How to Build an Occupancy Strategy for Your Business

May 21, 2013

By: AJ Magner, Executive Vice President, Jones Lang LaSalle 

Occupancy StrategyIf you could change any aspect of your current office or industrial space, what would it be, and why? Are your real estate decisions aligned with your organization’s business goals and objectives?

When considering a relocation or consolidation, Jones Lang LaSalle emphasizes business driven occupancy solutions. Here, I’d like to share three simple steps I use with my clients for optimizing an occupancy strategy.

1. Assess the Big-Picture Opportunities in Relation to Business Goals 

The first step is to analyze your current real estate situation, but from a slightly different perspective.  Set aside square footage, offices and cubicles, as well as your initial expectations or impressions and view your space from a broader, business perspective.

The key is to uncover the needs specific to your business. Explore underlying concerns that correlate with the current and desired real estate setting.

Some key questions to ask are:

  • What does our real estate portfolio look like today and where do we see it shifting in the next 5-10 years?
  • What corporate technological changes are we considering?
  • What customer service or retention initiatives are planned and how do these drive our real estate needs?
  • How would a change affect our bottom line?
  • What factors or key improvements are most important to our business, employee satisfaction and retention?

Questions like these will tie your business goals to your relocation or restoration objectives. Overarching business goals will drive the occupancy strategy.

2. Perform a Business Diagnostic to Identify Your Problem Statement

After performing the aforementioned assessment, craft a fully developed problem statement. With a narrow problem statement in hand, you can focus the search and identify customized solutions.

Diagnosing your business requires an honest assessment by key members of your management team. Together, you take a close look at all sectors of your business and pinpoint areas of strength and areas of weakness. The New York Times’ model – How To Diagnose What’s Wrong With Your Business provides an excellent checklist to follow in developing your organization’s base line conditions and problem statement.

Following this diagnostic, identify three key variables. These variables will focus your occupancy strategy, and will outline what matters most to your business.  Below are sample variables:

  1. Location
  2. Ability to reach a certain market
  3. Space for ongoing growth

Note that variables are unique to each business.

A quality problem statement will address long-term goals, as well as short-term goals and provide laser-focused direction as you move forward in identifying your real estate needs.

What should your problem statement look like? Here are a couple examples from past JLL clients.

  • Manufacturing Client: How do we accommodate highly seasonal variability in our business demand cycle and warehouse requirements to avoid paying for 12 months of rent to accommodate a 3 month inventory peak?
  • Global Manufacturing Client: What is the business case for consolidating multiple sites in major markets across business units?

With this, you are ready to move forward with the real estate search. 

3.  Evaluate Options to Select an Optimal Solution

With a problem statement in hand, you’ll know exactly what you are looking for, and thus be able to identify spaces that will fit your most important needs. In addition, once a selection of spaces has been initially vetted through the problem statement, find the best solution through a more thorough analysis of each location and its potential. 

JLL employs a conceptual framework to effectively form this comprehensive solution. The framework includes the following:

  • Forecasting – Make predictions based on data, costs, uncertainties, and other factors.
  • Utilization strategy –Deep dive into space efficiency, standards, etc.
  • Talent Impact – Evaluate current and target employee needs, desires, and more.
  • Occupancy Configuration – Evaluate possible uses of the space for your needs.
  • Portfolio Composition – Examine currently held real estate, ensure a logical and strong portfolio is maintained.
  • Business Case –Analyze the financial and operating impact of a possible change or move.

Above all else, seek a solution that is focused on business metrics. Then, strive to find a cross-functional, integrated business solution. The comprehensive solution will function to alleviate key problems and reach key goals, as well as result in cost savings.

If you’d like to develop a strategy for your business, we invite you to reach out to a JLL professional for advice and assistance. Send inquires to: Spaces@am.jll.com.

For more information, download JLL’s full report on Business Driven Occupancy Solutions. 

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About the Author 

AJ Magner Jones Lang LaSalleAs Executive Vice President,  AJ is responsible for the management of corporate account teams and relationships in Cleveland and throughout the Midwest. He specializes in industrial and logistics, supply chain, and corporate solutions. View AJ’s full bio to read up on his experience.

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Categories: Business Consulting, Corporate Relocation, Occupancy Planning, Office Space Planning, Property Management

Commercial Real Estate News Brief: April 2013

May 15, 2013

Commercial real estate is a dynamic industry. Keep up with Spaces’ monthly recaps of the most valuable industry articles we’ve recently come across, focused on news in Ohio, Michigan and Pennsylvania. 

The CRE Industry Goes Green, Spotlights Sustainability

JLL_Feb-NBThroughout April, in acknowledgement of Earth Day, commercial real estate experts worked to increase sustainability within the industry specifically through green leases (like KeyCorps’ new lease) and by offering advice to greener routines.

Real Estate Bisnow contributed to the trend in a recent article, Hot Topic: Green Leases, providing insight into specific details and terms that should be included within a sustainable agreement. For example, the article states “site selection is key,” encouraging those in the market to seek a location that is in close proximity to a train, bus station or other type of public transportation. This will make it easier for tenants to build environmentally friendly habits.

Real Estate Bisnow also touched on conditions to include when drafting the lease. This includes space efficiency (like renewable energy sources), as well as benchmarking key data to measure whether the conditions are making an impact.

JLL’s Executive VP of Sustainable Strategy, Michael Jordan, noted that green leases are the “future of commercial real estate,” in a recent article from Arizona Commercial Real Estate.  Typical benefits of a green lease include:

  • Cost savings from cuts in utility use
  • Improved tenant / landlord relations
  • Improved corporate image

Read the full article to read all ten advantages.

