Ecker: Future of commercial real estate undergoing a fundamental shift | REJournals.com

Commercial real estate is experiencing a fundamental, disruptive and well-overdue shift.  People entering the workforce today have a completely different concept of work and the space in which they work than when I began my career, more than 40 years ago. They’re younger than they have ever been, more tech savvy and globally aware with social media consciousness baked into their DNA.

Back when I started, I worked hard during the day and spent evenings and weekends socializing.  I believe that today’s workforce goes to work to socialize, as they have the ability to work 24 hours a day, seven days a week from anywhere they are located.  As the habit of the workforce changes, space available for lease must adjust to the work and social needs of this “new worker,” or go unrented.

Companies must develop new ways to allocate space as the traditional office becomes obsolete —new floor plans within old spaces designed for new work habits – to cater to employee needs and eliminate costly reconstruction.  No longer do employees require “the accoutrements of success” (i.e. large offices) to bolster their egos.

Recently, I have witnessed corporations such as BP and United Airlines relocate from the suburbs to the city in order to build the best employee base possible. It is also rumored that Sears and Kraft are considering moving back to the city. If brought to fruition, these moves will help the companies regain the culture imperative to their success. I think that one thread runs throughout successful relocations: Space that reflects the culture, values and ethos of the company itself. Perhaps Sears should consider moving to its former headquarters at Homen and Arthington?  Sara Lee has made a bold and smart move with its recently announced relocation from Downers Grove back to the city, repurposing the 400 South Jefferson building.

For a period of time in the ‘80s and ‘90s, corporations lost track of the need for the workplace to reflect the values and culture of a company. I cannot tell you how many CFOs and real estate directors only asked one question—“Where is the best deal?” The bottom line today does not only equate to the cheapest cost per square foot but must relate to the market value of the company.

A new formula

My colleagues and I have developed a formula, RV (Real Value) = MV (Market Value) x SV (Symbolic Value). In other words, the cost of office space must take into consideration the dynamics of the real estate market in addition to the Symbolic Value of a space. No longer can we judge the value of space by the old “per square foot” metric. Today, we need to look at the real value of the full spectrum of issues that make up the fiscal and cultural well-being of a business.  Only then can a judgment be made as to the Real Value of any particular space.

The future of office space

Zappos is repurposing the old City Hall building in a blighted area of downtown Las Vegas and Google took over the former New York Port Authority building in the Meat Packing District of New York City. Forward-thinking companies will follow suit and continue to find older buildings to repurpose at favorable prices. In conjunction with organizations such as ArtPlace, which aims to develop creative space use to enliven communities, developers will gain long-term potential for successful real estate development.

It is my opinion that, after the non-traditional spaces start to be absorbed, companies will begin to repurpose iconic buildings, such as the Willis Tower. To succeed, ownership of these buildings will be charged with facilitating alternative uses of their traditional office space. Companies that will boom in the coming years are those that are comprised of the new employee—tech savvy, young, socially conscious—and are choosing homes for their businesses that reflect the needs of these employees and which rise to their cultural demands. 

Howard Ecker is CEO and President of Howard Ecker + Company, a commercial tenant representation company. He can be reached at howard@howardecker.com

Lodging Sales Surge As 'Unprecedented' Hotel Market Run Unfolds - CoStar Group

Lodging Sales Surge As 'Unprecedented' Hotel Market Run Unfolds - CoStar Group

Lodging Sales Surge As 'Unprecedented' Hotel Market Run Unfolds

Improving Credit Conditions Expected to Entice More Buyers Off the Sidelines In 2012

By Randyl Drummer

March 21, 2012

The U.S. lodging industry, benefiting from two years of sporadic recovery, should continue to enjoy gains  in occupancy and pricing power through 2014, with rising profits luring greater levels of investment, according to a series of hospitality reports and outlooks released over the last few days. 

