower Westchester County, New York, is acutely aware of this phenomenon. “You know, fortunately we’re all healthier, so we’re staying in our home for longer,” he said. “Twenty years ago, everyone thought that once a person got to be 60 years old, they would move to a senior housing complex, whether it was high-end or something less glitzy, but that simply isn’t the case anymore.”

More seniors than before are choosing to age in place, but this trend is not enough to offset future demand for other types of senior housing. Projections by JLL indicate that the senior housing industry is stepping into a decade-long investment cycle, and even so, the sector will still be undersupplied by 600,000 units by 2045. In order to support peak demand levels, there needs to be an annual supply growth north of 25,000.

In theory, it should make a favorable scenario for lenders, but that’s not necessarily the case according to Ranieri. “I’m from the lending side, and the fact that only a few people would be willing to lend on a senior housing product just tells you, at least from my perspective, that it’s got to be high-yield,” he said. “Investors are going to expect higher returns and higher yields because it’s so labor-intensive. It’s not just housing, it’s care of people, whether they’re healthy and active or not.”

The labor-intensive aspect of the sector is exactly what makes it so tricky, both from an operational and a cost standpoint. Both the personnel and the residents of a community have a human component to consider when it comes to senior living. It’s also a very operations-intensive industry that requires specialized management compared to other property types. For any other revenue-generating commercial property, the landlord and manager’s interests are kept in line by a range of joint-venture agreements between owners and operators, regular lease forms, and alternative structures. But there is just more at stake when the well-being of vulnerable, elderly tenants are involved. So both capital suppliers and on-the-ground operators are looking for highly specialized partners. Think about it: If a commercial landlord clashes with their property management firm, there aren’t many barriers, beyond contract stipulations, that prevent a landlord from hiring a new one. But property management firms for senior housing developments, no matter the property type, are far more specialized and can’t just be changed out easily. If an operator is replaced, what happens to the residents who live there and the care staff that serves them?

Labor is typically what drives senior housing costs for the tenant and eats the ROI for the property owner, even when there isn’t enough staff to go around. Senior living worker shortages have forced an alarming number of facilities to cut down on their admission rates for new tenants. Out of 759 nursing home providers surveyed by the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), 98 percent of them have struggled to hire new staff, and 61 percent of providers have limited new admissions due to staffing shortages.

Ken Fisher on Family, Philanthropy, and Steering a New York Real Estate Dynasty Through the Pandemic

Senior housing of all types is getting more expensive, not just because of rising labor costs. Just like retail real estate, office, and multifamily, senior housing developments are feeling the sting of inflation, high interest rates, construction delays, and increased costs of construction labor and raw building materials. It’s made it extremely challenging to get lenders on board with new developments that are so desperately needed. “With the cost of building and staffing today,” added Ranieri, “I don’t know how you get that return. The price is just going to have to continue to escalate.”

Escalating prices are making senior living a messy subject, even for the companies that operate them. With current market fundamentals pushing up the property management, food, and labor costs, senior living companies are out to shed exposure by putting themselves on the market. Brookdale Senior Living, the largest owner and operator of retirement homes in the U.S., is reportedly in talks to sell. The news comes on the heels of other operators changing hands as the cost of doing business continues to creep even higher.

Those escalating prices need to be paid somewhere, so they’re often passed off to the tenant. For any other property type, rising costs can be written off as the nature of the local market, but for seniors who have retired or are too frail to generate extra revenue for themselves beyond their fixed income, this is extremely problematic. Lack of affordability makes otherwise viable housing options elusive for seniors. While wages for seniors continue to be largely steady, prices in the US home market are rising, and that’s not even factoring the cost of the supportive services that older citizens would require from senior housing developments. And the price tag will only get higher as time goes on. By 2047, the overall expense of care for the elderly in America will have doubled, from $2.8 trillion to $5.6 trillion. But solving for affordability is a complex problem with no simple solution. For Ranieri, not-for-profit senior housing is a promising avenue. “Not-for-profits can do senior housing on their campuses at a cheaper rate,” he said. “You’re not going to have government meals, but it’s the same level of care.”

Why Are So Many Retirement Communities Age-Restricted When the Data Argues Against It?

With so many moving parts to manage, the senior housing market was once thought of as a niche asset class. But with an apparent crisis around the corner, there’s a major opportunity for real estate investors. There may not be a simple solution, but the main thing that’s crushing affordability in senior housing is demand. Yes, inflation is at a four-decade high and there’s a shallow labor pool, but the turbulent economic landscape that’s supporting both of these factors are expected to balance out, at least to some degree, in the coming years. But with demand, there eventually comes supply. Developments are popping up across the U.S., with more slated to break ground in the coming years. As more investors jump on the bandwagon, more options will enter the market. The competition will heat up, and consumers will have more options of care as well as price. But if there’s one thing real estate investors know, it’s that a building’s quality will be the biggest market differentiator, no matter the sector. Senior housing may be a unique asset class with a lot of challenges, but it’s an asset class that suits a permanent societal need, making it a high-yield commercial investment.

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Manufactured Developments Are Becoming More Favorable in the Multifamily Sector

Thanks to high interest rates, supply-chain bottlenecks, and increased commodities cost for raw construction materials, prefabricated home construction is picking up speed as a substitute for traditional multifamily developments.