In case you missed it, we also shared a post featuring Corporate Sustainability on Earth Day. Check out the post to see why you may want to consider a green lease.

CRE Experts Get Social on Multiple Channels

The commercial real estate industry lagged behind when it came to social media marketing; however, it is now catching up, and maybe, exceeding other industries.

A recent article from CoStar Group reports that commercial real estate experts are now using social media strategically to enhance marketing and sales initiatives. CoStar said:

And as more of us are quickly learning the ins and outs of new tech tools, the most adept have also shifted beyond merely information gathering and putting a corporate or personal presence “out there” to implement strategies to become more nimble in their online interactions and generate interest by producing   fresh content on an ongoing basis.

CRE experts are active on Facebook, Twitter and LinkedIn. But, they are now also utilizing newer, specialized platforms, like CREvine. CREVine.com is a “collaborative community” open to all trade professionals.  Experts are able to join the community and share knowledge via blog posts.

Secondary Markets See More Startups, Increased Potential for Growth

What began in Silicon Valley—dubbed “the template of academic institutions and companies feeding off of each other to create first-rate ecosystem for tech startups and innovation”—is now occurring in secondary markets, according to a recent article in Fresh Water.

Fresh Water reports that smaller, regional cities like Pittsburgh, Cleveland and Detroit are now seeing an increase in startups, impacting the local economy.

Pittsburgh, in particular, is deemed the “language tech hub.” The city has an abundance of engineers thanks to Carnegie Mellon University, which lends to Pittsburgh up and coming tech culture. Fresh Water adds that the affordability of Pittsburgh, as it compares to bigger cities, is hard to pass up.

Cleveland is also called out as “Where the Technology Is.” Fresh Water attributes some of the success to the local Philips Center, which has remained influential within the area.

For more on how the technology industry is expanding beyond the expected hubs and impacting commercial real estate across the U.S., see JLL’s High Tech Office Highlights for Spring 2013.

News Wrap Up In Our Region

Cincinnati 

Cleveland

Columbus 

Detroit

Pittsburgh

Please feel free to add any relevant industry news we might have missed in the comment section below.

Stay up to date: Subscribe to Spaces today by RSS or email and never miss an article!

Newspaper image via NS Newsflash

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Categories: Commercial Real Estate News, Commercial Real Estate Trends, Jones Lang LaSalle

Align Your Commercial Real Estate Strategy with Market Conditions through JLL’s Property Clock

May 10, 2013

By: John Sikaitis, Senior Vice President, Americas Local Markets Research,  Jones Lang LaSalle

Investors, landlords and tenants all seek differing market characteristics before committing to or adding a new property to their portfolio. But, how does each persona align strategy with current and forecasted market trends?

The Jones Lang LaSalle Office Property Clock is a proprietary tool used to visualize where a market fits in a given cycle. Markets typically move clockwise as market conditions change. A falling market occurs between 12:00 and 3:00, followed by a bottoming market between 3:00 and 6:00. The market rises and peaks, between 6:00 and 12:00, before concluding a full real estate cycle.JLL Property Clock

The property clock can help you shape strategic actions within particular markets. It applies to both the industrial and office markets, and can also be used to predict market upturns and downturns ahead.

However, favorable and unfavorable times differ according to your market intentions. If used correctly, landlords, tenants and investors can utilize the clock to enhance real estate decision-making. For example, landlords will generally favor markets that fall on the left side of the clock (between 6:00 and 12:00), while tenants should seek to become active in markets on the right side of the clock (between 12:00 and 6:00).

When the Clock Strikes 6:00: Landlord-Favorable Conditions

Landlord FavorableLandlords can use the clock to obtain a holistic view of the national market. This is particularly useful for landlords who own properties across various markets. Strategies for pricing and concessions will differ within each market, according to its position on the property clock.

Markets that range between 6:00 and 12:00 are ideal for landlords. Markets on the left side of the clock signify increasing rents and decreasing concessions.

Between 6:00 and 7:00, rents will slowly begin to increase. By 9:00, landlords typically see robust rent growth. While the market progresses upward on the property clock, space availability begins to dwindle. This triggers development, and eventually construction, which once again stabilizes the market (at 12:00). From there, depending on the cycle, the market either remains on the landlord-favorable side if the construction cycle is limited or moves to the tenant-favorable side if the construction cycle is a bit ambitious, over-supplying the market.

When the Clock Strikes 12:00: Tenant-Favorable Conditions

Tenant Favorable Once the market has stabilized from an up cycle, characterized by increased space availability, flatter rents and upticking concessions, the market willmoves slowly into the 12:00 to 3:00 range where conditions start to become ideal for tenants to enter the market and commit longer-term to real estate if their business warrants that type of decision. During this stage, as space availability increases, landlords will be forced to compete against one another, leading to lower rents and increased tenant improvement dollars.

When the clock strikes 6:00, the market flattens once again, and the cycle continues.

How Can Investors Read the Property Clock?

From an investment standpoint, the clock can be used to predict which markets will contribute to a healthy diversified portfolio.

Markets that sit at 9:00 indicate competitive conditions, which means limited space availability and likely greater investor interest in those markets. Investors have greater competition when looking at investment potential; however, high demand and heightened rent growth potential signify greater returns for owners and landlords who own assets in those markets.

As the clock moves closer to the right side, risks increase for investors as market conditions will start to slow, however, the longer-term reward could be higher too. 12:00 usually signifies a leasing market that has started to overheat and thus, some investors will move to the sidelines, meaning less competition from an investment standpoint, higher yields and lower pricing.

Of course, there are advantages and disadvantages at each stage in the cycle. Actions and strategies formulated based on the market’s current state will depend on individual investment goals, as well as individual threshold for risk.

