Apartment boom hitting all of the Midwest’s major markets

73 East Lake rendering_8 2013by Dan Rafter

Christy Lockridge, principal with the Chicago office of Prudential, has seen the trend: Today’s renters increasingly want to live in the center of urban areas. They want to live near public transportation. They want to be able to walk to restaurants and shops. They want to live largely without having to jump into a car each day.

She’s seen, too, the impact that this trend has had on urban areas across the Midwest. Developers are descending on cities from Omaha to Minneapolis with plans for high-end luxury apartment towers, projects that are bringing new excitement to these urban areas.

And it’s a trend that Lockridge doesn’t see ending any time soon.

“We are continually and pleasantly surprised with how well the Midwest markets are performing,” Lockridge said. “There are new developments in pockets all across the Midwest.”

Lockridge, of course, isn’t the only commercial real estate professional seeing this. And much of the force behind this trend comes from the Millennials. These young consumers – for many reasons – are increasingly putting off buying single-family homes and choosing instead to rent. When they do rent, they’re increasingly choosing urban areas, in major cities like Chicago or New York and in so-called secondary markets such as Indianapolis and Cleveland.

The numbers back this up. The U.S. Census Bureau reported that in the third quarter of 2014, the homeownership rate for U.S. residents 35 and under fell to 36 percent. That is the third-lowest this figure has been since the bureau began tracking homeownership rates by age group in 1982. And the low point for this figure? That was 35.9 percent in the second quarter of this year.

Marcus & Millichap has reported on this trend, finding, for instance, that developers in 2013 and 2014 will have delivered about 2,220 new apartment units to Milwaukee. The company reports that developers brought 2,280 new apartment units to Indianapolis in the first three quarters of this year and about 4,300 units in Columbus during the last four quarters.

Across the Midwest

Just look at how strong this trend has become in Minneapolis/St. Paul. Marcus & Millichap reported that in 2014 developers will have added 6,600 apartment units to the Twin Cities market. About 77 percent of these apartments will be priced at market rates. In 2013, developers added 4,000 rental units to this market.

village at mission farms2The new units, though, won’t cause vacancies to rise. Marcus & Millichap says that by the end of 2014, the multi-family vacancy rate in the Twin Cities should fall to 2.7 percent, down 50 basis points from the end of 2013.

Rents, too, will continue to rise. Marcus & Millichap said that effective rents in 2014 will rise 2.1 percent to an average of $1,039 a month. In 2013, effective rents in the Twin Cities market rose 3.8 percent.

Michelle McDonough Winters, senior visiting fellow for housing at the Urban Land Institute Terwilliger Center for Housing, said that Millennials are already having a significant impact on the housing market across the country.

Because Millennials are seeking urban living, planning officials in suburbs across the country might push for changes to their communities, McDonough Winters said. They might push for more urban amenities in their suburban communities. That could mean enhanced public transportation, more apartment communities and more shops, restaurants and entertainment venues to which younger residents can easily walk.

In other words, suburbs to compete with their urban cousins might have to become more walkable and pedestrian-friendly if they hope to attract Millennials who prefer an urban experience, McDonough Winters said.

bennington place“Suburbs can’t become cities,” McDonough Winters said. “But they might become more urban. They might offer their own pedestrian-friendly downtowns. They might need to add urban elements that appeal to today’s Millennials.”

Lockridge won’t disagree. She says that she’s seeing steady growth in the central business districts in major Midwest markets such as Chicago, Minneapolis, Cleveland, Columbus, Cincinnati, Indianapolis and Omaha. She’s seeing steady amounts of new development in Des Moines and Milwaukee, too.

The Midwest view

“What is surprising is all the focus that is paid to the coastal markets,” Lockridge said. “There is so much talk about how the job growth is going there. Job growth, of course, drives apartment development. But what we are seeing in the Midwest is that we do have these pockets of job growth, mostly in the central business districts. That is driving the multi-family development in this part of the country.”

Lockridge cites Chicago as an example. Tech firms are moving into the city’s Loop in its central business district. This is bringing several younger renters to the area, which is inspiring developers to target these areas for new apartment projects.

“The live/work/play lifestyle is bringing renters to the CBDs,” Lockridge said. “The younger renters want to be close to all the amenities, whether restaurants or cultural activities. They don’t want long commutes. Thankfully, there is a variety of products that people can choose from when they decide to rent in the CBDs.”