The prefabricated construction category includes modular units (which are homes built in a factory and later assembled on-site), and manufactured houses (which are also factory-assembled but are built to meet national HUD standards), and mobile homes. Against a backdrop of a national housing shortage and a turbulent economic landscape, traditional multifamily construction methods are getting sidelined in favor of factory-built homes. The U.S. Census Bureau is seeing a 31 percent growth in the industry from May of 2022 to May of 2020, and demand is only continuing to climb.

Because of the streamlined process that comes with building in a factory, the timeline of construction for a prefabricated home is much faster than ground-up construction, and therefore much less expensive. However, there are some disadvantages: because each building site is unique to its locale’s terrain, weather, and zoning regulations, standardizing factory construction methods to suit the destination for every building is a challenge. Then of course there’s the longstanding cultural stigma attached to factory-made homes for being “cheap,” which has prompted policymakers to create stringent zoning regulations that disallowed prefabricated developments from building in desirable neighborhoods, making it a less-than-stellar investment for multifamily landlords. Despite these headwinds, prefab construction seems to be gaining favor which may provide one more tool for developers looking to build more homes, faster.

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Georgia’s Dugdown Corridor: A ‘national model’ for conservation

Last year, a group of scientists and volunteers splashed up a creek in Paulding County to look for endangered fish.

It didn’t take long to find them.

With two people holding a net upright underwater and others shuffling downstream to shoo fish into it, the team hauled up a handful of Etowah darters the first time they tried.

“That’s pretty cool,” said Bill Ensign, a retired Kennesaw State University professor, as he picked the rare fish out of the net, tallying them as he went along.

The colorful little Etowah darters live in a handful of counties in northwest Georgia, and nowhere else in the world. They’re unique to the Etowah River and some of its tributaries, including Raccoon Creek, where the day’s sampling expedition was happening.

Those darters are just one of the unique freshwater creatures living in the region.

Thanks to some quirks of geology and the last ice age, this corner of Georgia, along with northeast Alabama and neighboring parts of Tennessee, is a global hotspot for freshwater fish, and creatures like mussels and crayfish, too.

It’s an “incredible” place of biodiversity, according to Katie Owens, Upper Coosa River program director at The Nature Conservancy. Close to 80 species of fish live in the Etowah River basin alone.

“I like to think it’s a miniature Amazon right here in our backyard,” said Owens, who’s based in west Georgia.

Efforts to protect that rich biodiversity have become a jumping-off point for an ambitious conservation project taking shape in west Georgia — protecting and restoring not only Raccoon Creek, but miles and miles of land around it, too, expanding public access, bringing fire back to forests that depend on it and creating a refuge for wildlife as the changing climate alters ecosystems.

The Nature Conservancy is working with the State of Georgia, Paulding and other Georgia counties, The Conservation Fund, Kennesaw State University, the U.S. Fish and Wildlife Service and others on the project — it’s called the Dugdown Corridor. Named after a mountain in the area, it’s a vision for a giant connected network of forests and streams, stretching from the edge of metro Atlanta to the Talladega National Forest in Alabama.

A coordinated effort
As remote as it might seem — a relatively rural area of tree farms and wildlife management areas for hunting — one end of the corridor is barely an hour’s drive from downtown Atlanta.

“A lot of people don’t realize this is one of the most unique places in Georgia right here,” said Tim Pugh, the environmental compliance division manager with Paulding County.

Pugh, who was helping with the fish research at Raccoon Creek, grew up in the area.

He said the location, where three of Georgia’s geographic regions meet and mix — the Ridge and Valley, the Blue Ridge Mountains and the Piedmont — accounts for the unusual combination of wild plants and animals.

“It’s why we have all these odd plants, odd fish, odd rocks, odd everything,” he said.

Pugh said there’s a land ethic in the area at the edge of sprawling Atlanta, a sense that people don’t want the whole county to get developed.

“There’s a lot of families that have been here since the land lotteries in the 1800s,” he said. “So there’s a lot of people [with] deep roots here, that want it to stay.”

Pieces of property have been protected over time.

The state bought land in the area in the late-1980s to create Sheffield Wildlife Management Area, and later added a second neighboring wildlife management area called Paulding Forest.

In 2007 Paulding County helped buy some of that land after residents voted to tax themselves to pay for it. At the time — before the Great Recession — the housing market was going nuts, and Paulding was growing fast.

Brent Womack, a wildlife biologist with the Georgia Department of Natural Resources and a supervisor in the region, credits voters and the county for deciding to spend the money when they did.

“The writing was on the wall, if we don’t do something now to try to retain at least a piece of this it’s going to be gone,” he said. “It’s easy for people to say, ‘Yeah, we like greenspace.’ But you have to do things sometimes to really put your money where your mouth is and make it happen. And that’s what the county did.”

Womack can trace his family’s history in the area back to the middle of the 19th century. He said he never thought when he was growing up in Paulding County, imagining a future as a wildlife biologist, that he would get to work so close to home. “It’s pretty neat,” he said.

Between Sheffield and Paulding Forest Wildlife Management Areas, there are now about 50 square miles of public land for people to use, most commonly for hunting, but exploring through other means is an option for the adventurous. (Unlike at state parks, there aren’t bathrooms or marked trails in these largely wild areas). The Silver Comet trail travels through a portion of it.