The Property Clock Journey: Primary vs. Secondary Markets

Markets in Ohio, Michigan and Pennsylvania have lagged behind the national recovery. By property clock standards, this is normal.

A large majority of primary markets are driven by a single demand source, like finance, technology, energy or government. These markets are hit harder by significant ups and downs, and will move faster around the property clock. Investors are more likely to invest in these markets, such as New York, San Francisco, Houston and Washington D.C.

In contrast, secondary markets, like ours, are typically driven by numerous demand sources, not by a single industry sector. Therefore, these markets usually are not affected as much by big swings up and down. Market momentum must first be generated by several (if not all) demand sources. Only then will these markets see significant market growth or decline. Investors will typically favor secondary markets if they enjoy more stable, less risky conditions.

Primary and secondary markets move at differing speeds, but primary markets still have great impact on secondary markets. For instance, as industries nationwide continue to recover, our region’s cities have concurrently seen significant growth.

With Cincinnati, Cleveland, Columbus, Detroit and Pittsburgh currently (as of May 2013) at the bottom of the property clock, market activity in our region is picking up momentum; growth has returned. As the national market continues its path to recovery, our markets will follow—clockwise.

If you have any questions about the Property Clock, I’d be happy to answer them. Just share in the comment section below or email  me at spaces@am.jll.com.

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About the Author

Research_Sikaitis_J2John is the Senior Vice President and Director of Office Research and Local Markets Research for the Americas. John works in conjuction with the JLL team of research analysts to compile customized research reports, which include marketing trends, forecasts, economic updates and more. View John’s full bio to read up on his experience and recent transactions.

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Categories: Business Consulting, Commercial Real Estate Investment Resources, Commercial Real Estate Trends

How to Increase Commercial Tenant Satisfaction and Retention

May 2, 2013

By: Rob Roe, Managing Director, Jones Lang LaSalle, Great Lakes Region

Renewal

Building ownership and management is a business. Thus, losing tenants, like clients, can directly impact your ultimate success.

Without the monthly rent and bustle of business, how will you maintain upkeep in your building? And, ultimately, how will you make a profit from your assets? It can take two years to regain lost income if a single tenant is to leave a property, according to JLL’s recent study, The Cost of Losing a Tenant. You must also account for construction costs, as well as the absence of rent during leasing downtime.

As a landlord, it’s important to maintain a healthy portfolio of consistent, long-term tenants. To increase tenant retention and earn a consistent profit, you should put a strategic action plan in place to manage, oversee, and maintain current tenants. Through strategic management and streamlined procedures, the ultimate goal is to achieve building-wide tenant satisfaction.

Why? According to a survey done by Kingsley Associates in 2011, the likelihood of lease renewal is tripled when tenants are sufficiently satisfied with management.

In fact, the survey uncovered that the relationship between management and tenant is linked to overall satisfaction. A tenant that feels a strong positive connection to the landlord is less likely to vacate. Therefore, to increase the chances of maintaining tenants, landlords must foster a positive, attentive relationship with those who currently reside within their properties.

Boost Tenant Satisfaction With a Tenant Management Program

NewTo ensure ongoing tenant satisfaction, and maintain a healthy portfolio of tenants, craft a tenant management program.

First, get to know your tenant’s business. Understand what amenities help them to more efficiently run their business. Start by asking yourself (and them):

  • How does their space contribute to their brand?
  • Do they require special technology?
  • Do they hold large meetings on a daily basis?
  • Are they likely to expand?
  • How do they communicate best?

Once you have a pulse on your tenant’s business goals and needs, create a suitable program to streamline ongoing communications.

You can begin by assigning monthly management items to your team members, like scheduled phones calls or in-person visits that offer tenants a chance to express concerns. Make sure you have a consistent point of contact with each tenant with who you can contact to check for issues that need to be addressed.

But, to create a comprehensive program, you should strive to engage all members of your tenant’s organization. From upper level managers to entry level employees, each have specific needs, expectations and varying viewpoints related to their space.

Segment your communications by decision makers and employees. You can engage each group in the following ways.

Decision Makers

  • Do background research to find out more before engaging the decision maker.
  • Set up in-person meetings.
  • Offer unique ideas or solutions that will enhance their current space.
  • Discuss how they can better utilize the building for the betterment of the company.

Employees

  • Provide several avenues of regular updates like intra-building mailings, emails or memos.
  • Keep them updated on new building benefits, like a café or fitness center.
  • Encourage tenant employees to follow the building on social media, and use this avenue to efficiently let them know about new building offerings, building-wide social gatherings or need-to-know news.

The key to a successful management program is strategic communication. Make the management team available to tenants, and respond quickly to problems or questions.

Measure Program Results

DifferenceBenchmark tenant happiness and retention prior to launching your management program. Then, every six months, evaluate the impact that you have made.

One way to do this is to distribute a survey to measure tenant satisfaction. Don’t simply ask for yes or no answers related to happiness. Elicit valuable feedback by asking open-ended questions, as well as questions with scaled answers (e.g. “On a scale of 1-10 …”) You can also monitor your tenant retention, and ask for feedback from tenants who do decide to leave.

With meaningful suggestions in hand, take action. Happy tenants will likely remain, increasing the value of your property and maintaining consistent returns.

For more information, download JLL’s full report on The Cost of Losing a Tenant.

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About the Author 

Rob_Roe

As managing director, Rob’s responsibilities include real estate transaction representation and consulting services for Jones Lang LaSalle. View Rob’s full bio to read up on his experience and recent transactions, or connect with him on LinkedIn.

