Amy Wood

NAI Global, a leading, global commercial real estate firm, earned the top fifth spot in the 2022 Lipsey Survey of Top 25 Commercial Real Estate Brands. The survey was conducted among 100,000 commercial real estate professionals using a combination of ballot voting, phone interviews, and focus groups to identify the top global brands. NAI G2 Commercial Real Estate is an office of NAI Global.

 “We are proud that the strength of NAI Global is reflected in the results of this year’s Lipsey survey,” said David Johnson, Managing Director & Member. 

The survey is conducted by The Lipsey Company, a leading training and consulting firm specializing in the commercial real estate industry to equip organizations and their practitioners with the skills necessary to succeed in today’s competitive environment. The 2022 survey results can be found here: 

Brand Survey 2022

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The pandemic’s impact on commercial real estate has been profound, accelerating demand for flexibility in office and industrial leases. But the persistence of remote work is also beginning to disrupt the multifamily sector, with more renters now asking for flexible lease terms, particularly in core urban markets.

An estimated 20 percent of the U.S. workforce is expected to continue working remotely post-COVID-19, which is also driving demand for flexible and short-term apartment rentals, as remote workers take advantage of their freedom to experience new places or travel abroad. AirDNA, which tracks the short-term rental market, reported that short-term apartment rental demand in September was 105 percent higher than during the same month in 2019. Additionally, short-term rental income in the third quarter of 2021 set a new record, up 24 percent compared to the same period in 2019.

Driven mostly by demand from younger professionals, the short-term rental market last year saw the launch or expansion of start-ups that allow tenants to rent apartments for less time than the typical 12- to the 18-month lease term, says Geraldine Guichardo, global head of hotel research and director of living sector research with real estate services firm JLL.

There are twin dynamics driving this trend, according to Guichardo—a shift in renter preferences following the disruption caused by COVID-19 and landlords’ desire to maximize revenue potential. “This is a phenomenon we are seeing across all of real estate with a term we are coining as the ‘hotelization of real estate.’”

From an apartment perspective, renters, particularly those in urban centers, want more flexibility in the length of their leases given shifts in lifestyles and the increased flexibility in their working arrangements. According to Guichardo, as 48 percent of the global workforce is expected to remain in a hybrid/flex office arrangement, shorter apartment leases allow some workers to avoid feeling tied down with a long-term commitment.

On the landlord side, short-term leases can benefit landlords by allowing rental rates to be adjusted more frequently in response to market conditions, she adds. “This creates a hedge against inflation because as operational expenses increase, rental rates can be increased in real time. In essence, operationally, short-term apartments resemble a hotel’s operations.”

There are currently about 1.1 million short-term rental listings nationally, down 11 percent from 1.2 million in 2019, according to AirDNA. But the firm is forecasting an increase to 1.4 million listings this year. Two flexible, short-term apartment start-ups, June Homes and Blueground, raised millions in funding rounds last year and might account for a significant portion of this growth.

New York-based June Homes, a proptech start-up focused on providing flexible rentals in urban U.S. markets, raised $50 million, led by Softbank Ventures Asia. Tenants can tour and rent a shared or private apartment, furnished or unfurnished, at fair market rates for one to 18 months, complete the process entirely online and move in within three hours. For credit-qualified tenants, there is no upfront security deposit.

On the landlord side, Daniel Mishin, June Homes founder and CEO, says his company built an algorithm to identify apartments that are often units in disrepair but in desirable locations. June Homes is a turnkey partner with owners that guarantees occupancy and provides marketing and management of buildings at no charge, which eliminates broker and management fees. It has vendors in cities where it operates that create video tours of the units, upload them to the company server and renovate the units if needed, among other services. June Homes makes it money on the rental rate premium generated from unit improvements. The firm’s portfolio currently includes 2,500 units in Boston, Los Angeles, Philadelphia, Austin, New York City, San Francisco, and Washington, D.C., with plans to expand to Chicago this year.

In New York, Mishin says that June Homes’ units rent within seven days of the listing list.