Meanwhile, the conservation has continued — the state has added bits and pieces of property to the wildlife management areas as it’s been able to.

The broader Dugdown Corridor project is even bigger than that, though: A patchwork of public lands and privately-owned forests in an area covering around 200 square miles.

The western edge of the corridor shares a border with the Talladega National Forest in Alabama.

“We really are trying to think big picture,” Owens said.

That matters for delicate wild places, like Raccoon Creek.

That day in the creek, the team counted what they caught, tossed the fish back, then splashed their way further upstream to do the whole thing many times over again.

Ensign said what happens on land affects nearby waterways. Pollution and erosion can ruin places like this, where the endangered fish live.

“Once human development begins, those sorts of habitats are some of the first that disappear,” he said.

Forest land
It’s not just those fish and their sensitive streams that are special in this area. There are also forests here that grow almost nowhere else in the world.

On a different day, in a different part of the corridor, Owens looked across a hillside of blackened young longleaf pines. A fire had come through recently. But Owens said most of the trees would be fine; they’re adapted to fire, and this blaze was an intentional, prescribed fire to maintain the health of the forest that’s growing here.

“It looks a little bit desolate right now, with a lot of brown trees, a lot of brown needles,” Owens said. “Grasses and ferns and things are the first things to come back in greenery. It’s a really great transformation from burn day to just a few weeks later.”

Longleaf pines, an iconic Southern tree, used to cover 90 million acres across the Southeast. Now, they occupy a tiny fraction of that area.

The tall straight-trunked trees with round puffs of long needles are typically associated with the sandy coastal plain, but they grow here on rolling hills far from the ocean.

The groups working together on the Dugdown Corridor are focused on these montane longleaf forests, too, which only grow in the northwest corner of Georgia and northeast corner of Alabama.

The recently burned site had been a loblolly pine plantation until just a few years ago, Owens said. After the state Department of Natural Resources, which manages the property, harvested those trees, The Nature Conservancy came in to plant longleaf in its place, and to help maintain the new forest with the fire it depends on.

Owens also works with private landowners in the area on using controlled burns and managing their property with conservation in mind.

And for property owners that want to sell, including big investors, The Conservation Fund is buying timber land in the area to add to the corridor.

At a site the organization had recently bought, forest operations manager Jenna Schreiber looked on as a team cut loblolly pines, preparing them to go to a local mill. The trees had been planted by a previous owner for harvesting.

Though it might seem counterintuitive for an environmental group to cut down trees, Schreiber said it’s part of what The Conservation Fund does.

“Conserve large tracts of land, working forest land, supporting rural communities, supporting rural jobs,” she said.

And the money from cutting the trees helps fund the conservation work, she said.

The Conservation Fund and others working in the area say keeping working timberland is helpful for the corridor, too — as long as it doesn’t end up getting developed into housing or shopping centers.

“There’s increasing pressure on these larger tracts of undeveloped land to be cut into smaller pieces,” said Andrew Schock, state director at The Conservation Fund.

Protecting big chunks of land is important, Owens said, not just for recreation and wildlife now, but also looking to the future as climate change affects Georgia’s wild places.

The Dugdown Corridor will be able to serve as a refuge as animals move because big areas like this provide a place for them to go.

“We look at areas across Georgia and say, ‘Where are species going to move in terms of climate impacts?’ And this whole corridor, the Dugdown Corridor, lights up in terms of climate resiliency,” she said.

The state Department of Natural Resources identifies Sheffield and Paulding Forest Wildlife Management Areas as a high priority in its 2015 wildlife action plan, citing the “globally significant” forests and the Raccoon Creek watershed in all of its biodiversity.

Pausing in the creek that summer day doing fish sampling, Ensign said Raccoon Creek would likely never be restored to some kind of pristine state, “but we can protect, and we can also live in a way that minimizes what we know causes damage.”

He said the science exists on how to do less harm, but it’s a societal decision on whether or not to follow it. On the collaborative approach of the groups working to piece together the Dugdown Corridor, he said it should be held up as an example of what’s possible.

“It’s a national model,” Ensign said.


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Flex Space is the Next Big Office Amenity

Let’s face it, the office hasn’t evolved much over the last 30 years. But a global pandemic certainly changed that. Faced with tenants seeking spaces that match their new working models, landlords are stepping up, offering office spaces that are designed, amenitized, and even leased in new ways.

Flexible leases, with lengths as short as month-to-month, make real estate decisions easier for tenants, many of whom are still trying to figure out their long-term workplace strategies. And leases aren’t the only new offering. Flex space brings additional variety to the office category, giving companies more options for what type of space they may need.

When most people think about flexible office space, they typically think of co-working, but the spectrum of flex office space has gone far beyond just communal, open office co-working spaces. Flexible office options work for any building depending on which space is available, where the building is located, and the type of tenant it attracts. Those traditional hot desks and meeting rooms rented by the day or hour are now joined by full-fledged event and collaboration spaces designed for gatherings of distributed teams and off-hour events. In addition, flexible office suites marketed to startups and small businesses are now accompanied by their more mature sibling, enterprise flex suites.

New target tenants for flex emerge

A growing subcategory of flex space is designed and marketed for larger companies. These 3,000-10,000 square feet enterprise suites typically offer a higher level of customization for the space itself, along with additional services that bring the company’s culture and brand to life without putting internal pressure on the tenant to do that themselves.