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Categories: Business Consulting, Jones Lang LaSalle, Lease Renewal, Property Management, Tenant Management

Commercial Real Estate Trends in the Midwest: Q1

April 24, 2013

By: Andrew Batson, research analyst, Great Lakes Region, Jones Lang LaSalle

Q1 JLL 2013 will be a transitional year for commercial real estate, slowly leading the market along the path to recovery. Nationally, Q1 began the year with elevated touring activity in more than 40% of markets studied by Jones Lang LaSalle. Leasing activity also increased 15.9% when compared to Q4.

Wins and losses in our region varied by market; however, each Great Lakes city saw increased activity in two or more sectors during Q1.

Cincinnati

Chiquita Brands moved its offices out of its 113,000 square feet at the Chiquita Center, and several months later, the owner (250 AZ LLC) filed for bankruptcy reorganization. The Chiquita Center, a Class A space, was recently appraised at $33 million.

The recently vacated space remains empty; however, several other distressed downtown properties were sold during Q1, including the former Enquirer building, the former Cincinnati post building and the 580 building.

Q1 Market Activity

Leasing volume went up during the first quarter. Keating, Muething & Klekamp renewed their lease at One East Fourth, where they have leased space since 1960. They currently occupy 90,000 square feet.

Several businesses entered the Cincinnati market. Apex Industrial Technologies is seeking space to expand. Apex was granted a job creation tax credit (if they decide to grow their Ohio presence). Aside from the search in Cincinnati, Apex is also exploring alternatives in Kentucky and Indiana. P.L. Marketing is also in the market for approximately 60,000 square feet of space.

Sales volume increased, construction deliveries went down and construction starts went up. The $100 million mixed-use development project at DunhumbyUSA’s new headquarters broke ground in Q1 at the corner of Fifth and Race Streets. The new headquarters will include a parking garage, as well as retail and office space. DunnhumbyUSA hopes that it will be complete by next year. Paycor Inc. also continued construction on its new 136,000-square-foot office building, forecasted to open for business next spring.

View the full Cincinnati Q1 Analysis (Office Highlights | Office Statistics)

Cleveland

Eaton Corporation has vacated its downtown headquarters location, moving to a 600,000-square-foot building in Beachwood, causing vacancy rates to increase by 200 basis points during Q1. This may lower rent rates downtown; however, the building is a positive addition to downtown on-the-market space.

In other Cleveland news, the long-anticipated Ernst & Young Tower at 950 Main Avenue is forecasted to be complete in May. The 450,000-square-foot space is the premier multi-tenant CBD office building built in the more than 20 years.

Q1 Market Activity

Leasing volume decreased in Q1, but Cleveland did experience several significant leasing transactions. Cuyahoga County officially signed a lease for a building (yet to be constructed) at the corner of Prospect Ave. and East 9th street.

The Cleveland Metropolitan School District entered the market in Q1 for downtown space, seeking 90,000 square feet with plans to relocate in the fall. A global company, Alexander Mann Solutions Corp., is also seeking up to 50,000 square feet of office space for a new location in Cleveland.

During Q1, sales volume and construction activities increased. Construction starts, however, remained flat. The Ameritrust complex sold for $27 million to Geis Companies. The complex spans five buildings and 865,000 square feet, and a portion of the complex will be demolished to make space for the new Cuyahoga County headquarters.

View the full Q1 Cleveland Analysis (Office Highlights | Office Statistics)

Columbus

During Q1, Verizon announced that it will leave its Dublin headquarters, creating 200,000 square feet of vacant space. Verizon’s new location in Hilliard is 429,000 square feet and will house 1,500 employees. Verizon also hopes to add 500 jobs. As a result, experts predict that Hilliard will experience an $18 million dollar increase in income taxes during the next decade.    

Q1 Market Activity

Leasing activity went up. In an effort to expand, Buckeye Health signed a lease at Easton Way Two. Buckeye Health will move from its current downtown space to the 31,000-square-foot building. In other leasing news, two large companies renewed downtown leases during Q1 including Porter Wright and Kegler Brown.

Chase Bank may be scaling down nationally, but it has entered the Columbus real estate market seeking 160,000 square feet of space. The Scientific Expert Analysis (SEA) and the Columbus Bar Association also entered the market in Q1.

Sales volume remained flat and construction deliveries went down; however, construction starts did increase during Q1. Molina Healthcare purchased a 155,000-square-foot building in Westerville at 3000 Corporate Exchange for $8.5 million. In Worthington, the Community Corporate Center sold for $20.5 million. On the construction scene, Columbia Gas broke ground at their new headquarters in the Arena District. The 286,000-square-foot project is estimated to cost $50 million.

View the full Q1 Columbus Analysis  (Office Highlights | Office Statistics)

Detroit 

Rock Ventures now owns 2.9 million square feet of space in Detroit. The founder and chairman of Rock Ventures and Quicken Loans, Dan Gilbert, bought a downtown building at 1001 Woodward during Q1. Gilbert’s newest building spans 283,000 square feet; however, other recent purchases in the Detroit area far surpass this purchase.

During the last two years, Gilbert purchased the 800,000 square foot First National Building, the 505,000 square foot Chase Tower, and the 416,000 square foot Chrysler House, among other urban Detroit properties.

Q1 Market Activity

Leasing volume went up during the first quarter. The ad agency, Campbell Ewald, will relocate 600 employees to its newly leased downtown space at Ford Field. Health Alliance Plan also signed a new lease at Tower 14 for 193,000 square feet.

Several significant businesses are now in the market for Detroit space following Q1. The law firm, Brooks Kushman, has not relocated since 1990; but, they are now in the market for 64,000 square feet of space, as is Morgan Stanley Smith Barney.