PKF Hospitality Research, LLC predicted this week that revenue per available room (RevPAR) for U.S. hotels will rise 5.8% in 2012, the result of solid annual gains in occupancy and average daily room rates (ADR). 

"Ever since the first quarter of 2010, growth in lodging demand has greatly exceeded the supply increase," reported R. Mark Woodworth, president of PKF-HR. 
"We have seen six straight quarters of [room rate] growth, and are confident forecasting a sustained period of attractive industry profit growth," barring some huge economic disruption such as rising energy costs due to potential military hostilities with Iran, Woodworth wrote. 

"U.S. hoteliers have never enjoyed such an extended period of favorable market conditions. This is truly unprecedented and will likely result in accelerated, and significantly greater, levels of capital investment into the domestic lodging industry," he added. 

The number of sales of flagged select-service assets doubled last year, contributing to a 78% spike in sales of branded select-service, limited-service and economy hotels, Marcus & Millichap said in its first-quarter 2012 hospitality update, analyzing data from CoStar and other industry sources. 

Investors are showing particular interest in select service transactions as capital continues to flow into lodging, according to Jones Lang LaSalle Hotels, which forecasts that 2012 volume of select service hotel portfolio sales will likely double over 2012. 

"The select service sector is the most agile and resilient of the hotel transaction market. Its demand has quadrupled in the last 15 years, giving way to growth in the product offering," notes Al Calhoun, managing director of Jones Lang LaSalle Hotels. "An increase in corporate demand at branded upscale select service hotels is expected to bolster the performance for the overall sector in 2012." 

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REITs accounted for 35% of transactions as measured by dollar volume, up from about 24% the year before. Properties in high demand areas of large markets such as Texas and California are often achieving the best prices for sellers. 

"As property operations climb to former levels, the investment market is surging with renewed vigor as buyers push to acquire assets priced well below recent peaks," Marcus & Millichap said. Financing capacity is returning for deals with strong sponsorship and operating cash flows, whetting the appetite of investors for stable properties, many of which will likely trade in 2012 as buyers seek to take advantage of positive hotel fundamentals. 

U.S. hotels rented out more rooms than ever before in 2011 and demand will only continue to rise in coming years as business and leisure travel continues to recover amid a dearth of new hotel rooms, Val Bauduin, U.S. hospitality leader with Deloitte & Touche LLP, said during a panel last week titled "U.S. Hotels: A Performance Review and Forecast for the Future." 

After most major U.S. markets saw declines in the number of hotel rooms filled in 2009, often by double digits, the national occupancy rate turned positive in 2010 and a robust recovery took hold across the U.S. last year. U.S. occupancy averaged about 63% in 2005-2007, falling to 54.6% at its recessionary low point in 2009. It has grown steadily for two years, reaching 60.1% in 2011, and STR forecasts 60.4% occupancy in 2012 and 60.7% in 2013. 

While occupancy has been rising steadily since the end of 2009, room rates were slower to recover. But that too has changed. Nominal ADR for U.S. hotel rooms peaked in 2008 at $107.39 before falling to around $98 in both 2009 and 2010. However, the ADR shot back up to over $101 last year and should jump to $105.45 this year and $110 in 2013, Bauduin said. 

"What’s fascinating here is we’re predicting that we’ll be back to the peak within two years. I don’t think that any panel of experts last year would have predicted how fast [ADR] would rebound," he said. 

The projected steep climb in revenue per available room completes the recovery picture. RevPAR dropped off a cliff during the recession, falling from $64.23 in 2008 to $53.51 in 2009. As occupancy has firmed up, allowing owners to raise rates, revenue improved in 2010 and 2011 and will rise to a projected $61.06 in 2012 and $66.81 in 2013, according to STR Global. 

Lodging demand hit record levels last year in 30 of the 50 local markets covered in PKF-HR’s forecast reports. While the average annual change in the nation’s lodging supply from 1988 through 2011 was 2.1%, PKF-HR forecasts that new supply growth will remain less than 2% annually through 2016, leading to continued annual occupancy gains over the next 3-4 years. 