Big companies looking for supplementary spaces and companies growing faster than their corporate real estate footprint are ideal tenants for these spaces. Today’s flex offerings have matured to meet their needs, offering better IT infrastructure, elevated workplace experiences, and exciting amenities, time and cost-intensive aspects of having an office that tenants don’t have to manage anymore.

Investors are intrigued by this enterprise suite model because of its predictability to revenue projections. Enterprise suites typically have one-to-three-year lease terms vs. monthly leases for smaller co-working flex suites. This higher suite class is also leased to more creditworthy tenants, another check in the pro column for investors.

Enterprise flex suites give companies the agility to grow or shrink their office portfolios with less risk. But perhaps the bigger draw of these suites is offloading the pressure to curate in-office experiences that lure staff back to the office. Instead, landlords and asset management firms take on this responsibility when they offer flex spaces. They own their positions as experts in the new workplace, taking what they’ve learned across their portfolios to place more of a focus on experience, wellness, and collaboration.

Flex for any building

Rather than leasing space to co-working providers, landlords are investing in their own flex space offerings, diversifying what they offer to the market and their existing tenants. Right now, collaborative spaces are the biggest growth driver for flex space overall.

Melissa Schilo, Vice President of Account Management for Flex by JLL, explains, “We always knew that meeting rooms were complementary to an office or flex suite, but that category is now running its own race. The demand for collaborative meeting spaces has increased by 40 percent as companies look for thoughtfully created environments designed for collaboration.” These rooms (that can be reserved by the day, hour, or week by tenants or non-tenants) are perhaps the easiest entry point for landlords to enter the flex game.

Flex suites, dedicated spaces for a company to rent on a monthly or annual basis, are still in demand but need a bit of a makeover to thrive in a hybrid work setting. Instead of an open office set up for five or even thirty people with one or two small huddle rooms, that ratio of desks to meeting space within a suite might need to be close to a 40-60 split with added semi-private spaces for hybrid collaboration or small group working areas. In short, there will be more thoughtful spaces for people to work together, rather than solo.

In comparison, the cost of building out a traditional co-working floor dominated by hot desks and open spaces is more prohibitive. The conventional co-working revenue model isn’t as attractive to many landlords and investors, given its lack of predictability. However, it’s a promising option for buildings in prime, central locations for business travelers willing to pay a premium for easy access to amenities.

The importance of activation

Simply offering flex space isn’t enough to make it a viable revenue stream. It’s not like the Field of Dreams. Just because a building has it doesn’t mean people will want to work there. Creating a memorable experience that tenants and guests want to repeat is just as important as the space itself.

Activating a space is often referred to as the ‘art of placemaking,’ creating both a buzz and a community that gives a place its personality and purpose. Pre-pandemic, programming in offices often revolved around a few large events for tenants, but now, space activations are becoming smaller and more frequent, given people’s varied and sometimes inconsistent in-office schedules. Meghan Rooney, Vice President of Operations for Experience Management at JLL, says this programming approach is a win for building managers in terms of both budget and time. She says, “People aren’t looking for large-scale events. They’re looking for consistency. They want to feel that personal touch on a more regular basis.”

These space activations could be pop-up events that let occupants explore and connect with the building in new ways. For example, the Aon Center in Chicago holds “Breakfast with the Bees” events to let tenants interact with the beehives housed on the building’s roof and take home some honey harvests. Rooney’s team is also working with clients to experiment with underutilized spaces to see which activations gain the most traction with tenants, like turning a conference room into a meditation space or doing a series of food and beverage pop-ups in the corner of a lobby.

Green spaces, food and beverage options, or just space to rent for private events and meetings can also be made available for the broader community. Jacob Bates, Head of the Americas for Flex by JLL, emphasizes that, when done right, this type of placemaking has a powerful potential to extend the brand of the building beyond its own four walls. “Flex opens up the building to new customers, bringing spaces and experiences to the community, to the public. Suppose you can activate an amazing event space that was originally only built for the tenants. In that case, you’re not only creating new revenue streams, but you’re curating a new future tenant mix by going directly to the consumer,” he explains. These consumers, particularly those who work at large companies, are new to the flex game and come with more buying power and choice than ever before.

The pandemic has grown the demand for flexibility in the office. The increasing popularity of flexible options like collaboration spaces, flex, and enterprise suites is also turning landlords into advisors for their tenant’s workplace needs. Beyond the diversification that flex space brings to office buildings, it creates a model that allows companies to have a long-term, multistage relationship with their landlord. A tenant can grow from a one or three-person office to a flex suite, then an enterprise suite until they are ready to enter a traditional lease. A tenant can grow and mature within the new ecosystem of the building or the broader portfolio. And that is a true evolution of the role of the landlord.

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How a Mangled Supply Chain Led to an Industrial Real Estate Renaissance

Despite President Biden’s casual announcement that the COVID-19 pandemic has come to an end, the industrial real estate sector is still reeling from the virus’ impact. Bubbling geopolitical tensions, a mangled supply chain, and sky-high inflation continues to affect the market and for valuations of industrial properties. This is particularly true when it comes to properties that support the manufacturing sector.