Sales volume went up, construction deliveries remained flat and construction starts went up. In transactional news, ONP Owner LLC bought the 238,000-square-foot building at One Northwestern Plaza for $19.3 million. On the construction forefront, the David Whitney Building project broke ground downtown during Q1. The final product, which will include apartments, retail, and a hotel, is forecasted to cost $82.5 million.

View the full Q1 Detroit Analysis Detroit (Office Highlights | Office Statistics)

Pittsburgh

The Pittsburgh office market continued to flourish in Q1. Occupancy levels hit an astounding 91.2% in Q1, one of the strongest occupancy levels in the U.S.

Pittsburgh Class A office space is generally occupied by law firms, healthcare and professional and business services; however, Pittsburgh saw an increase in technology and energy businesses entering the CBD space during Q1.

Q1 Market Activity

Leasing volume increased in Q1. Leech Tishman, Schneider Downs, HDS Marketing, NCS Services and Emerson Electrical signed new leases. RedPath Integrated Pathology Inc. and the Ayco Company both renewed their Pittsburgh leases for 20,000 square feet and 18,000 square feet, consecutively.

Direct Energy is in the Pittsburgh market for a new 60,000-square-foot office, with hopes to relocate by the end of 2014. Edgar Snyder & Associates is also seeking office space.

Sales volume, construction deliveries and construction starts all remained flat. The Clark Building on Liberty Avenue sold for $7 million to PMC Property Group. The property group plans to renovate the building to create apartment units.

The 800,000-square-foot tower at PNC Plaza located downtown is under construction, with an estimated cost is $240 million. Two office buildings at Pittsburgh International Business Park are also currently being constructed.

View the full Q1 Pittsburgh Analysis (Office Highlights | Office Statistics) 

If you don’t find what you’re looking for in one of these downloadable research papers, feel to post a question or comment here and I will promptly respond.

Stay up to date: Subscribe to Spaces today by RSS or email and never miss an article!

About the Author
 Andrew Batson is Research Analyst for the Michigan and Ohio region of Jones Lang LaSalle and is responsible for the publication of quarterly and annual research. Mr. Batson ensures that our clients receive the most thorough, timely, and strategic market information in a way that guides decision making and identifies risks and opportunities. View Andrew Batson’s bio or connect with Andrew on LinkedIn.

 

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Categories: Cincinnati Commercial Real Estate, Cleveland Commercial Real Estate, Columbus Commercial Real Estate, Commercial Real Estate Trends, Detroit Commercial Real Esate, Jones Lang LaSalle, Pittsburgh Commercial Real Estate, Quarterly Reports

Corporate Sustainability: Benefits of a Green Lease

April 22, 2013

Jones Lang LaSalle San Diego

JLL’s San Diego office, which achieved Silver LEED certification in 2009.

By: A.J. Magner, Executive Vice President, Jones Lang LaSalle 

In recognition of Earth Day, Jones Lang LaSalle’s sustainability team published a new white paper, focused on why business leaders should consider green leases. The benefits are substantial and offer both quantitative and qualitative perks.

Why Consider a Green Lease?

Following are just a few of the benefits:

  • Achieve cost savings from reduced utility consumption and waste-stream diversions. As detailed in the report, JLL clients have identified short-term utility spend savings of 3-13% from easy-to-implement, sustainable measures simply built into their leases.
  • Keep employees happier, healthier and more productive. According to a 2009 CoStar study highlighted in the green lease report, workers in environmentally friendly buildings are, on average, 5% more productive and take 3% fewer sick days than others.
  • Enjoy smarter profits. Ray Anderson, a consultant and pioneer of sustainable enterprise, argues that, “sustainability is a better way to a bigger and more legitimate profit” (source). This concept is further legitimized in Anderson’s book, Confessions of a Radical Industrialist, as well as economic strategist Umair Haque’s The New Capitalist Manifesto.
  • Enhance your corporate image—within your industry, your neighborhood and your own walls. Going green isn’t just the smart thing to do; it’s the right thing to do. Buildings account for 30% of all greenhouse gas emissions, according to the U.S. Environmental Protection agency.

Download the full whitepaper, “10 Reasons You Should Have a Green Lease” for more information, and to get started on your path to sustainability.

Also, we’d love to hear how your company or your community celebrated Earth Day 2013! Our Cleveland office celebrated by helping client KeyCorp secure a new lease agreement—the largest green lease corporate headquarters deal in the United States. And, Jones Lang LaSalle was recently recognized with the 2013 Energy Star Partner of the Year – Sustained Excellence Award for the firm’s “continued leadership in protecting the environment through energy efficiency.” Who knew corporate sustainability could feel so good?

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AJ Magner Jones Lang LaSalleAs Executive Vice President,  A.J. is responsible for the management of corporate account teams and relationships at the Cleveland office. He specializes in industrial and logistics, supply chain, and corporate solutions. View A.J.’s full bio to read up on his experience.

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Categories: Business Consulting, Corporate Sustainability

Commercial Real Estate News Brief: March 2013

April 16, 2013

Commercial real estate is a dynamic industry. Keep up with Spaces’ monthly recaps of the most valuable industry articles we’ve recently come across, focused on news in Ohio, Michigan and Pennsylvania. 

corporate real estate news

Retail Real Estate Strategies Driven by Market Shift

Retail real estate strategies have been dramatically altered by the trend toward e-commerce.

As discussed in February’s Real Estate News Brief, e-commerce has driven new demand for the industrial sector. A recent article from the National Real Estate Investor dove into some of the specifics.

Retailers are seeking distribution centers that can serve both in-store customers, as well as online buyers. Coveted traits for these multichannel spaces include large parking lots, HVAC necessities and sufficient mezzanine areas. Due to the popularity of overnight shipping, and same day delivery, retailers also want to purchase distribution centers that are as close to the final customer as possible. This means that demand for warehouse space near metropolitan areas has increased dramatically.