Combined with occupancy increases in 2010 and 2011, the industry will experience an unprecedented six-year run of occupancy growth, Woodworth said. 

With occupancy levels expected to exceed the STR long-term average of 61.9% in 2013 and beyond, "we are beginning to see operators capitalize on these favorable market conditions and increase room rates," he said. "We expect to see [ADRs] increase in excess of 4% per year through 2014." 

In addition to the top-line revenue growth, hotel managers have implemented policies and practices that have improved operating productivity, resulting in strong bottom-line gains. With hotel profits already increasing by 30% since 2009, Woodworth said profits will continue to grow at an average 10.3% though 2014, far above the historical average of just fewer than 4%. 

Since 2009, hotels in the luxury, upper upscale and upscale chain-scale segments have logged the greatest gains in room revenue, while hotels in the lower-tier upper-midscale, midscale, and economy categories have grown RevPAR at a slower pace. 

During the recession, hotels competed based largely on price, with the rate compression blurring the distinction between room prices on two- and four-star properties, Bauduin said. With improved job growth and corporate profits, "luxury is now leading the recovery and expanding the chain scale, allowing different operators to again target their customer segments, and the benefits are trickling down from luxury to upscale and upper mid-scale," he added. 

The national occupancy level for hotels in each of the upper-tier chain-scales will exceed 70% through 2016, leading to lack of availability during peak periods and greater pricing power for hotel operators, PKF-HR's Woodworth said. Some travelers will opt for less expensive lodging, to the advantage of moderately priced hotels, he said. 

Inergy Automotive

Social Media in CRE No Longer Just for Socializing - CoStar Group

Social Media in CRE No Longer Just for Socializing - CoStar Group

Commercial real estate brokers and companies are slowly shrugging off their aversions to social media platforms and are engaging more frequently in online marketing, information gathering and client building.

While late to the social networking scene and still in a fledgling state of using websites such as LinkedIn, Facebook and Twitter, many in the CRE industry have started trying to harness their reach in hopes that one day it will lead to deals and dollars. At the same time, many others still refuse to join the fold and flat out state they will resist until they're the last ones online.

"Clearly social media is still a divisive issue in commercial real estate - the difference in sentiment between enthusiastic adopters and major detractors parallels the sentiments in other industries driven by client relations, such as nonprofits and law firms," said Angela Brown, external communications manager for CoStar Group. "What is interesting in the similarities is the fact that many of the perceived challenges involved with social media are not insurmountable - platform selection, time management and measuring ROI are actually relatively simple with a bit of education and practice."

"I also think there is a misperception out there that social media is a magic wand that is meant to replace traditional relationships. It doesn't work that way," Brown said. "It should be seen as an inroad to establishing new online relationships and as a bridge to building offline relationships."

Brown and Coy Davidson, senior vice president of Colliers International - Houston will be hosting a live webinar on costar.com entitled Social Media for Brokers next Wed. Feb. 29 at 12 noon EST. The two will tackle many of the issues raised in our survey and techniques for success in social media. Register here to participate.

In preparing for that webinar, CoStar updated an informal poll it did a year ago to find out what successes, challenges and strategies the industry has adopted in the past year.

"The commercial real estate industry still seems to be trying to get its arms around the basics of social media," Brown said. "It is not surprising then that the default use of social media is marketing and public relations - social media lends itself to broadcast messaging and people aren't quite sure how to use social media for business development purposes and that's the sweet spot. Promoting news and listings are one thing, but people want dollars and sense. That's why education and information are so important. Most marketers and salespeople know how to evaluate ROI for traditional channels like email campaigns and phone calls, but measuring social media return is a special skill."

CRE marketing and communications executives have become huge advocates for social media.

Amy Schenk, marketing manager for Cassidy Turley in Cincinnati has the firm all over the Internet on sites such as Facebook, LinkedIn, Twitter, YouTube, Google+ and is researching the use of Pinterest.