The COVID-19 pandemic was so monumentally disruptive that manufacturing companies are clamoring to pull back their operations overseas and bring them closer to home. Whether it’s by way of re-shoring (where companies bring back their manufacturing services from overseas to their country of origin), or nearshoring (where businesses transfer work to regions geographically closer to their base of operations). Either way, industrial real estate is getting a reset after a decades-long trend of pushing manufacturing jobs overseas.

Bright promises and foggy data
America began its life as a titan of manufacturing, but by the early 1970s, manufacturers began outsourcing a sizable portion of their production to countries with less expensive workforces, like China. The allure of offshoring was so palpable that the McKinsey Global Institute touted it as a “win-win situation for the global economy” back in 2003. Yet over the past few years, the overreliance on offshoring began to show cracks.

As offshoring sharply increased in the 1990s, the American manufacturing sector employed more workers than any other sector in most U.S. states. Many of those jobs were lost to foreign competition.

U.S. manufacturing employment dropped from 16 million workers in 1993 to a little over 10 million by 2010 | Source: Centre for Economic Policy Research
It’s incredibly difficult to pin down the extent of the effects manufacturing plant closures had on commercial real estate values in the corresponding area. The direct impact offshoring had on American jobs is a good place to get an idea, but even that data is hard to come by. Even the Congressional Research Service struggled to find the exact answer in 2012. “The only regularly collected statistics on jobs lost to the out-of-country relocation of work come from the U.S. Bureau of Labor Statistics’ (BLS) series on extended mass layoffs,” the congressional report reads. The BLS series also couldn’t provide a clear answer because the data pool was extremely limited. “Since 2004, BLS has asked firms with at least 50 employees that let go of at least 50 workers in layoffs that lasted 31 or more days whether the firms moved the laid-off workers’ jobs out of the United States. Given the series’ exclusion of small companies and focus on large layoffs, it underestimates the number of jobs lost to offshoring.”

Even today, the U.S. still does not track the amount of jobs lost to offshoring. At most, the U.S. Department of Labor keeps count of the number of workers who petition for Trade Readjustment Allowances, or support payments for individuals who cited job loss as a result of foreign imports (after they’ve already exhausted their unemployment compensation). What we do know is that during Barack Obama’s second term as President, 209,735 petitions for trade allowances were filed. Despite vowing to keep manufacturing jobs on U.S. soil when he was ushered into the Oval Office, Donald Trump’s administration saw just slight improvement with 202,151 petitions.

Even with murky hard data, the loss of American jobs to offshoring was a grievance aired in the political arena, and from the communities affected, it’s easy to see why. Not only did these layoffs damage U.S. workers, they also hurt entire local economies, causing mass exodus in some cases. From a real estate perspective, total community dismantling is not exactly a good omen for business.

And then, of course, COVID happened.

Traumatic supply chain injury
The pivot to offshoring in the name of fast-paced growth and profit left the manufacturing sector incredibly vulnerable to a global pandemic, showing that the model of greater distance comes with greater risk. Due to its long-standing reliance on manufacturers in Asia, American manufacturing became overly dependent on imports, which completely backfired as the global supply chain spiraled out of control and crippled what remained of the domestic supply chain.

Results of the U.S. Census Small Business Pulse survey. From May 31-June 6, 2021, 36 percent of small businesses reported delays with domestic suppliers | Source:
“COVID was a wake-up call,” said CNBC commentator and former hedge-fund manager Ron Isana during the National Association of Realtors C5 Summit. “We’re seeing companies move from a just-in-time model to a just-in-case model.” Isana is certainly not alone in the opinion that supply chain vulnerability casts offshoring in a harsh light. The National Association of Manufacturers, the largest manufacturing association in the United States, recently released their Third Quarter 2022 Outlook Survey which showed damning evidence that supply chain issues will continue to plague manufacturers even after the threat of the COVID-19 virus has been mitigated. It’s clear that the global supply chain exposed market inefficiencies, but savvy commercial real estate professionals know how to exploit market inefficiencies to their benefit.

Tactical reshoring
Brewster Smith, Senior Vice President of Supply Chain Solutions at Colliers, told me that the COVID-19 outbreak brought home to American manufacturers the hazards faced by offshore business ventures and how dependent they are on the global supply chain to get their goods back to domestic markets. “The supply chain disruption of 2021 taught us that our national supply chain is too dependent on manufacturing capacity in one part of the world that is too far away,” he said. “Re-shoring will help regionalize and/or localize the availability of supply for critical goods that will restore our supply chain resiliency.”

Agreeing with Smith, many companies are either planning to, or have already, recalibrated their operations by transferring their operations that had been moved overseas back to their home base, also known as re-shoring. Last year, more than 1,800 companies re-shored their productions, according to a report from the Reshoring Initiative, a non-profit organization dedicated to reigniting the manufacturing business in the U.S. Businesses want to expand or move their facilities more quickly and with less capital outlay than in the past, evident in the record spike in companies looking to pull their business back.

Smith maintains that the businesses which manufacture commoditized goods will remain overseas, but businesses that churn out goods with intricate production processes (which require a skilled labor force) are more likely to yank productions back. After all, shorter supply chains streamline demand data, improve the efficiency of inventory data, and ultimately improve order reaction times.

