The physician real estate market is dynamic and diverse in the United States due to unique local, state, and federal healthcare regulations significantly impacting the size, type, and location of outpatient healthcare. While the product type/location varies widely in healthcare real estate, two major influences are affecting physician real estate decisions, according to the BDC Network. Prior to 1989, and federal Stark Laws, the real estate market for medical space evolved almost entirely from a campus-based environment. Providers were offered lucrative lease terms to keep them close and hospital admissions high. However, with Anti-Kickback Laws and the Affordable Care Act (ACA) now controlling the market, even the most sophisticated practices are presented with new challenges.
As apartment rents continue to skyrocket in many city and towns across the country, more and more jurisdictions are adopting inclusionary housing programs in order to provide at least a few affordable apartments for low- and moderate-income families. Inclusionary housing policies require developers to include affordable housing when they build in the desirable places targeted by the programs, such as bustling central business districts or towns and neighborhoods served by mass transit. Hundreds of jurisdictions throughout the U.S. now have inclusionary zoning laws in place—most adopted within the past 10 years, according to a September 2015 report from the Lincoln Institute of Land Policy. The programs include 512 inclusionary housing programs in 487 local jurisdictions in 27 states and the District of Columbia. Nearly two-thirds of these are concentrated in New Jersey and California.
Since voters in Colorado legalized recreational use of marijuana in 2012, growers and distributors have gobbled up most of the available warehouse space in the Denver area. Because marijuana producers require lots of space to grow, package and store their products, and because the industry is quickly expanding, other Denver business owners are struggling to find affordable warehouse space. In all, growers and distributors took up a third of all the warehouse space leased in Colorado over the past 18 months, according to Cresa Partners, a brokerage.
Following several months of deliberation and one of the most divisive budget seasons in years, Tallahassee city commissioners voted 4 to 1 to approve a $706 million budget and a 13-percent property tax increase on Thursday evening. Originally a $704 million budget with a 27-percent property-tax increase was proposed to pay for 18 new Tallahassee Police Department officers in an effort to increase public safety, however, public pressure led to a decrease in the proposed-tax increase.
Investors take note: despite employers following educated young professional to downtown locations, suburban office property may be poised for something of a comeback, according to Marcus & Millichap analysts. While downtown office assets continue to attract superior occupancy, rent growth, price growth and other measures of operating performance, suburban office parks may present investors with the ultimate contrarian play, offering perhaps greater upside potential relative to pricier CBD assets, said Alan Pontius, Marcus & Millichap senior vice president and national director of commercial property groups, during a webcast this week presented on U.S. office market trends.
California's Proposition 13 is once again under fire, this time by a labor-union-backed organization called Make It Fair. The group contends that loopholes in Proposition 13 allow a small number of “giant corporations” and “wealthy commercial property owners” to get around paying the property taxes that they could easily afford. However, the “loopholes” that Make It Fair is referring to were put in place to protect residential and business owners of all types and sizes. Under Prop 13, dating back to its passage in 1978, property taxes are only reassessed upon transfer of ownership or, if title is held in a legal entity, change of control (obtaining a greater-than-50% ownership interest) in the legal entity. Once re-assessed, values cannot increase more than 2% annually.
A warning to apartment investors: the Seattle is market is not as hot as it seems, and rent hikes in the Puget Sound region are slowing. This is according to a new report by Seattle research firm Dupre + Scott Apartment Advisors, which forecasts rents at older buildings will increase only 1.5 percent by next spring when job growth is expected to start slowing significantly. This is drastically lower than the 8.3 percent increase a year ago. However, the company found that the thousands of new apartments that have opened in 2015 distort market reality because new units typically garner a rent premium of more than 40 percent. "We call this the skew of the new," states the report, which found rents at buildings constructed before this year increased only 6.4 percent.
Mayor Rahm Emanuel is set to call for the largest property tax increase in modern Chicago history to combat the city's financial crisis, and businesses may be expected to shoulder most of the increase. Emanuel is preparing to propose a $500 million property tax hike to plug Chicago's pension funding gaps, but he aims to exempt most homeowners from the increase. As a result, business property owners would shoulder almost the entire increase. While the business community recognizes the city's need for additional revenue, business owners have already been paying more than its fair and equitable share of property taxes in Chicago for a long time.
