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While commercial real estate in major metropolitan areas remains in high demand and continues to command top rates, supply is limited and competition is fierce for the spots that do become available. Many investors are therefore turning their attention (and dollars) to secondary and tertiary markets. And with good reason—transaction volume in these markets soared from $2 billion in 2000 to $45 billion by the close of 2017.
Market definitions are fluid and can depend on the specific needs of a developer or investor, but there are general guidelines that can help professionals navigate the landscape. Population, job growth, capitalization rate analysis, occupancy rates, and the volume of sales and investment in a community are some of the traditional indicators in a market classification. Nontraditional indicators such as a region’s professional sports franchises or the number of direct flights may also come into play.
Out of the more than 50 metropolitan statistical areas (MSAs) with populations over one million and the 30 MSAs over two million, five to seven of them—New York, San Francisco, Boston, Los Angeles, and Washington, D.C., with Chicago and Seattle sometimes thrown in—are considered core markets. The “secondary” level includes places like Denver, Phoenix, and San Diego, with “third-tier” tertiary markets like Las Vegas, Pittsburgh, and Salt Lake City rounding out the list. Characteristics of this last category include a population of under one million, a mix of traditional and alternative economic indicators, and controlled but consistent job growth.
There are many reasons to consider investing in these smaller markets that will have an impact on both your budget and long-term prosperity:
While it can be tempting to jump into secondary or tertiary markets with both feet, it’s important to do your homework and make sure each region is a good fit for your investment needs.
Economics at a glance don’t tell the whole story. It’s important to look at a market’s individual traits and put them side-by-side with national trends. There are also factors outside of traditional drivers that can have a big impact on a region’s fortunes. Denver without cannabis or Orlando without Disney are far different investments than naked numbers may show on paper.
Finally, a dose of reality is always helpful. The growth of these markets can’t last forever and in the event of another economic downturn, be prepared to pivot should the local economy take a dip.
In the words of hockey legend Wayne Gretsky, “skate to where the puck is going, not where it has been.” Early investors in secondary and tertiary markets may find a great opportunity where others haven’t yet ventured. Morris Southeast Group is proud to serve South Florida—one of the nation’s most vibrant and exciting secondary markets—and hope you will consider partnering with us. For a free consultation on property management services or commercial real estate investment, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
For several years now, we’ve all heard how e-commerce is changing the retail landscape. As consumers continue to click to shop, there is a greater expectation for rapid delivery. For e-retailers, that means establishing local distribution centers, most likely using vacant warehouse space or newly built facilities close to urban centers and airports.
At the moment, in locations like Miami-Dade where population is dense and available space is sparse, that formula seems to be working. But e-commerce shows no sign of slowing down and more distribution space will be needed. And the solution may involve looking upward.
Today’s warehouse usually comes in one size: sprawling. Very often, these structures took advantage of open land on the outskirts of populated areas. They were designed to be cavernous structures, a holding place for goods stacked to the height of the high ceiling, able to manage forklift maneuvering and trailer deliveries.
In places like Miami and other densely populated urban markets, the outskirts have disappeared. This lack of buildable land has increased its value, which in turn has led to rent increases in buildings that already exist.
At the same time, the tenant base has changed. In the past, most tenants would be content with 20,000 to 30,000 square feet of warehouse space but with a changing marketplace, many tenants are now seeking ten times that amount. And some experts predict there are about 10 years of available square feet remaining.
While a decade may seem like a long way off, the impact of Miami’s unique predicament is already being felt. Rising rents are encouraging potential tenants to shop for better deals, and many of these can be found north of Miami-Dade. Both Broward and Palm Beach counties tend to have lower rents and more space available, and both are close enough to Miami-Dade to still be able to provide efficient and rapid delivery.
Miami is seen as a potential market for the multistory warehouse, and although it does seem to solve a problem, it also runs into a few challenges that are uniquely American. Typically, multistory warehouses are located in dense areas. As a result, their design often involves tighter turns on ramps and in aisles, as well as loading and unloading areas on each of the floors.