But even after the massive reckoning from the global supply chain’s downfall, total re-shoring is not exactly viable for a lot of industries that really would benefit from having their operations much closer to home. The use of foreign manufacturing can be a huge liability for the U.S. drug supply. Pharmaceutical drug manufacturers are not able to pick up and return so easily. Even though prescription drugs and medical devices are highly complex products that require an exceptionally skilled labor force to make them, re-shoring pharmaceutical manufacturing is an endeavor of extremely high costs because biopharmaceutical facilities are subject to hyper-specific regulatory requirements. But even so, there is a strong case for pharmaceutical manufacturers and other industries where re-shoring is too cost prohibitive to reevaluate the local manufacturing strategy and figure out how to improve supply chain resilience and control exogenous vulnerability. The answer? Nearshoring.

Nearshoring to you
Nearshoring and re-shoring are similar concepts that involve businesses positioning their operations closer to the point-of-sale, but nearshoring is the compromise between offshoring and sourcing a local team. The idea behind nearshoring is simple: while maintaining the advantages of being in, say, the U.S., some functions are moved to accessible regions which have lower operational costs, like Mexico. A nearshoring location must have affordable property occupancy costs, adequate transportation connections to the capital and other important business hubs, and a competent labor pool. When compared to a pure reshoring strategy, nearshoring can yield more favorable results, primarily because supply and production risk can be diversified, partners with specialized skills and knowledge can be chosen to complement existing capabilities, and businesses can benefit from more favorable tax and regulatory structures while more clarity is still lacking in the U.S., as CBRE is seeing in Monterrey, Mexico.

Repurposing existing facilities for manufacturing has drawn a lot more interest from manufacturers. The companies of manufacturers are likewise seeing more upheaval and disruption. Additionally, if manufacturing facility sizes shrink, so may the amount of investment and dedication. As a result, leasing can be seen as having a smaller risk than in the past.

Barbi Reuter, CEO of Cushman and Wakefield, believes that nearshoring is the answer to a lot of industrial woes as nearshoring improves supply chain predictability and reliability while maintaining more advantageous labor access and costs. “There is a desire from employers and manufacturers to manage the downside and improve their supply chains and operations,” she said. Between mitigating supply-chain challenges, overcoming reshoring’s difficulties without sacrificing its advantages, and presenting a more favorable labor-cost environment, Reuter insists that “[nearshoring] is going to remain strong for the foreseeable future.”

The mangled supply chain put re-shoring and nearshoring in the spotlight, but is recalibrating the manufacturing sector closer to home as much of an economic win-win as offshoring was once said to be? Well, not exactly.

Companies flocked to offshoring for years because of the cost-savings, and nearshoring is inevitably more expensive. If we look at it from the perspective of an American corporation, they would nearshore to either Canada or Mexico. Even if it may be less expensive than employing Silicon Valley professionals, this still costs more than recruiting developers from India or China. Companies are also more geographically limited when they opt to nearshore their operations, which could hinder better business partner relations. Advocates who are vying for manufacturing to return to the U.S. for the sake of American jobs aren’t getting their prayers answered, which means that nearshoring is not reinvigorating the real estate markets that the offshore wave of previous decades left behind. Nevertheless, re-shoring and foreign direct investment targeted at specific locations by way of nearshoring are both contributing to the robust recovery of U.S. manufacturing. Even with inflation at a four-decade high and interest rates continuing to rise in the background, investment in industrial real estate has soared. Plante Moran’s U.S. Industrial Real Estate Market Summary of last quarter showed that the sector is experiencing both record-low vacancy rates and record-high rent rates.

With manufacturers shifting to a more robust supply chain management strategy after the pandemic unveiled a flawed system, industrial real estate in North America is experiencing a sudden rebound. After years of the sector being an overshadowed asset class, much in thanks to the offshoring surge of the previous decades, industrial real estate is having its renaissance moment.

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Selling a House After the Death of a Parent

Managing a parent’s death can be difficult, especially if you also have to sell a house. Learn about the steps for selling a house after a parent passes away.

A parent passing away is one of the most difficult times in a child’s life, regardless of when it happens. Whether your parents were old or young, the emotional toll it may take on you could last longer than you expected.

But a parent’s passing has its challenges beyond the emotional fallout. They have belongings and assets you may need to manage and sort through when they die, including a home. If you’re handling the disposition of your parent’s home after they die, keep in mind that it’s not the same as a typical home sale. There are a few things you should be aware of if you’re selling a house after the death of a parent.

Selling an inherited house
If your parent passes away and leaves you their home, you may need to manage the transfer before selling it as long as there are details about the transfer.

“When a parent passes away, they could leave the home to their children by transfer-on-death designation in many states,” said Geoffrey Kunkler, a partner at Carlile Patchen & Murphy LLP in Columbus, Ohio. “If they do not do so, the property will likely be in their estate and subject to the jurisdiction of the probate court.”

Kunkler said a transfer can happen quickly as long as the paperwork is in order. And from there, you can sell it once it’s yours. Otherwise, you’ll need to wait for probate to play out.

“If [the] title has not been transferred out of the parent’s name, the child will not be able to sell it,” Kunkler said. “Depending on what the parent wrote in his or her last will and testament and the rules of the local probate court, there could be multiple steps to take before the child can sell the property.”

The probate process could delay your home sale. If you had plans to list the homes soon after your parent passes, you might have to wait a little longer. Make sure your parent’s will or trust has your inheritance clearly instructed so the process can move faster.