Posted in Chicago Commercial Real Estate, Cincinnati commercial real estate, Cleveland commercial real estate, Columbus real estate, Des Moines commercial real estate, Finance, Illinois, Illinois real estate, Indiana commercial real estate, Indianapolis commercial real estate, Iowa commercial real estate, Milwaukee commercial real estate, Minneapolis commercial real estate, Minnesota real estate, multi-family, Nebraska real estate, Ohio commercial real estate, Omaha commercial real estate, St. Paul commercial real estate, Wisconsin commercial real estate | Tagged , , , , , | Leave a comment

Minneapolis’ Doran Companies gets a boost: Will manage Robert Muir Company’s retail centers in Twin Cities

Woodbury Village

Woodbury Village

by Dan Rafter

Bloomington, Minn.-based Doran Companies just boosted its property management portfolio by five regional shopping centers.

That’s because officials with Robert Muir Company are closing the company’s operations and management offices in Edina, Minn. In doing so, the company is turning over daily management and leasing operations of the five regional shopping centers to Doran Companies.

Four of the five shopping centers are in Woodbury, Minn.: Woodbury Village, Woodbury Village Green, Shoppes of Woodbury Village and Tamarack Village/Woodbury. The fifth, Rivertown Village, is located in St. Cloud, Minn.

In all, the five shopping centers total about 1.5 million square feet of space.

Shoppes at Woodbury Village

Shoppes at Woodbury Village

Kristin Muir is handling the transition of the centers for Robert Muir Company. It makes sense that the Muir family is turning over the centers to Doran Companies. Kelly Doran, owner of the company, served as president of Robert Muir Company from 1992 to 2005, before leaving to form development, construction and property management business Doran Companies.

“It gives us great comfort to once again be connected to someone who had such great success working with our father in the past,” said Muir in her statement.

Doran Companies, with the addition of the Muir shopping centers, will now have more than 3 million square feet of combined Doran and Muir properties under its management.

Robert Muir Company employed 16 staffers in its Edina operations. Some of these staffers will be absorbed by the Doran Companies, though it is uncertain how many.

Robert Muir, chairman of Robert Muir Company, has retired. When he and Doran worked together, though, the Robert Muir Company developed millions of square feet of shopping centers. These developments included Oakdale Village in Blaine, Minn.; Rivertown Village in St. Cloud; Silver Lake Village in St. Anthony, Minn; Calhoun Commons in Minneapolis; and four shopping centers in Woodbury.

“I cherish the time I worked with Robert,” Doran said in a written statement. “He was a great mentor during the years we worked together, and he remains a great friend.”

Posted in retail, Minneapolis commercial real estate, Minnesota real estate | Tagged , , , , , , , | Leave a comment

RE/MAX’s Hulsey: To maximize the service, maximize the marketing, too

by Dan Rafter

Mark Hulsey

Mark Hulsey

Mark Hulsey, managing broker of RE/MAX Results Commercial in Saint Paul, Minn., has a simple philosophy about the importance of marketing: If you want to maximize the service that you provide to clients, you must maximize your marketing efforts, too.

And for Hulsey, that means relying on technology to market retail, office and industrial buildings, everything from Web sites dedicated to single properties to aerial photos taken by drones.

Those brokers who aren’t tapping the latest technology to promote their listings? Hulsey says that they’re not providing their clients with the best possible service.

“We take marketing very seriously,” Hulsey said. “That old way of looking at marketing a property — grab the listing, keep it close to the vest and promote it to a small circle of brokers and potential buyers and then take it to the wider market if that doesn’t work — is no longer the right approach. I came from a different theory: If you want to maximize your value you have to maximize the way you market properties.”

Hulsey points to a vineyard that he is selling. There are multiple elements to the property — everything from the vineyard to several outbuildings. Hulsey not only hired top photographers and videographers to snap photos of the outbuildings and take video of the property’s landscape, he also used a drone to take aerial photography and videos of the entire property.

This allows Hulsey to showcase the property to potential buyers in California, Chicago or anywhere else on the globe. Hulsey just has to send these buyers a link to the video taken by the drone. Now potential buyers can evaluate whether the property makes sense for them before they take the long trip to the Twin Cities region.

“Now they can get a really good understanding of the scope of the property from above,” Hulsey said. “They can get a more realistic portrayal when talking about an investment asset. They can see what surrounds that asset. Rather than mapping out for them that there’s a Home Depot or McDonald’s nearby, you can show them these neighboring properties from a drone point of view. It helps investors to get a better handle on that asset without even leaving their desks.”

Drones certainly sound high-tech, and they are. But Hulsey says that this technology is now becoming almost commonplace among the most marketing savvy of commercial brokers. The next frontier? 3D virtual walk-throughs. Virtual tours of properties, of course, have been popular among real estate brokers for years. 3D tours, though, are even more realistic, creating the illusion that potential buyers are actually walking through a property. Brokers can even create 3D tours for commercial properties that are not even built, relying on renderings to give potential buyers a sample of what they might want to purchase or invest in.