This past year, the Oregon legislature made some important law changes that will affect each individual, partnership, firm, or corporation that has taxable personal property. Effective with the 2016 Personal Property Tax Return, a new filing date for all returns has been established and will be March 15, 2016. Previously, the due date was March 1st each year. There is no longer an opportunity to file a request for an extension beyond this date. Returns filed after March 15, 2016 will be assessed a penalty.
Relatively high investment returns and generally improving market fundamentals has driven investor interest in the seniors housing sector. Transaction volumes are at record high levels, pricing is close to a cyclical peak, and auctions are active and often fully priced, according to the National Real Estate Investor. Developers from other property types are actively building seniors housing assets and more capital providers continue to enter the market. In addition to several other factors, today’s low interest rate environment has fueled activity as the cost of capital for both acquisition and development is historically low. While all of these trends are seemingly positive, industry experts wonder if they are sustainable and if the sector is headed toward a bubble. This is particularly the case for pricing, and is a question for other commercial real estate assets as well.
Miami-Dade’s appeals system for property taxes relies on antiquated software plagued by “inaccurate data" and a jumbled scheduling process that helped cause a backlog responsible for millions of dollars in delayed payments to local government, according to a new watchdog report written by the county Inspector General’s Office. While staffing changes has helped the property appeal system improve in recent years, the system still suffers from an inefficient administrative system that could save time and money with improvements and more employees, the report said. The report makes 16 recommendations on how to correct the deficiencies “It has to be resourced appropriately. It has to be run like a court system,” Mary Cagle, Miami-Dade’s inspector general, said in an interview. “Because it’s really important to the citizens and the county that… it be done timely and efficiently.”
The City of Austin filed a lawsuit challenging Texas’ property appraisal system last month, a move supported by Mayor Steve Adler who argues that commercial and vacant lands are being systemically undervalued in violation of the state constitution, and at the expense of residential property owners. However, Mark Pulliam, a retired attorney and local political activist, calls the legal gambit an “ill-conceived publicity stunt" that won't save people money. Adler’s allies point to a study of the Travis County Appraisal District, which asserts commercial parcels are under-appraised by as much as 50 percent. The nonpartisan Texas Taxpayers and Research Association counters that property tax rates are a bigger factor than any perceived variation in property values. “All available information — be it from the appraisal districts themselves on the disputes they handle, or from the Comptroller’s review of local values — does not offer evidence of the widespread undervaluation of commercial property,” TTARA states.
As college enrollments soar around the globe, more students are forced to look for accommodation outside of dorms or typical off-campus housing. Hotels have untapped potential to accommodate the overflow of students at college campuses, yet the hotel sector has been slow to take advantage of this fledging base of demand. The number of students worldwide wanting a university education grew 78% to 176 million during the past decade, according to Class of 2020, a nonprofit that aims to further the professionalism and knowledge of student housing in Europe and beyond. That number is forecast to increase to 263 million by 2025.
Commercial transaction volume and value has been on the rise in 2015, but what is driving the positive uptick? GlobeSt.com, George Ratiu, director of commercial research at the National Association of REALTORS, and experts from Inland Group discussed the various factors affecting the industry. Not only is the US economy stabilizing, but reduced CRE inventory has amplified demand and accelerated price growth. Manhattan, Los Angeles, Chicago, Dallas and Atlanta recorded the highest commercial real estate sale volumes in 2015, driven, in part, by overseas investors seeking stable assets. However, the fastest growing metro areas in year-over-year sales include secondary and tertiary markets, like Orlando, Palm Beach, St. Louis, DC’s Virginia suburbs and Raleigh/Durham. The faster comparative growth is due to a recovery in market fundamentals and higher, more attractive yields for investors.
Macy's will close 35 to 40 underperforming stores, around 5% of its total locations, in response to shifting shopper habits and investor demands to make better use of its real estate. While the specific stores have yet to identified, they are expected to be shuttered in early 2016. Annual sales volume at the stores is expected to be about $300 million, which would represent about 1 percent of total Macy's sales, the company said.