At first glance, this doesn’t seem like much of an issue—until one considers the size and length of the typical American tractor trailer, a mainstay of the nation’s delivery of goods. In Asian and European cities, this wasn’t too much of an issue since they already use smaller trucks that are easily maneuverable in tight city streets and on warehouse ramps.
In America, big trucks could bring urban traffic to a standstill which could delay the movement of goods, which could then eat into profits. While smaller trucks and vans could solve the issue, developers and potential tenants may see compact vehicles that transport less product as inefficient, too risky, and too expensive.
Generally speaking, multistory warehouses are a new concept. As a result, initial rents would be higher, and the tenant would need to feel especially secure that the investment would be worth the return. That being said, can the Miami-Dade market afford not to look at warehousing solutions for the future? At Morris Southeast Group, we have always felt it’s important to look ahead in order to meet the CRE challenges and changes that are sure to come, from multistory warehouses to using virtual reality to prepping for climate change. To learn more about property investment opportunities and our 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.
From Brooklyn to Boca Raton, the once ultra-hip urban core of America’s cities now finds itself beyond the reach of many of the professionals who helped make it so desirable. These former residents are fleeing big metropolises in search of affordable rents and mortgages, safe schools, and open space. But they still crave the comforts of urban life—walkable neighborhoods, vibrant food and culture, access to the city—and, where these features don’t yet exist, they may bring these qualities with them.
This migration marks a new take on the move by an earlier generation, which left
cities out of fear for their safety due to rising crime rates. Now, city
dwellers are leaving because they simply can’t afford to live there.
This shift has become a large enough trend that some realtors now specialize in it. One realtor spends much of her time moving New Yorkers out of New York (85 percent from Brooklyn alone), to “laid back” villages and towns in Westchester, along the Hudson River, and in suburban New Jersey—areas once thought of as boring bedroom communities.
The youngest (and largest) generation makes up a significant portion of those making this move. According to global real estate company CRBE, approximately 103,000 more millennials ages 25 to 29 moved out of cities than moved in, and 167,000 more ages 20 to 24 did the same.
Granted, some of this migration can be attributed to underemployed young professionals moving back into their parents’ basements – but a significant portion moved to find a more affordable lifestyle. And it doesn’t stop with millennials. The numbers for Gen X are even more striking: 660,000 more fled cities than settled in them.
Yes, these young professionals are heading to the suburbs. But not just any ‘burbs will do.
No sprawling neighborhoods with few sidewalks surrounded by causeways clogged with big box stores. For these former urbanites, a healthy mix of affordable housing, locally-based food culture, and cultural literacy are necessary ingredients to complement the leafy-green streets. Towns like Irvington and Hastings in New York, Homewood, and Berwyn near Chicago, and Doral and Plantation in South Florida have stepped up to fill the bill.
Developers have noticed. Many towns within striking distance of the Big Apple have significant building projects underway and in the planning stages:
In short, these new transplants want the best of urban life, through a suburban lens:
While much of the focus of the “hipsturbia” movement has been focused on places like New York City, South Florida is no stranger to the trend. Some CRE developers have increasingly turned their attention away from downtowns like Miami, West Palm, and Fort Lauderdale to put down stakes in the likes of Doral, Plantation, Sunrise, and Boca Raton. Indeed, 64 percent of new construction in South Florida has moved to these suburban markets.
Chief among the reasons for this shift are workers reaching their breaking point on commute times and traffic congestion. On the developer side, land costs are significantly less, sometimes by as much as $10 to $15 a square foot.