Hulsey said that he hasn’t yet tapped into 3D walk-throughs. But he does plan on making this technology his next big marketing investment, he said.

“Commercial real estate has been viewed as more of a slow-adopting industry when it comes to technology,” Hulsey said. “That is changing. All industries now have to adopt more quickly to new technology. Now more of the players in the industry recognize that you don’t have be bleeding edge, you just have to make sure that you are using the technology that is available to you. If you don’t, then you don’t have an edge. In our industry that is so competitive, using the latest technology to market your listings can become a real advantage.”

Hulsey said that clients come to him because of his marketing skills. He’s worked in marketing and communications for about 30 years, something that has helped as he’s built his commercial real estate business.

“Clients today understand how important marketing is. They don’t just want people who have a thorough understanding of valuation and due diligence. They also want marketing experts to showcase their properties in front of the largest number of potential buyers,” Hulsey said. “It’s a matter of saying that we need to get our listings out to the market in a big way, especially in the changing market we are now in after the Great Recession. The exceptional marketing skills are so important today.”

Posted in Minnesota real estate, office, retail, St. Paul commercial real estate | Tagged , , , , , , | Leave a comment

A retail renaissance in Detroit?

Is a retail renaissance underway in Detroit? One Detroit architecture and design professional thinks so. And he has plenty of evidence to back up his opinion.

Bob Kraemer

Bob Kraemer

Guest post by Bob Kraemer, Kraemer Design Group

Downtown Detroit is a continually evolving narrative, one that I believe would pleasantly surprise non-locals who haven’t read beyond the bankruptcy headlines. Unlike many cities that have gone through a significant decline, Detroit did not tear down many of its historic buildings that formulate its skyline, buildings that are now becoming a huge asset.

That’s not to say that these buildings have all been well taken care of. Many haven’t and require extensive work, but when done right these adaptive re-use projects create unique and culturally significant environments. While the end of the story has not yet been written, it is increasingly clear that the next chapter in the ongoing tale of downtown Detroit’s development re-emergence will have a clear retail focus.

While retail development has picked up across the Midwest in recent years, this particular retail resurgence is unique to Detroit. It is on a different level entirely from what we have seen previously in adjacent satellite communities like Birmingham and Royal Oak. As for the why—or at least the why now—it is clear: Downtown Detroit has residents again. Even better, these residents are disproportionately made up of young professionals with disposable incomes.

While the addition of more downtown residents is obviously a prerequisite for retail growth, there are other factors at play. The money that has been and continues to be invested by Dan Gilbert is substantial, and his development vision and sophisticated understanding of the power of place-making have spurred much more than just headlines.

At the same time, Detroit Red Wings owner Mike Ilitch has broken ground on a new hockey arena and downtown entertainment district, a planned $650 million investment that includes extensive public infrastructure improvements and a number of new mixed-use “neighborhoods.” Savvy retailers are taking notice. For the first time in a long time, retail in downtown Detroit makes sense.

The fact that the M1 Rail project is moving forward is another benefit. In the past, investors seemed hesitant to buy in, uncertain if the M1—a 3.3-mile circulating streetcar along Woodward Avenue—was just an empty government promise or if the construction would be too intrusive. And while street-level retail has been hesitant to move into spaces with empty buildings above, the fact that those buildings are filling up now makes retail opportunities both more attractive and more viable.

What is particularly interesting about Detroit’s burgeoning retail re-emergence is that the city’s downtown commercial landscape presents some rare opportunities. With such a notable absence of downtown retail prior to the recent momentum, new retail can be developed creatively and planned carefully to a degree that is not usually feasible.

While the Arena District holds great promise for two and three years down the road, Woodward Avenue is clearly the hotbed of retail development activity today. Additional action is just beginning to filter in to the Capitol Park District. Capitol Park seems likely to be next in line, with momentum picking up significantly in 2015. We are also seeing some new retail around the iconic Z deck, the innovative mural-covered parking structure named for its distinctive zigzag design. Parking availability is generally expanding downtown, especially in the evenings and on weekends.

Despite the optimism and momentum, some challenges remain. One issue is that many downtown storefronts (particularly along Woodward) are quite deep, and retailers aren’t necessarily interested in that big of a space on day one. With more activity, those spaces should become more attractive, especially because they are located in prime spots. Another factor is that many of these locations are part of a local historic district. Consequently, new façade designs need to be approved by civic authorities, adding an additional layer of complexity.