Selling an inherited house with siblings

The best way to settle potential family disputes is to make sure your parent’s will or trust specifically outlines their last wishes. Even then, you’ll need to discuss the next steps with your siblings if you’re planning to split costs and proceeds.

If you’re planning to sell your parent’s home with siblings, get answers to questions like:

  • Who’s handling the sale of the home
  • Who’s funding home expenses?
  • How much is the house worth?
  • How is the splitting of the proceeds happening? For instance, is it equal among siblings or is there a set percentage?

Emotions run high in families when a parent passes, and it’s normal to have disagreements about how assets should be handled. You can request a mediator, but if you don’t have a unified agreement, probate will determine who gets what for you.

Understanding the status of the house
It’s important to know the house’s status before going forward: probate, transfer on death deed and living trust.

“How a house is titled is critically important,” Kunkler said. “If it is in probate, it will go through the court process before it can be sold. If it is set up with a transfer on death deed, the title passes automatically when the decedent has passed, and all the beneficiary typically needs to do is file an affidavit and the death certificate before they can sell the home.”

A living trust is an easier way to transfer assets and property because it avoids the probate process.

“Often probate can be the slowest,” Kunkler said. “Property that is in a living trust will not go through probate and will instead be governed by the terms of the trust document.”

Because probate can be one of the biggest holdups in selling an inherited home, you’ll need to make space in your timeline for this. If your parents haven’t passed but are making end-of-life plans—like estate planning—a living trust might be a good alternative to a last will and testament. It might be a little bit of work now, but it will save you and your family potential problems once they pass.

Do you need a real estate agent to sell an inherited house?
Selling a regular home is already a difficult task, which is why real estate agents offer a big benefit. They can walk you through any hurdles you might face, especially because you’re selling an inherited house.

It’s usually not required to hire a real estate agent to sell an inherited house, but having one could mean the process goes smoothly. You might want to bring other experts on board, too.

“You may want to seek legal or tax advice in addition to professionals who could help assess the house and the real estate market,” Kunkler said. Consider an estate or probate attorney who has experience navigating the probate process and selling inherited properties.

You’re under no obligation to hire professionals, but going at it alone could delay the home sale. You’ll have to maintain the house while it’s in probate and getting toured. You’ll have to list the home , market it, handle viewings and negotiate with prospective buyers and their agents. All that and going through probate can make selling an inherited home feel like a full-time job. If you have the means, consider offloading some of that work to professionals who can help.

Dealing with the loss of a parent isn’t easy, and that emotional load might be even heavier when you’re tasked with selling their home. But there are some actions to take as soon as you can to avoid drawing out the process.

If your parents are still alive and able to, have them outline their specific plans in a living trust, which avoids probate. A transfer on death deed is also a good option, but you’ll need to make sure your state validates it before choosing that option. If those aren’t viable options in your situation, it’s better to have some form of will than nothing at all. Just know that it could take longer to sell an inherited house this way, especially if the title needs to get transferred out of the parent’s name.

The best thing you can do right now is have a concrete estate plan set up for your living parents. If your parents have already passed and you’re in the process of selling their home, you might need to have a great deal of patience and the help of some professionals to better get you through it.


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What Developers Should Know About Sunshine Laws

The best disinfectant is sunlight, as the saying goes. That was certainly the reasoning behind the creation of state Sunshine Laws, which were put into place to ensure transparency in government. The laws require that government meetings and records be publicly disclosed and open to the public. The state of Utah enacted the first of these kinds of laws as far back as 1898. Florida adopted similar laws several years later, and all states eventually passed Sunshine Laws in the 1960s and 1970s. But the legislation truly took the spotlight after the Watergate scandal, a saga that played out in front of the country and led to a new focus on government accountability and transparency. In 1976, Congress passed a federal mandate, the Government in the Sunshine Act.

These laws affected the property industry in several ways with additional scrutiny as the government became involved from the very start of a real estate development project, whether it’s a public-private project or not. Plans must be submitted to the city, permits applied for and granted, and in some cases, public hearings and approval from governing bodies are part of the process. In New York City, new development projects can take several years from start to finish, with some projects required to go through what’s known as ULURP, Uniform Land Use Review Procedure, a months-long process that can make or break a development. It’s during these phases in the development process when real estate firms must engage with public officials that firms must exercise the utmost caution to avoid inadvertently disclosing sensitive information.

Better safe than sorry
City officials’ communications are considered public and can be requested at any time. City filings, like project plans and permits, are also public record and can usually be easily viewed through databases. “A lot of communities go above and beyond what they are required to do so people can see what’s going on in government,” said Scott Ziance, a partner at law firm Vorys, Sater, Seymour and Pease LLP. Ziance works with real estate clients who often have projects with highly confidential aspects.

Most of the time, in-house lawyers at commercial real estate firms or services firms will have basic knowledge of the general principles of Sunshine Laws, and the same goes for outside legal representation. The most important thing for commercial real estate professionals to know is what they have in the public domain that their competitors or their tenants’ competitors can use to their disadvantage, and to think about how to minimize what they put in the public domain. “Where I find people get surprised is by how broad public records laws are,” said Ziance. “Unless it’s a trade secret—and that’s a very high standard to meet—almost everything is public.”