Make no mistake, the vibrant urban cores of our cities aren’t going anywhere. But just as a rising tide lifts all boats, the suburbs are now seeing a real share of that vibrancy come to their communities. We at Morris Southeast Group are excited to see where this trend leads and are ready to work with you on your CRE project, no matter the locale. Call us at 954.474.1776 for a free consultation on commercial real estate investment or property management services. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
A hallmark of the Tax Cuts and Jobs Act passed in 2017 was the creation of Opportunity Zones. In short, the program was another effort to encourage investment in economically depressed communities around the country. And true to the current state of politics in the country, both cheerleaders and critics were quick to voice their opinions.
In 2018, Florida joined the list of states eager to participate in the program. The candidate neighborhoods, identified as census tracts, represent counties throughout the state but South Florida leads the pack in the number of communities in need of investment. Nevertheless, nearly two years after its passage, Opportunity Zones (OZ) remain a highly debated topic.
The basis of the program is to promote economic investment while offering a tax break incentive. In short, when taxpayers sell an appreciated asset, they can then invest that gain in governor-nominated census tracts. Some key details:
Naturally, there are pluses and minuses – philosophical and economic – to investing in Opportunity Zones. For investors, it’s a tax incentive that also holds the potential to do good: reduce poverty, increase employment, and spur growth in some of the poorest communities in the nation. In fact, of the top 10 cities predicted to benefit the most from the Opportunity Zones program, five are in Florida: Orlando (1), West Palm Beach (2), Tampa (3), Fort Lauderdale (8), and Miami (10).
Critics, on the other hand, say, “not so fast.” Some point to previous programs that they say failed in the long run, as well as the number of people who would be displaced as a result of living in an Opportunity Zone and the convergence of investments in neighborhoods that were already seeing a surge in investments prior to the start of the new law.
Even in the midst of the debate, though, opportunities are there – but for the investor, the best advice is to proceed with caution, for some very good reasons:
Morris Southeast Group is excited about the possibilities found in Opportunity Zones throughout the region – especially when one of these investments is researched thoroughly and represents the right move for one of our clients. To learn more about property 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.
While it may seem a far way off, June 1 is right around the corner – the start of the 2019 Atlantic hurricane season. You don’t have to be a meteorologist or climatologist to know the far-reaching effects that hurricanes have on South Florida. After a storm hits, the future of the local economy sometimes hangs in the balance, and CRE plays a crucial role in helping get businesses and neighborhoods back on their feet.
This makes it all the more important to set your disaster preparation in motion to protect your commercial property from mother nature’s wrath.
Don’t wait until your property is in the midst of repairs or a rebuild to consult your insurance policy. When prepared properly, these policies are living documents, adapting to the ever-shifting risk landscape. Review them annually, if not more frequently, to be sure they accurately reflect your understanding of what will happen once they take effect.
Some questions to consider:
When that “Hurricane Watch” alert flashes across your screen, it is typically too late to begin complete preparations for what’s likely to come. Ideally, the planning process begins every January – just over a month after the close of the previous season – which will give you the time and clarity to properly plan your disaster response.
Every CRE business should have the following on their active agenda, even while hurricane season is the faintest glimmer in the distance:
Once that “Watch” bulletin pops up, these protocols should be put into action. If you wait until the alert elevates to a “Hurricane Warning,” time may not be on your side. As always, contact your local emergency management agency to learn about specific risks in your area.
Some hurricane preparations will come in the form of standard facility maintenance, such as trimming trees, cleaning roofs, and clearing gutters. But there are a number of additional steps to take in order to fully protect your property:
In the event that a storm temporarily forces you and your staff to hunker down at work, you’ll want a fully-stocked supply of essentials to get you through until the sun shines again. Some items to include:
While the exact path and timing of a storm can be uncertain, the preparations needed to withstand it are not. With proper planning and regular maintenance, your team and your property will be ready when the winds begin to blow. Such diligence minimized the impact of Hurricane Irma on South Florida’s CRE market and set new national benchmarks for building codes and construction standards. Morris Southeast Group is proud to serve this market and invite you to consider partnering with us. For a free consultation on 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.