As a direct result, rents continue to heighten, and are expected to continue to do so, for such facilities.

Stressing About Distressed Assets?

CoStar discussed the state of the commercial real estate market, in terms of distressed property value, in a March 27 article.

CoStar emphasized that the current market for distressed properties is favorable for those selling assets, as opposed to buying.

The real estate market’s path to recovery has impacted pricing of distressed assets, now at or above market values. Experts predict (and recommend) that banks will sell their existing inventory in the coming months.

The speed of market recovery differs by region, and therefore, affects the performance of distressed sales. In New York and California, distressed sales decreased in 2012. However, distressed sales increased in Illinois, Pennsylvania, South Carolina, Colorado, New Jersey, Missouri and Maryland.

Markets are prime for selling distressed assets during the early stages of recovery. This currently includes the Midwest region.

What’s Trending in Lending?

Greg Warsek, Senior VP and Senior Regional Manager for the Chicago market at Associated Bank, recently discussed the link between the state of the real estate market and available financing with REJournals.com.

Warsek said that due to a strengthened real estate market, commercial real estate loans are now easier to obtain. In the past, a building owner was required to have existing, committed tenants prior to qualifying for a loan. But, with a solid market in place, banks are now more lenient with this rule.

However, Warsek said that banks still like to see prior experience. He calls this “execution risk.” If a borrower has experience in a certain sector, then a bank can expect a higher chance of success. Warsek said that they also evaluate personal character, as well as financials.

Sequestration Takes Effect, Real Estate Market Experts Forecast Impact

The upturn in the real estate market may soon be stunted by the U.S. government sequestration, which officially went into effect on March 1.

The cuts ($85.4 billion) will reduce defense spending by 7.9% and will also reduce domestic discretionary spending by 5.3%. Medicare will also be hit hard, among other programs.

The World Property Channel expects the budget cuts to “be a blow to US commercial real estate.” From office building use to building construction, the government usually allocates an immense budget to commercial real estate spending. Those who work in the construction and office markets will be impacted the most, predicted The World Property Channel.

News Wrap Up In Our Region

JLL released the Great Lakes Skyline Reviews during March, in which our lead researchers examined the premier office buildings in the top metro areas across our region, and the United States. Skyline reviews include:

  • Assessments of occupied, direct available, sublease available and future available space
  • Current inventory, direct vacancy rates, 2012 absorption and average asking rents
  • Top deals from the past year
  • Expert predictions for how the city’s Skyline will change in 2013
  • And more

Get a sneak peak of your city’s Skyline Review here, and click through to download the full report.

Congratulations to JLL’s Todd Hughes and Dan Wendorf on making Baltimore Business Journal’s list of “top real estate deals of 2012.” Hughes and Wendorf represented Kenco in the 692,000 square foot deal deemed “industrial winner.” Wendorf is based in JLL’s Columbus office.

In addition, Wendorf provided insight into the Columbus industrial market in an article for Heartland Real Estate Business. A few key points:

  • Though many real estate experts in the industrial market across the U.S. expected a slowdown in late 2012 and into 2013, the opposite has been true in Columbus. Specifically, Columbus continues to be an attractive logistics market, retail, and a growing e-commerce market.
  • Growth is expected to continue among both big-box and mid-size tenants.
  • Columbus finds itself in a favorable position, which it hasn’t seen for several years, after four straight quarters of positive absorption and declining vacancy. Industrial opportunities abound for landlords, tenants and developers alike.

Cincinnati

Cleveland

Columbus

Detroit

  • Faurecia North America Inc. intends to begin construction within 60 days at Oakland Technology Park on its new 300,000 square foot headquarters. Total cost of the project is expected to reach approximately $30 million.
  • Borders Group Inc. former headquarters at 100 Phoenix Drive will soon be the office of Gold Star Mortgage Financial Group Corp.  The financial group plans to utilize the 70,000 square foot space with an additional 250 new employees in the coming year.  

Pittsburgh

Please feel free to add any relevant industry news we might have missed in the comment section below.

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Categories: Commercial Real Estate News, Commercial Real Estate Trends

A Look at the Top: Premier Commercial Real Estate in Ohio, Michigan and Pennsylvania Metros

March 20, 2013

By: Andrew Batson, research analyst, Great Lakes Region, Jones Lang LaSalle

Pittsburgh Skyline JLL

The Pittsburgh Skyline

Jones Lang LaSalle recently wrapped up production of its annual Skyline Review, which included focused research on high-profile commercial buildings in Cincinnati, Cleveland, Columbus, Detroit and Pittsburgh.

To meet JLL skyline qualifications, each included building exceeds 175,000 square feet, houses a recognized tenant, maintains a desired location, and has been newly built or renovated since 1985. While conducting the review, we examined occupancy, leasing, investment and rent rates within prime skyline real estate.

All local market Skylines were developed in conjunction with the United States Skyline Review, so that CRE professionals can easily compare their cities to national trends, and draw conclusions about 2012 as well as the year to come. Following are highlights from each of our region’s Skyline Reviews, with information to download all complete reports if you’re interested.

The Cincinnati Skyline

The Cincinnati skyline spans 18 office buildings. Across this set, direct vacancy has heightened in the past year, reaching 23.3% at the close of 2012. Many tenants left Kentucky properties upon realizing additional benefits within the state of Ohio, including a tax environment tailored to enhance business success. Vacancy increased as an abundance of tenants left properties at Madison Place, Rivercenter I and Rivercenter II, in particular.