"Over the past year, I have seen a huge increase in CRE professionals accepting social media and becoming more open to utilizing it for business," Schenk said. "The CRE industry as a whole is very conservative and set in its ways of operating and therefore usually follows behind other industries when it comes to adapting to new business tools. However, it seems there is finally consensus that social media is here to stay which created a sudden rush to become involved."

"Referrals are a huge source of business in CRE and social media is all about referrals," Schenk said. "By sharing, tweeting, posting, liking and pinning, people have built a universe of over a billion people that could be referring your services. At Cassidy Turley we have found social media to be a vital part of our CRE business development, customer service and marketing platform. The statistics prove that it's critical to have a place in the social media arena since it is now where the majority of people spend their time to socialize with friends and business acquaintances, find the latest news, research companies and professionals, and share information.

Gail Donovan, Director of Communications at Ariel Property Advisors in New York, said commercial real estate professionals will be more effective if they can reach a wider audience of buyers and sellers.

"We believe in reaching members of our target audience of current and potential clients and investors by using the communication tools they are most comfortable with. For this reason, we use a full menu of delivery options -- email, mail, fax, Twitter, Facebook, LinkedIn, RSS news feeds, and LoopNet," Donovan said. "At Ariel Property Advisors, we see social media as another distribution tool with which to sell properties for our clients, share our research, and market and brand our firm."

Alicia Miller, director of marketing at Rock Commercial Real Estate in York, PA, said social media allows instant conversations to take place.

"We have had direct property inquiries and referral leads come from social media," Miller said. And "social media is a wonderful way to pitch news to media and promote clients successes."

"Brokerage advisors use their own LinkedIn accounts for social networking and as a referral source. Marketing uses LinkedIn and Twitter to communicate settled listings, ratified leases, available properties, changes to available properties, client success stories, CRE research trends, team updates and successes and carry on conversations regarding CRE interests, both local and national," Donovan said. "We currently integrate several easy to use tools that allow marketing to monitor, publish and analyze our social media channels allowing more time for content creation."

Caitlin Luebbe, lease and marketing administrator for Ironwood Investments in Shoreline, WA, said social media can be an advantageous method of expanding your network, increasing brand awareness, and deepening your customers' sense of brand loyalty, especially if your company's drivers are aimed at directing business to your company website.

"A focused online marketing strategy that's aimed at effectively engaging commercial property owners and real estate investors within the target market can help a company to access hard-to-reach market consumers and generate favorable word-of-mouth advertising," Luebbe said. "Every post and blog update is ultimately an opportunity to reinforce your company's official brand and corporate identity and differentiate yourself from the competition. Such online activity also helps to positively impact your placement in organic search-engine rankings and make sure that you get noticed on sites like Google."

Real estate executives and brokers too provided feedback on their individual experiences using social media. We present those here.

Sourcing Capital

In short, I feel strongly that social media impacts my business in four major ways: it boosts visibility, fosters relationships, leverages media dollars, and builds brand equity. Recently we connected with a new capital source looking to invest in distressed properties as a direct result of a "re-tweet" from one of our followers on Twitter. The principals of our firm, Kinetic Companies, take a very hands on approach to using social media. Our biggest challenge has been training brokers, stakeholders, and employees to "think before they click" and recognize the impact blast style via social media messaging has on our company brand.
Joel Moyes, Principal, Kinetic Companies, Phoenix, AZ

An Everyday Tool

Our team currently uses multiple social media mediums as both an informational gathering tool as well as a way to build awareness of our brand / market activities that demonstrate good implementation of our service lines. We regularly rely on social media like Twitter, LinkedIn and Facebook for everyday activities in order to improve our business development and maintain existing client awareness. I do not believe you can quantify the gains on a specific basis as our experience has been more abstract as a research tool in-order to connect dots or some type of PR regarding information about an industry sector.
Albert Ellis, Senior Associate, Colliers International, Southfield, MI