Meanwhile, Blueground, a New York-based start-up with international operations, launched in 2013, but raised $180 million last year, including $140 million in equity capital, from investors led by WestCap, and an additional $40 million debt facility from Silicon Valley Bank. The firm plans to expand into 10 new markets this year. It currently has 6,000 units under lease contracts in nine major U.S. and nine major European cities. Greece-based Apostolos Foteinakis, Blueground chief financial officer, says the company plans to add 3,000 to 4,000 new units by the end of 2022, entering new markets across the United States, Europe and Asia.

Since its inception, Blueground primarily served business travelers, according to Foteinakis, but now there is a significant number of remote workers entering the sector. “We have observed over the past couple of years people experiencing new ways of living. They are traveling more and want to be flexible—live life on their own terms,” he says, suggesting that the move from unfurnished long-term rentals to flexible furnished rentals represents a shift that over time might disrupt the traditional apartment market.

Blueground rents its apartment units from landlords, redesigns and furnishes them, and then sublets them at flexible terms of one month or more for a premium rate. Occupancy of Blueground averages at 95 percent, according to Foteinakis, with an average stay of several months.

The U.S. market represents 65 percent of firm’s business and Blueground often leases units from property management companies that are located in the most popular neighborhoods of cities where it has a presence. For landlords, a deal with Blueground guarantees occupancy, Foteinakis notes. And as an added bonus, the tenants often fall in love with the building and the neighborhood and end up signing long-term leases directly with the building’s owner.

NAI G2 Commercial Real Estate received the NAI Global President’s Award for the Secondary Market for the manner in which the office promotes the brand, drives business, engages with fellow professionals, and provides leadership within NAI Global’s structure. The award recognizes NAI Offices that have demonstrated a steadfast commitment to the strategic vision of the enterprise that has helped make the commercial brokerage, investment advisory, and property management firm a Top 4 commercial real estate services provider in the world. 

The award was presented at the 2022 NAI Global Convention in New Orleans, Louisiana. 

“NAI G2 Commercial Real Estate is a great example of how local and regional leadership drives the NAI Global brand that continues to facilitate the respective office’s competitiveness and growth, yet also makes us a leader worldwide. Our entrepreneurial management style, combined with excellence in every market we serve, is what distinguishes NAI Global in the commercial real estate industry,” said Jay Olshonsky, President and CEO of NAI Global. 

“We are excited to receive the NAI Global President’s Award for the top Secondary Market in the NAI Global network, and we look to continue to build on this success. Our diversified team of specialists work diligently to deliver exceptional results for our commercial real estate clients throughout the Columbus, GA and East Alabama markets,” said David Johnson, Managing Director and Member of NAI G2 Commercial.

“The recognition is humbly appreciated and due in large part to the efforts of our amazing team of commercial real estate professionals. NAI G2 Commercial leads the region in commercial sale & leasing transactions because we are constantly evolving our processes to achieve best outcomes for our clients,” said Jack Hayes, Director and Managing Member of NAI G2 Commercial.

About NAI G2 Commercial Real Estate

NAI G2 Commercial Real Estate is the market-leading, full-service real estate brokerage and asset management firm based in Columbus, GA providing service and expertise in West Georgia/ East Alabama. Whether you are a commercial real estate buyer, seller, owner, tenant, or developer, NAI G2 Commercial is your top choice, given our local market expertise and access to a world of opportunity through the NAI Global network. 

About NAI Global

NAI Global is a leading global commercial real estate brokerage firm. NAI Global offices are leaders in their local markets and work in unison to provide clients with exceptional solutions to their commercial real estate needs. NAI Global has more than 300 offices strategically located throughout North America, Latin America, Europe, Africa, and the Asia Pacific, with over 5,100 local market professionals managing in excess of 1.1 billion square feet of property and facilities. Annually, NAI Global completes in excess of $20 billion in commercial real estate transactions throughout the world.

NAI Global provides a complete range of corporate and institutional real estate services, including brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain and logistics consulting and related advisory services. To learn more, visit www.naiglobal.com.