From an aesthetic standpoint, new Detroit retailers have taken differing approaches. John Varvatos, for example, has asked for some local input relative to the look and feel of its space, but has largely stayed true to its proven design concept. Shinola, on the other hand, has somewhat looser brand standards, and has been more flexible about capturing local energy and infusing more Detroit aesthetic into its brand presentation.

Currently, local and regional retailers and pop-ups are leading the downtown charge. But national retailers are already on the way in, and those numbers are expected to grow significantly. Second-generation or second stores from strong local players like outdoor retailer Moosejaw will also play a prominent role. Higher-end retailers will likely dominate, with quality brands, branded entertainment concepts and high-end dining options. We are already seeing a substantial first wave of dining and entertainment. There are already a tremendous number of new restaurants appearing downtown. For large numbers of new downtown residents and businesses, this is the vanguard of what promises to be a very substantial and very welcome retail resurgence in Detroit.

Detroit-based Kraemer Design Group, PLC is an architecture, interior design and creative firm with nearly 20 years of experience in historic renovation and architectural consulting. For more information, visit www.thekraemeredge.com.

Posted in Detroit commercial real estate, Michigan commercial real estate, retail | Tagged , , , , , , | Leave a comment

RGA headquarters building to add visual flair to St. Louis’ I-64 corridor

Fox RGA Exterior

by Dan Rafter

St. Louis’ Interstate-64 corridor is getting a bit more exciting. That’s thanks to the new $150 million Reinsurance Group of America global headquarters designed by Fox Architects and international architecture firm Gensler.

The 405,000-square-foot stone, glass and steel headquarters building opening this month in Chesterfield, Mo., is visually bold. And it will certainly stand out among its neighbors.

“There is nothing like this building on the I-64 corridor or anywhere in Missouri,” said Bob Dunn of Fox Architects, in a written statement.

The Reinsurance Group of America headquarters building is the largest project in the St. Louis region since construction wrapped on Centene Plaza in 2010. It ranks as the largest headquarters project in the region in at least two decades.

Fox Architects designed the interiors of the building and served as Reinsurance Group of America’s consultant to architectural firm Gensler on the design of the core and shell of the building.

The architects didn’t skimp on style when designing the building. The headquarters consists of two five-story towers linked to a two-story atrium lobby and amenities bar. This space features 10,000 square feet of training facilities, a 7,500-square-foot fitness center, 20,000-square-foot kitchen area and a 500-seat cafeteria that can also function as a 700-seat auditorium.

The building, which sits on a 17-acre site, has been designed to accommodate future growth at Reinsurance Group of America. Plans are already in place for a third building on the site, one that will be built when growth at the company requires it.

Numerous conference areas, flexible workspaces and Wi-Fi access to high-speed Internet encourage employees to move around, call impromptu group meetings or carry their laptops to alternate work spaces when they need more space, quiet or privacy.

All of that “people moving” is expected to improve employee health, morale and productivity, said Colleen Crutcher of Fox Architects, which has worked on the planning and design of the facility for three years.

“We believe design can improve our clients’ businesses when it’s based on solid knowledge of how they operate,” said Crutcher, in a written statement.

Posted in Missouri commercial real estate, office, St. Louis real estate | Tagged , , , , , , , , , | Leave a comment

The U.S. economy? Only 6 percent of us feel it’s excellent

dollar signsby Dan Rafter

Would you consider the U.S. economy to be an excellent one today? About 6 percent of U.S. residents do — though it’s hard to see why.

Chain Store Guide recently released its December Consumer Spending Report. And in that report, the percentage of surveyed consumers who rated the economy as excellent jumped from 4.6 percent in October to 6.2 percent in November.

That’s the good news. The bad — or more realistic, if you prefer — news was that 35.6 percent of respondents rated the economy as poor in November, up from 34.4 percent in October. And the survey found that 40.1 percent of respondents said that they believed the economy is getting worse.

And the news isn’t better on an individual level: 60 percent of adults surveyed rated their personal finances as fair or poor. Only 28.5 percent considered themselves to be in good shape financially.

So, if you’re struggling with debt and mounting bills? You’re far from alone.

Posted in national commercial real estate, retail | Tagged , , , | Leave a comment

BOMA Chicago’s T.J. Brookover: Ready for a year of growth, challenges

T.J. Brookover

T.J. Brookover

by Dan Rafter

T.J. Brookover, regional manager for AmTrust Realty Corp. in Chicago, has a busy year ahead of him. In November, he was elected president of the Building Owners and Managers Association of Chicago, better known as BOMA/Chicago.