Finding Us in New Ways

Social media is changing how America does business. It has a greater effect on the millennials, and Gen Y that are the early adopters when it comes to how they are handle consumption. At Velocity Retail Group we use social media to reach the smaller growing percentage of the population that tweets and follows. But we still have to rely heavily on traditional methods because so many in the industry, mostly baby boomers are obtuse to the newer tools. One of the main successes is the power of the Internet and search engines allows people to have access to the information that we put out there on blogs, tweets and our Facebook page, and LinkedIn and enables them to find us in ways that were not as likely before.
Dave Cheatham, Managing Principal, Velocity Retail Group, Phoenix, AZ

Connecting with Information

I am a newbie to social media. I use it but try not to let it run my life. I use social media (Twitter) to feed information which I find interesting and important to what I do. It has allowed me to connect with some pretty interesting information sources when I need information.
Greg Rutten, Principal, GRu Ventures Inc., Del Mar, CA

Success Is Measured by Amount of New Information

Social media has enabled me to casually "meet" new CRE members and have enabled me to exchange meaningful ideas and find information about trends, fact, articles and information about software products that I may have never been aware of or known about the capabilities of the same. My successes have been measured by the advice, information and experiences that I have shared and received by others in CRE, that I may not have had access to before.
Howard Applebaum, President, Corporate America Realty & Advisors, Rutherford, NJ

Keeping Track of Contacts

Social media provides an easy way to see what people are up to and a great way to get introductions to people you may want to meet and discuss things with. I have used it to make people aware of new listings and real opportunities I have. But mostly I use it in just getting my name out and letting people know what I do. I have over 600 LinkedIn contacts and release information to them on a very selective basis. Undoubtedly the biggest challenge for social media in a business application is the lack of time most people have to learn something new.
Ray Rosado, Broker Associate, Cassidy Turley Fuller Real Estate, Denver, CO

The Interaction Shows You're Interested in Your Clients

Social media isn't important just to CRE but to any business looking to expand their client base and reach more customers. As far as social media directly relates to CRE, you aren't going to find a head of real estate for very large companies that will be following you on Twitter or something, but you can use social media as a way to keep clients more updated on the news and trends in the market place as well as deals big and small that have closed in the marketplace. Lastly, I think the more you have your own social media interacting with your own client's (because they almost 100% will have their own as well), it shows that you are interested in their expansion and their business doing well too.
Joshua D. Arcus, Broker & Managing Director, The Siderow Organization, New York, NY

Generating Buzz

In my area of specialty (multifamily), I figured out early on that social media is a great tool for generating buzz about a particular property. Using my Facebook page, I have been able to secure additional listings or at least generate conversations with owners and lenders regarding either the property I am highlighting or one of their properties near mine. I don't think it will ever replace direct communication but it will reduce the need for paid advertisements.
Kevin Rocio, Broker, @properties, Chicago, IL

A Foot in the Door

I am an avid user of LinkedIn and use it to actually drive business not just see how many contacts I can get. Whenever I am trying to break into an account I will try to research LinkedIn accounts to see who works at that company. I'll scan through each employees profile and look for common ground. Once I can find common ground, reaching out is usually easier. I also reach out on the phone, not through LinkedIn as it's so much warmer. I simply use LinkedIn to do the research, not to try to conduct business. This can be an excellent way for tenant/landlord rep brokers to get their foot in the door with companies they are trying to secure business with but don't know many employees.
Marty Busekrus, Senior Associate, CBRE | Capital Markets, Boca Raton, FL

As Close to Free Advertising as You Can Get

I am an active blogger as well as contributing columnist to the Savannah regional business journal. The ROI in social media specifically, being recognized as a local industry expert, is by far a better investment than the traditional route. That is the great thing about social media, if you have the time to commit, it is as close to free advertising and as you can get.

Real estate continues to be one of the most profitable avenues to invest

Real estate continues to be one of the most profitable avenues to invest - The Economic Times