A group of Philadelphia civic and business leaders on Labor Day released a report projecting 79,000 new jobs in the city over the next decade if politicians agree to major tax restructuring. The study, commissioned by the Philadelphia Growth Coalition, bolsters the group's case to amend the Pennsylvania Constitution and allow the city to tax commercial real estate at a higher rate than residential property. The current tax rate of 1.4 percent applies to all real estate. Under the proposal, the additional money raised from commercial real estate taxes would be used to cut wage and business taxes. The Growth Coalition believes Philadelphia is overly dependent on a wage and business tax and under-relying on a real estate tax, arguing that shifting some of the city's tax burden from what can easily leave (jobs and businesses) to what can't move (land and buildings) would make Philadelphia more competitive with the suburbs.
While tax abatements are an important tool for communities to attract new development and spur job growth, cities and other tax-abating governments don't often share the accumulated financial consequences of those tax breaks. However, the Governmental Accounting Standards Board (GASB) in August ruled that some of the financial details of those tax breaks are essential for a clearer understanding by citizens, municipal bond credit analysts and even public officials of a governmental body's financial health. Under GASB 77, as the rule is called, all governmental bodies will be required for the first time to disclose on their public, audited financial statements the annual cost of tax abatement for the reporting year. In addition, notes in the statements will explain the purpose of the programs, commitments made by recipients (such as pledges to create a specific number of jobs), and any ways those dollars might be recaptured — for example, if new income tax is coming in from jobs created by the abatement.
WaterWalk Hotel Apartments — a new concept that combines apartment living with an extended-stay hotel as a new corporate housing option — first opened a year ago in Wichita, Kansas, and has plans for 11 more locations in seven states, including North Carolina, Texas and Florida. Guests can stay short-term, as they would in an extended-stay hotel, or live long-term and furnish the space as they would their own one-, two- or three-bedroom apartment. Tenants have access to all of the amenities available to hotel guests, including housekeeping, a fitness center and concierge. Part of the expansion is thanks to a $100 million franchisee agreement with the United Kingdom-based Henley Group announced late last month, which includes plans to develop five U.S. locations.
Mayor Rahm Emanuel is set to call for the largest property tax increase in modern Chicago history to raise enough money to make a major pension payment for police and firefighters next year, the mayor's City Council floor leader and a City Hall source told the Chicago Tribune. The mayor is considering a property tax hike of between $450 million and $550 million for police and fire pensions, but he has yet to settle on a final number, a City Hall source said. Ald. Patrick O'Connor, 40th, said the idea is to cut down on the annual budget hole that has plagued the city budget for years and further scale back some of the poor financial practices. That includes scoop-and-toss borrowing, in which the city takes debt that's coming due and kicks it out into the future at a higher cost. The administration also wants to put the police and fire pension systems on a road to solvency, he added. O'Connor put the figure at $450 million for police and fire pensions, plus another $50 million for a Chicago Public Schools construction program.
As investor interest grows in the student housing sector, several industry leaders discussed the biggest trends over the last five years and those emerging today with the National Real Estate Investor. One of the biggest trends over the last five years that continues today is the over-amenitization of student housing properties. In some markets, developers consistently add luxury amenities, like lazy riverpools and rock-climbing walls, when this only escalates construction costs and caters strictly to affluent students. Implementing the best, most consistent Internet and information technology features, however, is the most appealing amenity to student residents across the board, who typically have three to five devices connected to the Internet at any given time. Looking forward, student housing owners need to ensure they increase engagement with their technology service providers to be sure they are providing residents with high-quality services that meet their needs.
Business confidence, employment growth and low interest rates are driving a major push in New York City office construction, as the city is on track to hit a 25-year high this year and almost double that built in 2014, according to a new report by the New York Building Congress. Big development sites at Hudson Yards on the West Side and the World Trade Center in lower Manhattan are helping to boost the pace of office construction, which is expected to reach 4.3 million square feet in 2015, the report said. That is a 79% increase from the 2.4 million square feet built in 2014 and the highest level since 1990. Office construction had been a laggard during the economic recovery, but that is changing as employment in office-using industries picks up, Richard T. Anderson, president of the Building Congress, told the Wall Street Journal. In 2015 and 2016, the report projects, 9.7 million square feet of new office space will be constructed in 19 buildings across Manhattan. The report’s analysis includes office space in buildings still under construction.