If you drive from San Jose, California, toward San Francisco along El Camino Real, a historic road that was once used for travel between Spanish missions, you’ll see an endless stretch of strip malls and parking lots, semi-urban sprawl extending nearly the entire route between the two major cities. The street, which is typically six lanes wide, isn’t a place people want to walk alongside. But it could be the best place for solving the Bay Area’s ongoing housing crisis—and a model for how to reimagine underused commercial strips in other areas that desperately need new apartments.

By one calculation, there’s room for a quarter-million new apartments on the street, which could be built without displacing any existing homes. In the five most populated Bay Area counties, in total, there are 700 miles of major arterial streets with room for up to 1.37 million new homes.

“There’s a lot of underutilized lands there,” says Peter Calthorpe, a Berkeley-based urban planner who co-founded Urban Footprint, a company with a software tool that calculated the potential for the space. “Old strip commercial is now overbuilt, underused, undervalued, largely because we shop online. We don’t go cruising down the strip anymore to get what we need.”

That’s not to say that no one ever goes to the old strip malls; if you want to get good Indian food or shop at a Korean supermarket, the low-slung buildings are a good place to find them. But new mixed-use buildings could keep retail space on the ground level while adding floors of apartments on top.

On the street itself, some lanes of traffic could be dedicated to public transit, and wide sidewalks could make room for café seating with separated bike lanes on the side. In the late 1980s, Calthorpe was the first planner to define transit-oriented development—the idea that compact, walkable, mixed-use neighborhoods should be built around train stations. But he says that wide streets like El Camino could be used in a different way.

“The reality that I see these days is that transit is too expensive to build in a ubiquitous way, especially if you use BART [rapid transit] or light rail systems,” he says. “Light rail’s now $100 million a mile. So the idea that you’re going to be able to come close enough to capture a large percentage of our populations in sprawling metropolitan areas just doesn’t seem logical.”

Instead, he says, some traffic lanes on streets like El Camino can be converted to bus rapid transit, letting buses quickly travel from stop to stop. And the lanes could eventually be used by autonomous vans that pick up passengers on demand, 24 hours a day, seven days a week. (This may not be so far in the future; Singapore began testing autonomous buses on city streets last year.) “When you think about where you could put [bus rapid transit] or [autonomous rapid transit] as it emerges, it’s on the big arterial corridors,” Calthorpe says. “That’s where you have the space to steal the lane.”

It’s official: 2021 was the REIT industry’s strongest year on record since 1976, according to Nareit‘s Q4 REIT Performance Report

REITs led the U.S. stock market in investment returns. The FTSE Nareit All Equity REIT Index posted a total return of 41.3 percent in 2021, and the FTSE Nareit Equity REITs index increased to 43.2 percent. Meanwhile, the S&P 500 saw a return of 28.7 percent in 2021.

Every REIT sector recorded positive returns in 2021. Self storage topped the list with returns of 79.4 percent, followed by the industrial sector, which saw returns of 62 percent. The office sector, continuing its adjustment to remote work and other ramifications of the pandemic, still posted positive returns totaling 22 percent.

Nareit Senior Economist Calvin Schnure attributes REITs’ extraordinary performance last year to a notable improvement in operating factors, including a rebound in earnings and a recovery in occupancy rates.

Unanticipated consequences

One unexpected assist for REITs came from the long-term performance of the digital economy. When COVID-19 hit, consumers turned to e-commerce during the early days of shelter-from-home and remote work. This indirect boon for the real estate industry bolstered industrial REITs, data center REITs and infrastructure/cell tower REITs. As the pandemic and the resulting necessity to rely on technology changed, however, e-commerce activity did not. Schnure told Commercial Property Executive:

“As the physical economy reopened and in-person transactions rebounded, the online activity didn’t sag or give back its prior gains. If anything, it has continued to grow rapidly, as it appears that millions of people have found new ways to use technology to simplify their lives in ways they hadn’t considered prior to the pandemic. As a result, demand for industrial real estate, data centers and cell towers, has continued to grow.”

And there are no signs that the impact of the digital economy on real estate will wane. “Trends through the second half of 2021 suggest that digital real estate will continue to be strong in 2022,” Schnure added. “Vacancy rates in industrial properties have fallen to practically zero and rents and property values are rising rapidly.”