There’s an old joke that if one holds onto old clothes long enough, they will eventually be back in fashion. While it may be some time before ‘70s polyester leisure suits are chic again, the same cannot be said about motels.
What was once a dilapidated and dying element of the hospitality industry has undergone a revival revolution in recent years, and the momentum isn’t slowing down. In fact, it’s quite the opposite. With a limited number of properties available, more and more smaller independent and larger hoteliers are working feverishly to make kitsch cool – and South Florida, because of its long love affair with midcentury architecture, is at the heart of the motel revival movement.
In many ways, the motel industry is the result of a post-WW2 booming middle class from decades ago. With a strong economy and automobiles, American families embarked on road trips, and motels satisfied a need for affordable accommodations located near roadside attractions, such as small amusement parks, western town re-creations, and caverns.
As the nation became more connected through an extensive and well-linked interstate highway system, motels and local roadside attractions were often bypassed. Travellers were more likely to stay in no-frill chain accommodations located near on and off ramps. In order to stay afloat, motel clientele changed, its reputation now tarnished by whispers of extramarital affairs, hourly rentals, criminal hideouts, and overall seediness.
In the decades since the motel’s decline, more branded chain hotels swept in to fill the void and luxury hotels grew more luxuriant and expensive. A younger generation of travelers, weighed down by college debt and a weaker economy but valuing experience and affordability, helped to put Airbnb on the map.
The intimacy of renting accommodations in a stranger’s house, though, wasn’t for everyone – and inventive and creative hoteliers see an opportunity in the supply of aging motels. Often, these relics had remained in families for generations or had owners who were simply overwhelmed by the challenges of running a profitable operation. Either way, buyers and investors found eager sellers – and the revivalism revolution began.
The new hoteliers have pretty much stumbled upon a formula for re-doing an old motel, one that celebrates the personality of the structure without demolition. That formula’s success, though, is based on a few key elements:
On a local level, several South Florida motels have found a way to pay homage to the region’s historic and nostalgic architecture while creating a hip-but-authentic place for not only a new generation of travelers but also an aging Baby Boomer population looking for a stroll down memory lane. In Miami, there’s Vagabond and the New Yorker. Both are known for their nod to classic vintage style and an independent and community mindset. A little further up the coast, in Fort Lauderdale, is Manhattan Tower, with its iconic tower and Intracoastal views.
At Morris Southeast Group, we’ve written extensively about the opportunities to repurpose old structures into something else – and we think it’s fantastic to repurpose an old motel into a celebration of its glory days that serves a new market of travelers. To learn more about hidden retro gems and other property investment opportunities, and/or our other CRE 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.
Although it was developed in 1984, it took until quite recently for 3D printing to become part of our everyday vernacular. In recent years, its use has grown by leaps and bounds – from printing artificial limbs and organs to weapons to food. It seems that the only thing that might hold back 3D technology from here is lack of imagination.
That’s why it’s time for anyone interested in CRE to pay attention. While experts debate how long it will take for 3D printing to become a viable, common technology in the real estate business, there is no doubt that it will – and that it is set to have an impact on all aspects of the industry.
When it comes to engineering and design, 3D printing was once considered a novelty act – a tool to create three-dimensional models of future projects that clients could examine from all sides – and household décor items. Printers, though, have gotten quite a bit larger and the technology has jumped forward.
Using a technique called “additive building” or “additive manufacturing,” the 3-D printer scans a blueprint of a structure, and then “prints” with a soft concrete that is applied in stacked layers. Around the world, construction and technology firms have joined forces to make this technology possible, and nations are taking notice:
In the United States, 3D printing has been relegated to specific projects, such as efforts to restore the facades of historic buildings in NYC or as exhibition projects on college campuses. Much of this is because the long-range vision for 3D technology has outpaced what already exists. While some imagine a future of entire 3D-printed communities filled with homes for less than $4,000, there simply is not a system in place for field inspections and building codes to ensure a project’s structural, electrical, and plumbing integrity.
