Parking in a Changing CRE Marketplace: Adapting & Futureproofing

Steps to take today and for tomorrow

When it comes to parking, people generally have a lot to say—and when asked to comment on the state of it, they usually turn to words like “headache,” “necessary evil,” or some words this blog can’t repeat. Let’s just say that it’s safe to say that most people loathe parking, especially in crowded cities. Along with traffic in South Florida, it’s very often a big downside of time spent behind the wheel.

And that’s actually a little disappointing (bear with us). Because in today’s rapidly changing CRE landscape, parking is actually kind of an exciting topic, with new challenges leading to some cool new ideas.

Why parking is changing

A combination of increased residential and commercial properties in congested downtown areas, a changing demographic that telecommutes and sees little need for car ownership, shared workspaces, advanced automotive technologies, and ride-sharing options are all coming together to change parking needs.

The result is parking garages that are strangely both over-crowded and under-used, depending on the hour and/or the day of the week. Further complicating matters are future predictions that parking garages will become very close to obsolete. To meet the challenge, there are two general courses of action: meeting today’s needs and future-proofing for tomorrow.

Solutions for parking today

All too often, parking garages are somewhat of an afterthought in CRE—which is odd, since in many cases, they are actually the first impression many visitors have of a building. They are, in a sense, the true lobby. And as such, they often need to step up their game.

To help make parking more convenient and personal, some garages have created reception areas, valet services, parking assistance technology (such as LED lights for drivers to easily locate available and handicap spaces, and digital signage of available parking on each level), automotive detailing services, designated areas for taxis and ride-sharing vehicles, and improved lighting and security.

In addition, many garages have established shared parking arrangements with neighboring businesses. The needs of the businesses involved help to determine how best to establish this parking partnership. For example, a commercial business may need parking spaces during the workday, while another—a restaurant, perhaps—needs those spaces in the evening. Sensors, counters, and other technologies can help negotiate overlap times.

Solutions for parking tomorrow

Developers and architects now sit at a crossroads when it comes to parking garage design. Municipalities want either a minimum or a maximum number of spaces, while many predictions point to a future in which parking will be a thing of the past. One report, for example, projects that those five years old and under will not get a driver’s license.

To meet this challenge, more and more garages are being designed with an eye toward futureproofing so they can be easily converted into other uses. This means level rather than graded floors, ceiling heights that meet office and residential standards, openings that can be easily fitted for future window placement, and open shafts that can someday house ductwork and wiring.

Around the world, the future is here. The repurposing of parking garages is already happening, from Wichita, KS, where a parking garage was converted into an apartment building, to London, where one became a hub for small businesses. Making preparations now not only helps a building project stay relevant for a longer period of time. It’s also cost-efficient in the long term, as it costs far less to repurpose than it does to demolish and start from scratch.

Paying attention to parking is critical

While parking may not become completely obsolete anytime soon, predictions indicate it could significantly diminish in relevance. For developers, investors, and owners, it’s a smart idea to keep an eye on parking trends. In the present, adequate and convenient parking keeps visitors and tenants satisfied. For the future, it keeps the CRE property relevant and profitable if one plans to hold the property for many years.

The Morris Southeast Group team has already seen the struggles malls have had in meeting the challenges created by e-commerce. When it comes to the future of parking garages, it makes sense to prepare today so they remain adaptable.

To learn more about parking solutions and requirements, property management services, investment opportunities, and/or other services, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

The Power of Infrastructure to Transform CRE

Roads, bridges, jobs, and commercial real estate values all benefit

Infrastructure forms the fabric of our daily lives and powers our economic prosperity. Buildings, roads, bridges, and communication networks are just a few examples of the vast web of systems that give us space to work, play, and learn. When these systems are maintained and functioning well, they enhance the value of a region’s commercial real estate, leading to increased occupancy and higher rents.

Room to grow

The U.S. has long struggled to properly fund and develop its infrastructure, which has resulted in traffic congestion, blackouts, and worrisome conditions for many bridges and roads. In 2017, the American Society of Civil Engineers gave the country a grade of D+, saying that $3.6 trillion would be needed by 2020 to get to an “adequate” level of infrastructure. This shortfall has a significant cost attached to it—every year, we spend 5.5 billion hours sitting in traffic, at a loss of $120 billion in time and fuel. Miami knows this problem firsthand, as it ranked as the 10th most traffic-clogged city in 2018, with the average local driver in the car 64 hours a year.