Article originally posted here.

Developers are rushing to start construction on new apartments—and so far, the demand for new apartments seems likely to stay high enough to fill them.

Occupancy rates remain strong and rents are rising quickly for rental apartments. The biggest questions for developers are not whether enough renters will want to live in their proposed buildings. Instead many worry about whether construction delays will hurt their schedules or if rising costs will blow their budgets.

“Barring another ‘black swan’ event, there’s still a ton of pent-up demand for newly-built apartments,” says Jay Parsons, deputy chief economist for RealPage. “Investors continue to fund new developments, and we’re likely to see another sizable increase in starts in 2022.”

Many apartment developments that start construction today are likely to be leasing units within a year or two. Those apartments should continue to benefit from strong demand from renters.

“Solid economic growth, continued strength in the labor market, high single-family home prices, and international migration will help prop up demand,” says Thomas LaSalvia, senior economist at Moody’s Analytics.

Renters signed enough new leases to absorb 200,000 vacant apartments in 2021. That’s a “solid year,” relative to the years before the pandemic, according to LaSalvia.

Developers opened more than 386,000 apartment units were completed in 2021, according to estimates from Dodge Data & Analytics Supply Track. That was slightly below the 405,000 units delivered in 2020.

“Supply chain issues and some uncertainty from early in the pandemic had the effect of delaying and slowing new product coming to market [last] year,” says LaSalvia.

This year, Dodge Data & Analytics Supply Track, estimates more than 600,000 units will be delivered, although it’s possible to further disruptions could delay some units.

With demand outstripping supply, rents are rising quickly. “This combination helped push rent growth in the sector to record highs,” says LaSalvia.

For example, asking rents rose 11 percent for apartments at luxury, four-star, and five-star properties across the U.S. in 2021, according to CoStar. (Most new apartment developments are designed to earn high rents, to pay the high cost of land and construction, unless they receive government subsidies.)

Rents at these asset classes are expected to continue to rise another 7.0 percent in 2022, according to CoStar as the number of potential renters eager to seek housing is likely to keep increasing.

“International migration was minimal over the last year or so—we anticipate this will change in the short term, as long as the virus subsides,” says LaSalvia.

Developers will also open a greater number of new apartments in 2022. Many will finally open projects that had been delayed in 2021. “2022 is on track to be the biggest year since the mid-1980s for new supply,” says Parsons.

Luxury renters can afford the rent hikes

As property managers push rents higher, they are not likely to lose potential residents.

“Developers have found that renter incomes are growing just as fast or even faster,” says Parsons. “So, they’re able to pass along increased costs into the base rent, and that hasn’t impacted demand for lease-ups.”

At a typical class-A+ luxury property—such as at a new urban high-rise development—the cost tends to be in the low 20-percent-range of the income of a typical renter. “There’s not a major affordability barrier. The bigger risk is for renters to find better deals at slightly older and cheaper class-A properties, but right now, there’s so little vacancy that it’s not a factor,” says Parsons

Construction costs and delays scramble development plans

The biggest challenges for developers are the rising costs of construction and the delays that add even more extra costs.

“The big question is around costs and timelines,” says Parsons. “Everything is more expensive and everything is taking longer to get—from materials to labor to appliances. That’s making it more difficult for developments to build budgets and timelines.”

Apartment developers are also highly enthusiastic to build in prime suburban areas—but those sites are hard to find and increasingly expensive.

“As suburban land prices skyrocket, suburban site options narrow,” says Parson. “The most desirable suburbs severely limit where you can build apartments due to restrictive zoning and NIMBYism.

That’s bringing many developers back to urban areas, where rents are rising once again for apartments, even though the coronavirus pandemic continues and relatively few workers have returned to the office.

“As the price premium for urban narrows, some developers are finding better opportunities in more urban locations,” says Parson. “There are far more significant barriers to entry in high-demand suburbs than in most cities. That’s been true for a long time, but it’s gotten even more significant since COVID as suburban land prices have shot up.”