Despite elevated vacancy, the Cincinnati Skyline saw increased leasing activity over the course of the past year. Several sizeable businesses officially relocated within the city’s Skyline, including Omnicare, Vorys, First Financial and Neilsen. But, the CRE landscape altered dramatically when Chiquita Banana left its 113,000 square foot Cincinnati headquarters. The additional space will likely affect landlord behavior and flexibility in 2013.

Cincinnati Skyline Statistics (as of year-end 2012):

  • Inventory: 8,209,912 square feet
  • Direct vacancy: 1,707,812 square feet  (+ 92,149 square feet since last year)
    • Direct vacancy rate: 20.8% (+ 1.1% since last year)
    • 2012 net absorption: – 204,521 square feet  (compared to + 405,008 square feet last year)
    • Gross asking rents: $24.10  (+ $0.15 since last year)

Download complete Cincinnati Skyline Review

The Cleveland Skyline

The Cleveland office market holds more existing inventory (9,114,810 square feet) than many cities within the US secondary markets including Cincinnati, Baltimore, Columbus, Detroit, Portland, Tampa and more. Cleveland businesses increased overall occupancy, pushing direct vacancy levels down to 19.3%, 0.3% less than last year. Atypically, average asking rent along the skyline also dipped, to $20.13 per square foot.

Despite positive absorption gains in 2012, we expect vacancy levels to rise above 24% this year, due to the addition of the Ernst & Young tower, as well as the relocation of Eaton Corporation.

Cleveland Skyline Statistics (as of year-end 2012):

  • Inventory: 9,114,810 square feet (+ 544,000 since last year)
    • 45 Erieview Plaza added to this year’s assessment
    • Direct vacancy: 1,760,395 square feet (- 28,284 since last year)
      • Direct vacancy rate: 19.3% (- 0.3% since last year)
      • 2012 absorption: 69,823 square feet (+ 74,627 since last year)
      • Gross asking rents: $20.13  (- $0.13 since last year)

Download complete Cleveland Skyline Review

The Columbus Skyline

The signature series of Columbus office buildings charmed new tenants into the skyline during 2012. Asking rents began to climb as vacancy dwindled to 14.3% across the 20 properties. Gross asking rents heightened to $19.90, providing additional income for landlords and trending space for tenants.

The ongoing growth along Columbus’ skyline correlates with the recovering economy. In 2012, Columbus and its surrounding suburbs generated more than 17,300 jobs, and the city is expected to continue growing throughout 2013.

Columbus Skyline Statistics (as of year-end 2012):

  • Inventory: 5,366,034 square feet
  • Direct vacancy: 768,745 square feet  (- 77,456  square feet since last year)
    • Direct vacancy rate: 14.3% (- 1.4% since last year)
    • 2012 net absorption: 52,221 square feet  (- 26,343 square feet since last year)
    • Gross asking rents: $19.90  (+ $0.06 since last year)

Download complete Columbus Skyline Review

The Detroit Skyline

Law firms, financial services, technology companies and automotive manufacturers, among other businesses, inhabit the space along Detroit’s skyline. Detroit’s local economy saw improvements with the creation of 8,100 jobs; however, vacancy heightened to 19.2% and asking rents dipped below 2011 levels to $20.80 per square foot.

Despite increased vacancy among the Skyline, several key transactions enhanced the skyline tenant base in 2012. Detroit’s Renaissance Center Towers 500 & 600 made the 2012 national top 20 Skyline Leasing Transactions with Blue Cross Blue Sheilds’ (BCBS) 470,000 square foot lease. The transaction, which was completed by BCBS in the second quarter, ranked third. Additionally, Quicken Loans and Chrysler completed hefty transactions to expand their current real estate footprints.

Detroit Skyline Statistics (as of year-end 2012):

  • Inventory: 7,563,699 square feet no change
  • Direct vacancy: 1,454,170 square feet (+ 70,406 square feet since last year)
    • Direct vacancy rate: 19.2% (+0.9% since last year)
    • 2012 absorption: -40,406 square feet (compared to 223,090 square feet in 2011)
    • Gross asking rents: $20.80  (- $0.75 since last year)

Download complete Detroit Skyline Review

The Pittsburgh Skyline

The Pittsburgh Skyline currently has the least vacant space in the country, dwindling below 5% in 2012.

As a result, gross asking rents rose to approximately $27.00 per square foot. Asking rents have continued to climb for three consecutive years in Pittsburgh, and are expected to continually heighten in 2013 due to minimal available space. However, this trend may change in 2015 with the projected completion of the 32-story PNC Bank Tower.

Upon completion of the new tower, PNC Bank plans to move out of 145,000 square feet on four floors of the U.S. Steel Tower. When this large block of prime space becomes available, we expect physical vacancy to rise to as much as 6.4 percent throughout the Class A CBD market.

Still, with area employment making large strides in 2012 (sustained into 2013) coupled with the robust local economy, we foresee pent-up demand to fill the large blocks with relative alacrity, keeping Pittsburgh one of the tightest office markets in the U.S.

Download complete Pittsburgh Skyline Review

To access the full 2013 Skyline Report for your city of interest, follow the associated link below.

Stay up to date: Subscribe to Spaces today by RSS or email and never miss an article!

About the Author 

Andrew Batson

Andrew Batson is Research Analyst for the Michigan and Ohio region of Jones Lang LaSalle and is responsible for the publication of quarterly and annual research. Mr. Batson ensures that our clients receive the most thorough, timely, and strategic market information in a way that guides decision making and identifies risks and opportunities. View Andrew Batson’s bio or connect with Andrew on LinkedIn.

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Categories: Cincinnati Commercial Real Estate, Cleveland Commercial Real Estate, Columbus Commercial Real Estate, Commercial Real Estate News, Commercial Real Estate Trends, Detroit Commercial Real Esate, Jones Lang LaSalle, Pittsburgh Commercial Real Estate

Show Us Your Skyline

March 13, 2013

Every Skyline has its own special story to share, and who better to tell it than the people living there!