There’s also the matter of jobs. 3D printing is sure to cause a disruption in the job market, particularly in the construction field. While there will be a greater need for designers, engineers, and innovators, many construction workers will have to be re-trained to be incorporated into this new field or find work in other areas.
Similarly, the real estate industry will also have to adapt to a 3D future. As the technology becomes more cost effective and readily available, professionals will have to understand the technology and help clients to also envision 3D possibilities – from new construction to remodels to interiors.
At the same time, available properties will also undergo a transformation. Some retail properties, for example, will only need to house a 3D printer and it’s supplies for print-on-demand products; everything from housewares to furniture to whatever else one can imagine. Similarly, small industrial properties and warehouses may again be re-purposed, this time into local 3D printing centers or storage and fulfillment facilities.
If all of this sounds like the stuff of some far-fetched sci-fi film, Morris Southeast Group would like to remind everyone that it wasn’t so long ago that virtual reality just seemed like a neat gimmick. Today, it can be a necessity for a real estate deal. Similarly, e-commerce has radically reshaped CRE as well as commerce as a whole in a relatively short time. This is why we keep an eye on the future while providing top-notch service and investment advice in the present. To learn more about property investment opportunities, and/or our other services in South Florida, 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.
When it comes to attracting quality tenants, there’s already plenty of information about using lighting. Much of it, though, has to do with landscape lighting, security lighting, and specific lighting – such as ambient and task – for residential properties.
When it comes to commercial properties, lighting can be just as crucial to attracting top-quality tenants. For years, LED has been the standard but we are now experiencing a lighting revolution. In fact, new and improved technologies are almost being developed as fast as, well, the speed of light.
The first LED light was developed back in 1962, and its early usage was usually in the computer tech industry. Over the decades, improvements in delivery of LED light, as well as its relatively low cost and energy efficiency, have made LEDs very common. This increase in demand combined with what some experts see as a glut on the market have led to a push for differentiation – and this, in turn, is leading to customizable options for specific industries.
Perhaps the most exciting innovation in the world of light is Li-Fi, which is short for Light Fidelity. Presently, we are all familiar with broadband and Wi-Fi – and just as the name implies, Li-Fi means the light bulb is the router, with data traveling at 224 gigabits per second on the rapidly blinking waves of an LED bulb. In other words, where there is an LED light bulb, there is Internet.
Presently, a major disadvantage is also one of its advantages. Since LED light cannot penetrate walls, a signal’s range can be limited. On the other hand, it means that a company’s internal communications are secure from users in another room, building, or even outside.
The team at Morris Southeast Group is always excited about advances in technology and its impact on commercial real estate. It’s important to keep properties relevant to meet the changing needs of owners, investors, and tenants. To learn more about property investment opportunities, and/or other 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.
Most urban dwellers agree that development projects such as renewable energy, homeless shelters, public transportation, and affordable housing are good for their communities. But when it comes to where those projects are located, many local residents come down with a case of NIMBY (Not in My Backyard). One of the many results of this syndrome is an increase in land use restrictions, which a 2015 study estimated cost as much as $1.5 trillion in lost productivity.
In South Florida, developers have had their successes and failures in countering the NIMBY response. Below we detail several thoughtful, proactive ways to engage a community and respond to concerns about a new development.
It can be tempting to adopt a defensive posture when a community group pushes back on a project. In these situations, step back and imagine the scenario from their side. We all have families, live in neighborhoods, and want a quiet, safe place to call our own. Anything that seems to threaten that can be seen as dangerous and scary. Show respect for local residents and take the time to listen to their concerns.
To effectively mitigate this opposition, it’s crucial to address its root causes, which often fall into these buckets:
Personal connections made in one-on-one conversations or meetings of small groups are the most effective way to build support. Large, public hearings are more difficult to manage and can often fuel the fire of resistance by giving potential opponents an opportunity to network on site.