But there is hope on the horizon. Politicians of all stripes agree on infrastructure as a basic good, as do 75 percent of Americans as a whole. An increase of $18 billion a year would create 200,000 jobs and add $11 billion to the U.S. economy. CRE investors know this all too well—infrastructure is one of the top reasons people choose to purchase or develop a property. When roads, power grids, and sea-ports are running smoothly, the value of nearby CRE improves dramatically.

Lifts all boats

The benefits of an improved infrastructure across many categories that have great importance to CRE investors.

• Access. If your building is easily accessible by well-paved roads, subways, and buses, or walk/bike paths, it will be easier to visit and to do business there. The tenants of this building, therefore, will be much more inclined to pay top dollar for rent.
  
• Jobs. 14 million people work in positions connected to infrastructure, making up 11 percent of the U.S. workforce. These include truck drivers, train engineers, power grid technicians, and pilots.
  
• Transit. Businesses located near public transit can charge 80 percent more rent than their more distant counterparts. In addition, the rise of rideshare and driverless automobiles demonstrates the need for thoughtful urban planning and well-paved roads. Case-in-point, the new Brightline train, which connects Miami to West Palm Beach (and, eventually, Orlando) is a hopeful counterpoint to the city’s traffic woes.
  
• Energy. As renewable sources of energy grow and become more widely adopted, there are dozens of positions that come with them, such as those who install solar panels, and natural gas workers who need trucks, rails, and pipeline.

Major projects on the horizon

Many urban areas have heard this call to action and have projects already in the works:

• Miami’s “signature bridge” will connect historic Overtown with neighborhoods that sit along Biscayne Bay, reversing an urban planning decision in the 60s that forced many families out of their homes to make room for I-95, and cut them off from the rest of the city.
  
• Houston’s 180-mile beltway called the Grand Parkway will connect major employment centers and ease congestion in the notoriously car-heavy town.

• Los Angeles’ public transit system is in for a major makeover, extending it’s Gold, Expo, and Purple Metro lines to the city’s west side and beyond.

Although the country as a whole still has a long way to go towards systemic infrastructure improvements, these initiatives show how individual communities can take steps to smartly overhaul their roads, bridges, and railways. CRE will be a chief beneficiary of this work.

Morris Southeast Group stands ready to help you take full advantage of this trend, with CRE expertise born from years of experience. For a free consultation on our commercial real estate investment or property management services, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

Long-Term vs. Short-Term Leases in a CRE Property

Which is best for you?

A lot has been written lately about thinking outside of the lease box, including exploring the possibility of short-term leases. One big reason for this conversation is the rise of pop-up businesses, and the short-term lease is a way of filling space that would otherwise remain empty.

Before jumping into the short-term lease market, however, there are a few things for both landlords and tenants to consider. In many cases, a long-term agreement may be a far better leasing option. As with most things in life, there are pros and cons to both types of leases—and here is the long and short of it.

The power of the short-term lease

Generally speaking, short-term leases can stretch from one to 12 months. Anything longer than 12 months starts to creep into the long-term territory. A short-term lease is a more viable option in markets where there are tough eviction laws and where the demand for space is greater than availability, which means landlords have a larger pool of tenants from which to choose. This, in turn, means a property is more likely to remain occupied each time a short-term tenant leaves.

For the landlord and tenant, a short-term lease has several benefits. The greatest of these is flexibility. Because leases are short (and often have higher rents than similar long-term properties), the landlord is able to change terms and conditions, as well as the rental price, more often to meet his or her changing needs. At the same time, a short-term lease may make sense for a tenant who is—for whatever reason—unable to make a long-term commitment. This, of course, widens the pool of prospects for the landlord.

Short-term isn’t always a good thing

Of course, all of this doesn’t go to say that short-term leases are always an ideal solution. There are some key concerns that both landlords and tenants need to consider:

• For the tenant, a short-term lease can be a little iffy, especially if they like the space and want to continue renting it, but the landlord finds a long-term tenant (to replace them) in the meantime. And tenants can expect to pay more with a short-term contract.
• For the landlord, there are issues that need to be addressed each time a tenant leaves, such as advertising for a new tenant, checking references, and preparing the space for the new occupants. Because the old tenants often only have to give short-term notice, landlords—especially those who are not working with a CRE brokerage or property management firm—may find their time to accomplish these tasks flying by. The result may be a property that sits vacant.
• Landlords will also find that ultra-short-term leases are not valued as high to lenders or potential purchasers of the asset; long-term leases are what provide stability for an asset, which usually translates to a higher value. This depends on the type of investment, however. For example, industrial vs. multi-family: in the latter case, a short-term lease is normal for apartment tenants.