Jones Lang LaSalle has officially launched its first social media campaign, Show JLL Your Skyline, as part of the company’s 2013 Skyline Review. The annual Skyline Review takes a deep dive into the commercial real estate markets of 34 cities across the nation—including Cincinnati, Cleveland, Columbus, Detroit and Pittsburgh—capturing trends in supply, demand, pricing, investment and demographics.

But to really make the Skyline come alive this year, we’re looking to you.

Chicago Skyline

Chicago Skyline via Twitter user and JLL employee Taylor Danahey (@tdanahey).

We want to see if the saying, “a picture tells a thousand words” is really true, so we’re asking JLL employees, clients and friends a favor: Tell your city’s Skyline story through a photo. 

To participate, capture an original photo of your U.S. city skyline, and tell us about the picture on Twitter or Instagram. By submitting an original photo, you’ll be entered to win $500 to use for a trip to the city of your choice to see its famous Skyline! The photo contest will run March 6-27, 2013, and the winner will be selected on April 1—no joke!

Here’s how the contest works:

  • Take a photo of your city’s Skyline, anywhere in the United States.
  • Log on to Twitter and / or Instagram* and share your photo with a description to tell the story behind it, by March 27.
  • Be sure to use the hashtag #ShowJLLYourSkyline and tag @JLLnews (Twitter | Instagram).
  • You’ll automatically be entered to win $500 to use for a trip to any U.S. city.

* Don’t have an account? Create one at no cost: Twitter | Instagram

Stay tuned to the Spaces blog next week for details from the Skyline Reviews in Ohio, Michigan and Pennsylvania. See how your city’s top real estate compares to similar cities in our region and across the United States.

Subscribe today by email and never miss an article!

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Categories: Jones Lang LaSalle

Commercial Real Estate News Brief: February 2013

March 8, 2013

Commercial real estate is a dynamic industry. Keep up with happenings with Spaces’ monthly recaps of the most valuable industry articles we’ve recently come across, focused on news in Ohio, Michigan and Pennsylvania. 

Industrial Market Growth Correlates with Increased E-Commerce Activity

The effects of online shopping are touching several real estate sectors. According to a recent article in the National Real Estate Investor, e-commerce is boosting growth within the industrial sector. As consumers continue to order products online, the demand for distribution facilities and infrastructure increases.

The National Real Estate Investor reported that “Global e-commerce is expected to double to $1 trillion in three years…” This trend is changing the face of retail and industrial occupancy. Because of continued rise in online shopping habits, retail real estate is decreasing in demand.

Construction activity surrounding distribution is on the rise, REJournals.com reported. Several big name companies are seeking space for new facilities, like Amazon, Unilever, PetsMart and Home Depot. Yahoo Finance also attributed the growth in the industrial sector to e-commerce, referenced to as a “demand driver.” During Q4, 5.4% of retail market transactions occurred via e-commerce.

Technologies Outside of E-Commerce Also Driving Change

The Vice Chairman and Partner of Deloitte & Touche LLP, Bob O’Brien, recently discussed the dynamic landscape of CRE with the Wall Street Journal. O’Brien also pointed to the changes generated by the proliferation of e-commerce within the real estate sector, including impacts to warehouses and distribution centers and alterations to existing retail facilities.

In addition, O’Brien exapanded his discussion into other technologies, that can be utilized within one’s CRE department or organization, to enhance capabilities. Though CRE companies may traditionally have been slow to catch on to new technologies, O’Brien suggests the use of advanced data analytics to lend greater value to tenants.

He said, “Specifically, CFOs can help increase lease revenue by equipping their finance and leasing teams with sophisticated data management, data integration and analytical software tools.”

New technologies, like e-commerce, are forever altering the state of commercial real estate.

In Big, Tall CRE News

America’s famous landmark, The Empire State Building, may be back on the public market.

The building owner, the Malkin family, aims to construct a publicly traded company entitled “Empire State Reality Trust” by grouping the notorious skyscraper with 18 real estate assets, according to a recent article in the WSJ. Proceedings are still ongoing. But, if 80 percent of current shareholders vote yes, the plan will be set in motion.  WSJ reported, “The plan has divided investors.”

News Wrap Up: In Our Region

Region-wide

JLL professionals recently wrapped up a sizeable deal for KTR Capital Partners. The Core Midwest Distribution Portfolio was sold to Welsh Property Trust at $99.5 million. The portfolio includes five buildings that are located across several Midwest cities including Chicago, Indianapolis, Columbus and Cincinnati.

Cincinnati

Cleveland

  • The Aurora and Bainbridge Geauga Lake amusement park shut down in 2007. The land, which totals about 500 acres, is back on the real estate market. The seller is willing to sell the land off in portions, down to 3.5 acres.
  • The Internal Revenue Service relocated to a space that is 44% smaller than its original location. The new space, at Corporate Plaza 1 located in Independence, spans approximately 35,000 square feet.

 Columbus

Detroit

Pittsburgh

  • In order to consolidate space, American Eagle Outfitters has put 50,812 square feet of space on the market. The space up for sale, located at SouthSideWorks, is distributed among three offices within the building.
  • The Urban Redevelopment Authority continues development on the East Side, following a small transaction with Mosites Company. Mosites Company intends to add a transit center. When complete, the project is forecasted to total approximately $75.2 million.

Please feel free to add any relevant industry news we might have missed in the comment section below.

Stay up to date: Subscribe to Spaces today by RSS or email and never miss an article!

Newspaper image via NS Newsflash

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Categories: Commercial Real Estate News, Commercial Real Estate Trends

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