Shifts in the Seniors Market
The seniors housing industry is “undergoing a significant transition, finding a new normal for investment and development activity,” says Real Capital Markets' April 2019 Senior Housing Snapshot. The report notes one trend showing that delivery of new construction dropped 14.8 percent in 2018 from 2017, although many consider the contraction a necessary slowdown as demand catches up to the strong supply cycle, particularly in major markets. The buyer profile has also changed. Five years ago, REITs were the most prolific buyers; in 2018, private buyers and institutional investors were the most active. Among industry practitioners surveyed for the report, 61 percent said that partnering with a strong operating firm was the most critical factor to impacting a property's profitability.
Hot Spots for Coworking
City centers boast the most opportunities for coworking spaces, though consumers wouldn't mind adding some retail to the mix.
Choice for a Coworking Space
- Town or city centers: 74.2%
- Shopping centers or malls: 73.1%
- Cafes or restaurants: 53.2%
- Industrial parks:43.7%
- Travel hubs (airports, train stations, etc.): 43.2%
- Residential areas: 32.0%
Source: Colliers, GlobalData
Smaller Retail Markets Catch Investors' Eye
Retail investors casting a wider net to increase their portfolio yields are looking toward secondary and tertiary markets. Marcus & Millichap's 2019 Retail North American Investment Focus notes that smaller metros offer opportunities for undervalued properties, although demand has focused on existing properties because of limited new construction in these areas. “Multi-tenant cap rates in primary markets averaged in the low-6 percent range over the past 12 months,” the report says, “whereas tertiary metro first-year returns averaged in the low-7 percent area.”
Financing for Green Multifamily Grows
As developers and investors become more familiar with the benefits of environmental features for multifamily buildings, the availability of capital sources for financing such features has also increased. Multifamily Housing News reports on a variety of financing options aimed at energy saving, ranging from Fannie Mae and Freddie Mac programs for construction and renovation to property-assessed clean energy financing. However, one expert told MHN that many developers remain unaware of the programs, and lenders must often persuade them to include green features into projects to be eligible for the programs.
Investment in U.S. grocery real estate totaled $9.9 billion in 2018, and more than 17 million sf of space was added. States with the highest percentage of total new grocery square footage, including:
- Florida: 9.7%
- California: 7.8%
- Texas: 7.8%
- North Carolina: 7.4%
- Illinois: 6.8%
- Virginia: 6.8%
Canada Leads Inbound Multifamily Investment
From 2014 to 2018, inbound capital to the U.S. multifamily sector totaled $50.1 billion, an increase of 241 percent from the previous five-year period.
Percentage of Total Cross-Border Multifamily Investment (2018)
- Canada: 63%
- Europe: 15%
- Asia: 15%
- Latin America: 3%
- Middle East: 3%
- Pacific: 1%
Planning Medical Offices with Consumers in Mind
Medical office buildings need to consider three features for success in the future, says Jon Boley, senior vice president of acquisitions and development for HSA PrimeCare, a Chicago-based developer and manager of health care facilities. Writing in Healthcare Business Today, Boley says that these buildings need:
- Main Street locations close to the patients they serve and provide ample parking and proximity to residential neighborhoods.
- “360-degree wellness” in design and site selection. Wellness features include fitness centers, community spaces for health and nutrition education, and nearby walking paths.
- Flexibility to react to changing technology and future needs of upcoming generations.
Retail: Storefront, a 5-year-old New York startup, has become the world's largest marketplace for popup stores, or short-term retail spaces. The company represents more than 10,000 listings in North America, Asia, and Europe. CEO and co-founder Mohamed Haouache tells Stores magazine that Storefront works with mall companies and real estate brokers to keep vacancies low and “keep older retail spaces alive.” The average length of a typical popup store contract, he notes, is 12 to 15 days, and about 60 percent of popup activity is seasonal. “My vision is to make popups more accessible,” he says. “I want renting retail space to be as easy as booking a room on Airbnb.”
Health/Senior Care: After four years of decline, occupancy at skilled nursing facilities in the U.S. was 82.4 percent in 4Q2018, virtually unchanged from the previous quarter and down only 0.4 percent from the previous year, according to the National Investment Center for Seniors Housing & Care. “While it appears that the worst of declining occupancy has passed, it's too early to predict whether occupancy will increase over time,” says Bill Kauffman, senior principal at NIC. “However, it's likely that the growth of elders in their 80s … will boost demand for skilled nursing care.” And, he added, “even though we're seeing stability in both rural and urban areas, rural areas face distinct challenges brought on by lower levels of occupancy, low reimbursement rates, and labor concerns. These factors have contributed to hundreds of facilities closing in rural areas.”
Office: The rise of driverless cars will leave its mark on the commercial real estate industry. Matt Caywood, CEO of TransitScreen, which provides real-time information about public and private transportation to buildings, tells GlobeSt.com that low-speed driverless vehicles will be able to provide transportation to businesses that aren't adjacent to transit, which can lead to more options for a company's choice of locations. High-speed vehicles that serve suburban areas could help boost the value of real estate farther from city centers.
Student: Has the “amenities war” in student housing peaked? Colleges may be rethinking resort-style living communities and focusing more on features that support students, while maintaining occupancy levels and increasing value. Bisnow.com reports that schools are focusing on improved study spaces and open areas to promote a sense of community. While high construction costs may continue to encourage trophy or high-rent properties, at least one developer is aiming at low-cost alternatives. “If a recession hits, instead of paying $1,500 in rent for a trophy unit right on campus, parents will start asking their kids to look for an apartment a few blocks away where they can pay $1,000,” says Jason Schwartz of Blue Vista Capital Management. “If there is a correction, we will be very well positioned.”