Even choosing a project name can be a giveaway to competitors. It should go without saying, but don’t give away the name of your business in the project’s name in any filings or emails unless you absolutely have to do so. Ziance said he’d seen his fair share of techniques by companies to conceal their identity, everything from using college and high school nicknames to simply putting two random words together. However, some companies don’t do themselves any favors. “I have seen my fair share of things like ‘Golden Arches’ where people aren’t that creative,” Ziance said.

Sword and shield
Commercial real estate firms should worry, but not just about competitors getting an advantage. Reputation and public trust are hugely important when it comes to development projects. One developer recently found that out the hard way while trying to get a project approved by the local government. Development firm Provident Land Services had been trying to build an 80-acre mixed-use development in the Charlotte, N.C. suburb of Weddington. The proposed project was met with a lot of concern from area residents, who turned up in force at town council meetings and formed groups opposing the development. The project garnered so much backlash that one town meeting had to relocate to the local high school to accommodate crowds.

Through public records requests, one of the groups discovered emails between the developer and city leaders. The group claimed that the correspondence showed “a lack of transparency” about how the project timeline was presented to the public. The questioning of the communications between the developer and government officials played out in local media. Some of the groups eventually filed complaints with federal and state agencies about the development, and the town council ultimately rejected the project. A similar story played out earlier this year in Alexandria, Va., when activists opposing the overhaul of an art center obtained emails between developers and city leaders through public records requests and alleged collusion between developers and city officials.

Another important step real estate firms can take to protect information is communicating through service providers. That could mean accountants, lawyers, or even civil engineering firms, which often can get out ahead of permitting. Using a third-party as a contact and choosing a project name that doesn’t give away the company and its plans can further delay any word of a project getting out. “Being able to see what your competitors are doing is the way that public records law can be used as a sword,” he said, adding that by getting creative and using caution with filings and communication, the laws can also be used as a shield.

 The idea is similar to using LLCs in commercial and residential real estate transactions, a common tactic among real estate firms, celebrities, and other high-profile individuals and companies. The federal government took aim at anonymous LLCs last year when it passed the Corporate Transparency Act (CTA) as part of the 2021 National Defense Authorization Act. The law was created to crack down on money laundering and the financing of terrorism by requiring the disclosure of information from corporations, LLCs, and similar entities. Rules in the act were due to go into effect earlier this year but have been pushed back.

Sunshine Laws haven’t changed much since they were enacted, except in the aftermath of the 9/11 terrorist attacks. Several states added exemptions for records relating to a building’s critical infrastructure and computer systems for publicly or privately-owned companies. “Basically, they didn’t want to make it easy for terrorists to know about computer systems or infrastructure,” Ziance said. As an expert in the field, Ziance has participated in several seminars on best practices for Sunshine Laws. He often polls attendees on whether they think non-disclosure agreements signed by the highest-ranking executive or official in the community would protect a project from the public. Most people answer yes, which is wrong. “There is a misconception that a signed NDA would have control over public records laws,” he said. “I’ve seen a lot of mayors and EDC officials sign NDAs that are not going to be binding against them. You can’t agree by private contract to something contrary to the law.”

Ziance’s advice for developers looking to start on a project is to get started early by pinpointing what information will be available to the public. Identifying which documents will need to be handed over to the government should be a part of your checklist. The documents could be sensitive from any standpoint, primarily from the perspective of a competitor’s or tenant’s competitor. “Come up with a strategy with in-house or external lawyers for minimizing disclosure of info and minimizing what at all possible for a public records request,” Ziance advised. Developments don’t stay a secret forever, but if you plan ahead, you have the opportunity to get creative and form a clear strategy. Doing so gives you better control over what information is revealed and when. And when communicating with city officials, always remember the front page test: how would this look if it were on the front page of a newspaper?

CBRE: Construction costs forecasted to jump 14 percent in 2022

An ongoing global sand shortage is delaying real estate developments, straining project budgets, and sending some construction companies scrambling to find alternative solutions. The sand shortage has been a growing problem over the last decade, driven by the continued growth of the world’s population and more people moving to urban areas. A recent construction outlook report from JLL found that the US construction industry is seeing “rapid price growth” in the price of sand, and it is not expected to come down any time soon. According to Stanford University, the price of sand has more than doubled over the last few decades, jumping from $4 a ton 31 years ago to the current price of $10 a ton.

Concrete, one of the most widely-used materials in the construction world, is created mostly from sand. It is used to construct buildings, bridges, roads and is also used in cosmetics and computer microchips. In fact, sand is the most consumed commodity in the world, after water. However, keeping up with demand has been a challenge. The kind of sand used in construction is mined from riverbeds, lakes and beaches, and the soaring demand for the material is leading to an environmental crisis in some places where mining is common. And because sand is an unregulated business, the unrelenting demand for the key material has led to violence, death and “sand mafias.”

There are alternatives to using sand in the construction process. One is mass timber, a material that has been growing in popularity in recent years. Another is crushed rock, which is already being used in the US, Europe, and China where it is the main source of aggregates. A third option is recycling waste from construction and demolition sites like concrete or masonry. A report from the United Nations Environment Programme released earlier this year on the sand shortage recommended better regulations and standards surrounding sand extraction in order to protect riverbeds and coastlines. “If we can get a grip on how to manage the most extracted solid material in the world, we can avert a crisis and move toward a circular economy,” said UNEP’s Pascal Peduzzi. While prices may not go down anytime soon for the construction world, it’s an encouraging sign that influential organizations are making the sand shortage a priority.

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