Midwest Real Estate News recently spoke with Brookover about his goals for the association, the challenges facing building owners in 2015 and the state of the Chicago commercial real estate market.

Midwest Real Estate News: Now that you’ve assumed the presidency of BOMA/Chicago, what are your goals for the organization in the coming year?
T.J. Brookover: My job is to provide leadership to a 22-member board. That board, frankly, is composed of very seasoned professionals. Our board members, on average, have about 20 years of experience in this field. The staff is seasoned, too. My job is to look for things that will impact our member buildings and look for ways in which we can provide help either by way of advocacy or education. Those are our two focuses as it relates to member buildings.

MREN: This position requires a lot of time. Why volunteer for it?
Brookover: There is definitely a time commitment. But it’s one that I see as being important, not just to our member buildings but also to our affiliate members, those people who provide services to our buildings. I’ve seen the good work that BOMA does. I thought it was important to take more of an active role. The time spent helps me, too. It provides me with access to people with differences of opinion and different expertise.

MREN: What challenges do BOMA members face in the coming year?
Brookover: The one thing that we continue to focus on is the pressure that managers and owners have as it relates to the cost of maintaining and operating a commercial building. We are seeing trends that will push up real estate taxes. There may be utility rate hikes that will increase the cost of our utilities in the future. Labor rates are on the way up, too. We have janitorial staff, security staff and engineering staff in these buildings. There is pressure to increase health and welfare contributions, pension contributions and wages. All those things – labor, real estate taxes, utilities – are major expenses of operating a building, and all of them have the potential to rise over the next year and thereafter. We are paying particular attention to those expense-line items and what we can do by way of advocacy to help building managers and owners control those costs.

MREN: These are certainly big issues.
Brookover: Look at the daily papers. There’s debate over real estate taxes as a way to fund pension shortfalls. With utility rates there are always tariffs being filed. There are always justifications being made by the generators of our power that they need additional money to operate. Of course, there is plenty of discussion these days over wage rates, too. These are large issues.

MREN: When you look at your market in Chicago, are you seeing an increase in commercial real estate activity?
Brookover: We are seeing an increase in property sales and an increase in occupancy rates. Businesses are starting to come out of hiring freezes, so they might need more space. Some of the larger firms are adding people. Even some of the smaller and mid-size firms are hiring again. Many of these companies were hesitant to hire after the recession. Now they feel more comfortable in hiring for those positions that have been open and have been covered by their current employees. That may attribute to some of the trends of occupancy rates being pushed up a bit.

MREN: Are you seeing any interesting trends in the Chicago market?
Brookover: We are seeing some start-up firms that are in need of space. Some are moving from the suburbs to Chicago to take advantage of our educated and available workforce. We are also seeing some large firms that are opening downtown offices to be able to capture and take advantage of that well-educated and available workforce. Some members of the workforce prefer to be downtown where they have access to an environment that provides a good balance of live/work/play opportunities. People want to move near to where they work. They want to lessen their commute times. That seems to be the trend today.

MREN: We’ve written a lot lately about the changing layout of office space, with more companies moving to open, collaborative office space. Are you seeing this trend, too?
Brookover: There is a noticeable change in how users view their space. There is a trend toward more open, collaborative workspaces. People are moving out of private offices and into more open areas, even at the CEO level at some companies. They will have huddle rooms for impromptu meetings. They will have more collaborative open areas where people can meet and have discussions rather than being separated into private offices.

MREN: What other trends are you seeing?
Brookover: Larger firms, law firms and accounting firms, have shrunk the amount of space per person in an effort to become more efficient. It all comes down to how companies use their office space most efficiently. The cost to occupy space in Chicago can be rather high. Our owner members do their best to lower their operating expenses. But they sometimes do have to pass an increase in operating expenses to their tenants. Occupancy costs as they increase, then, will put pressure on these tenants. Will companies spend their money on adding additional jobs or will they spend it on higher rent or occupancy costs? As Chicago becomes more expensive with rising utility rates, taxes and labor costs, that is going to put pressure on companies on how to allocate their money. Is it spent toward occupancy costs rather than adding to their labor forces? If so, that could have a negative long-term impact on jobs in Chicago. I don’t know if that will occur, but it is something to pay attention to.

MREN: What are some of the benefits for companies that choose to open locations in Chicago?
Brookover: Firms can reach out and tap into a very educated workforce. That educated workforce is now eager to be in a downtown area that offers a good stock of affordable housing, good educational system – especially higher-ed – and fun venues. That workforce is here.

Posted in Chicago Commercial Real Estate, Illinois, Illinois real estate, office | Tagged , , , , , | Leave a comment