The stability and challenges of long-term leases

By its name alone, the long-term lease indicates that both parties are willing to make a commitment for longer than one year, if not longer. For tenants, long-term-lease properties are less expensive than comparable short-term leases and are also easier to find. Landlords, particularly in markets where rents are falling, will want to offer long-term leases for stability and relatively assured income.

Commitment, though, comes with challenges. Once locked into a long-term agreement, tenants will have to stay or face significant consequences if they attempt to break the lease. Similarly, landlords may feel as if their hands are tied if they’re faced with a problem tenant, or changing market conditions mean they could be charging far more rent.

Finding the perfect lease

One way to help navigate leasing options is to work with skilled professionals who are adept at understanding the unique needs of landlords and tenants. Morris Southeast Group is that team. Additionally, we also provide property management services to help landlords and owners keep more of their time while keeping their properties occupied and tenants happy. To learn more about owner and tenant representation, leasing options, property management services, investment opportunities, and/or other services, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

Greener CRE Is Good For Business

Sustainability is now a driving force in business and commercial real estate

It seems not a day goes by without a reference to climate change and the push for more sustainable efforts. While the idea of sustainability isn’t new, it has often been seen as a vague concept that’s simply “the right thing to do.”

According to a recent study by ING, though, sustainability appears to have moved up in priorities for the corporate boardroom. More and more companies, for the first time ever, now view sustainability as a growth engine and even a necessity. And in order to remain competitive and viable, CRE needs to take notice.

Key findings of the sustainability study

For the purpose of its 2018 report, ING interviewed 210 US-based finance executives, representing a broad spectrum of industries. Among the key findings:

• Corporations with the most comprehensive sustainability framework saw increased revenue and better borrowing and credit-rating outcomes.
• Companies using a sustainability framework were often the most engaged in meeting the needs of the 21^st-century consumer, thereby ensuring survival and growth.
• Despite these positives, more than half of the financial executives interviewed for the study reported difficulty in identifying sustainability-led business opportunities. Additionally, there is a definite need to better understand how sustainability can be applied to different types of businesses.

Translating the sustainability study to CRE

Although the ING study focused on sustainability and the corporate business model, many of the findings can easily be applied to CRE. In fact, all players in the CRE equation—from borrowers and lenders to owners and tenants—can benefit from adopting sustainable strategies for commercial, multi-family, and industrial properties.

• The decision to have a property go green appears to have a positive impact on revenue, as well as a potential reduction in operating costs—and this translates into higher property values.
• After the collateral property becomes LEED-certified or Energy Star labeled, CMBS (commercial mortgage-backed securities) loans can have a more than 30% reduction in default risk, as well as better loan terms.
• Building characteristics and operational practices that impact the intensity of the property’s energy usage can also impact the risk of default. In other words, energy efficiency may start to play a more important role in the risk assessment process for new mortgages. This is similar to green tagging, a practice that is taking its place in European banks.
• A changing demographic also means a changing attitude among potential tenants, many of whom place sustainable options at the top of their priority list. These generally fall into four categories: space design and integration (think co-work spaces and flexible design), wellness (natural lighting, proper ventilation, and environmentally safe products), resilience (a property’s ability to bounce back after a disaster), and solar energy.

Building a sustainable framework

The goal of sustainability is all about growth and longevity. That’s why there is an ever-increasing pool of green consultants to help bring businesses of all sizes. It only makes sense, then, that those sustainable goals—growth and longevity—can also be applied to CRE.

The professionals at Morris Southeast Group understand the importance of sustainability. As a staple of the South Florida community for 30 years, we have witnessed and experienced environmental changes, and stay abreast of those the future holds. We recognize the critical importance for owners and tenants to successfully prepare for and meet eco-challenges. To learn more about sustainability options, property management services, investment opportunities, and/or other services, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.