Bookmarks: 5 Interesting Articles That May Help You This Week

Each week, I select a few articles that rise above the fray and hopefully help you on your journey in the CRE world. They pull from one of four "corners:" corporate real estate, technology, management science and anything positive. I welcome your comments on these articles.

1. Industrial Investors Drive Cap Rates Lower in Secondary and Tertiary Markets

Demand for industrial space is still outstripping supply, despite a record-high construction pipeline that delivered 126.8 million sq. ft. of new space in the first half of the year. Another 327.5 million sq. ft. underway, according to Cushman & Wakefield's second quarter 2019 MarketBeat industrial report.  Net absorption for the first half of the year totaled 88.6 million sq. ft., and new leasing activity in the first two quarters involved 256.6 million sq. ft.

With demand for logistics facilities still going strong, vacancy has remained at or below 5.0 percent, according to Jason Tolliver, managing director of investment services at Cushman & Wakefield.  

But sales volume is expected to soften in 2019 compared to record-setting activity last year, in part due to “retailers trying to get ahead of tariffs (on Chinese goods),” Tolliver notes.

2. Tip Your Hotel Maid

As I check out of a hotel, various excuses race through my head for not tipping the housekeeper. I’m in a big rush. I don’t have cash. Will the maid who folded my clothes get the money? Why can’t I just add a gratuity to the credit-card bill and expense it?

About 70 percent of hotel guests go through the same mental exercise and end up not leaving a tip. A waiter would have to spit in your soup, and you would have to see him do it, to stiff him. Housekeepers are stiffed every day. I’ve heard every reason why guests treat hotel workers so differently than other service workers, but I’ve not heard a good one.

I have more than a passing interest in the subject. For 10 years, my grandmother, Nellie O’Connor McCreary, was a maid at the Hotel Washington, now the W Hotel. If you lean over the railing of its rooftop bar after a drink or two, you’d swear you could see the Oval Office.

3. ULI, PwC Emerging Trends Report Forecasts Continued Strength in CRE in 2020

The commercial real estate market remains strong, despite talk of an approaching recession, according to an Emerging Trends in Real Estate 2020 report produced by the Urban Land Institute (ULI) and consulting firm PwC and released at this week’s ULI fall meeting.

“Real estate is in a very good space,” said Mitch Roschelle, partner and business development leader with PwC, at the event. “The real estate community caused two recessions: it caused it in housing, and it caused it in the savings and loan crisis. This go-around, whatever happens, it ain’t going to be [real estate’s] fault.”

U.S. commercial real estate remains a favored asset class due to volatility in the global financial markets and global geopolitical instability, driving investors toward safety of U.S. properties.

4. The Math Behind A Last Touch Warehouse Location

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Selecting the right location for Last Touch facilities is, to state the obvious, key to their success. Delivery times from Last Touch facilities can be measured in hours, Prologis said. As a result, location characteristics for this segment are the most similar to retail.

Building-level characteristics are often secondary to location considerations. “Furthermore, the largest, densest markets often have the greatest challenges to on-time delivery (such as high congestion), which increases the importance of well-located facilities,” according to the paper.

Not all markets warrant a Last Touch location however. Prologis determined that the top 25 US markets, with aggregate income of more than $100 billion, qualify for at least a City presence and the top eight markets, with aggregate income of more than $250 billion, are likely targets for a Last Touch operation. “Around the world, major 24-hour cities generate the need for Last Touch operations; those cities include Tokyo, London, Shanghai, Paris and Mexico City,” it said.

5. Is Retail-To-Industrial The Next Big Thing, Or Just A Pipe Dream For Last-Mile Logistics?

The contraction of retail, and the empty spaces it has left behind, has meant opportunity for industrial redevelopment in some cases, such as a former regional mall in Ohio that is now serving Amazon.

That prominent example is the site of the 2.2M SF Randell Park Mall in suburban Cleveland. Vintage 1976, the property sputtered to an end in the 21st century. The site was razed entirely a few years ago and is now an Amazon warehouse, or fulfillment center, as the retail giant calls it.

The location near the intersection of I-480 and I-271 that made the mall a viable retail property in its heyday now adds to its attractiveness as an industrial site — particularly for Amazon, according to Industrial Commercial Properties, which developed the new facility.

Your success blesses others. I wish you a great a hugely impactful week!