Most people are not economists or urban planners. They don’t care about the 30,000-foot view; they care about the view from their porch.
An essential starting point in working against any NIMBY opposition is to find those who already believe in your cause. People will follow the crowd and if they believe that a majority of their friends and neighbors support your project, they are more likely to follow suit.
If you can rally supporters to speak out on your behalf – in person or online – even better. Residents who may be on the fence are more likely to lean in your favor if they hear testimony from their neighbors in a public forum or see positive chatter on social media.
Identify and target specific pockets of support:
A comprehensive communication strategy can work wonders to convey a message consistently and clearly. As one-on-one interactions with residents inform your understanding of the issues involved, incorporate them into your messaging. Proactively address the most glaring concerns – traffic and parking, environmental impact, strain on services, neighborhood preservation –and your message will be one of collaboration rather than confrontation.
Share as many details of the project as possible so that they become familiar and, frankly, unremarkable, to your core audience. The more ordinary your plans seem, the less misinformation is likely to circulate.
Every NIMBY movement has its own unique motivations and local roots and thus requires a unique and locally-inspired approach. The more time you take at the outset to listen, understand and reflect back the community’s values, the more likely you are to gain supporters and minimize naysayers. We at Morris Southeast Group are proud community partners and are always tuned to the needs of our neighbors. For a free consultation on 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.
Automation is the new black when it comes to speed and cost efficiency. Miami’s own Sedano’s grocery outlets, in partnership with Massachusetts-based Takeoff Technologies, is wearing this new style proudly as they deploy what is being called the world’s first “robotic grocery store.”
If successful, this new model will offer other retailers a brave new world of online growth at a fraction of the current cost of doing business. They will roll out the technology in 14 of Sedano’s 34 locations, and Takeoff plans to launch similar programs at five additional regional and national U.S. retail chains.
The process is fairly simple: customers order groceries from their phone or laptop, artificial intelligence-enabled robots at Takeoff’s automated fulfillment centers fetch the items, and Sedano’s staff helps sort and get them ready for in-store pickup or out the door for delivery. Takeoff’s system then automatically restocks inventory as needed, filters customer service requests, and provides reporting and analytics.
The grocery business can be cutthroat. Its low margins and high volume have companies always on the lookout for an edge. Robots bring a new opportunity to simplify processes and cut down on labor expenses. And the sector is growing, expected to reach $100 billion by 2022, with the overall warehouse robotics market expected to increase at a compound annual growth rate (CAGR) of 11.8 percent between 2017 and 2022, putting it at $4.44 billion in value.
These automated shoppers can yank 60 items off the shelf in a manner of minutes; 900 per hour. By contrast, living, breathing shoppers can only grab 60 per hour. Every week, the system processes as many as 3,500 online orders per location, with promises of delivery within two hours. These numbers dwarf those seen by traditional stores that rely almost exclusively on manual processes.
These automated micro-fulfillment centers offer efficient service and significant cost savings because, among other reasons, they don’t take up as much room. They each need only 8,000-10,000 square feet, sometimes installed in the grocery store itself, which greatly shortens the distance between supplier and retailer and saves a boatload of cash, since they don’t have to build a physically separate distribution center.
It also shortens the distance between warehouse and customer, with orders able to be picked up mere steps away from where they are stored and delivery options being that much faster.
While a pioneer in many respects, Sedano’s is not the only grocer to dip their toe in automation.
In its quest to solve the conundrum facing all modern supermarkets – offer a robust and changing selection of products at a reasonable cost and still bring in enough profit to pay the bills – South Florida’s own Sedano’s has embraced disruption and is charting an exciting course towards the future. The impact on CRE will be interesting, especially if automation moves grocers toward finding smaller spaces in strategic locations – not to mention the impact the technology will have on other retail businesses.Morris Southeast Group keeps abreast of innovation and trends in South Florida business and their potential impact on CRE, and we’d be happy to help you find your next investment opportunity. For a free consultation, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
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