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Tag Archives: Wolf Commercial Real Estate


New Proposed Regulations for Qualified Opportunity Zones

Qualified Opportunity ZoneThe second round of proposed regulations issued on April 17, 2019 provide additional guidance on some of the questions and issues that remained unclear after the initial round of proposed regulations that were issued in October 2018. The Opportunity Zone program was created by the Tax Cuts and Jobs Act (TCJA) to stimulate economic development and job growth in low income communities across the US, DC and the five US territories by providing tax breaks to investors in the qualified zone areas.

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TAX INCENTIVES OFFERED BY THE PROGRAM:

• Tax Deferral
• Step-up in basis
• Permanent Exclusion

TAX DEFERRAL:

Most capital gains can be deferred with tax savings to the taxpayer until 12/31/2026 or until the investment in the Qualified Opportunity Fund (QOF) is sold, whichever is earlier, if the original capital gains are invested in a QOF within 180 days of the sale of the asset.
• Gain from sale or exchange of assets between related parties as provided in the proposed regulations does not qualify.
• Investment in QOF must be an equity interest and cannot be a loan or another debt instrument.
• The deferred gain retains its attributes

STEP-UP IN BASIS:

The basis in the capital gains invested in the QOF is increased by:
• 10% if the taxpayer holds the QOF investment for at least 5 years, or
• 15% if the taxpayer holds the QOF investment for at least 7 years

Thus, the taxpayer can defer and effectively exclude up to 15% of the original capital gains from taxation.

PERMANENT EXCLUSION:

The capital gain on the sale or exchange of the investment in the QOF can be permanently excluded from taxation if the QOF investment is held for at least 10 years.

Example:

• John has a capital gain of $ 100,000 from sale of Apple stock as on 7/1/18.
• He invests $ 100,000 in QOF on 11/1/18 (within 180 days of 7/1/18):
• Does not pay any tax on the entire gain in 2018
• Holds the QOF investment until 11/30/23 (past 5 years) and sells the QOF investment at a gain of $ 20,000:
• Gets a step-up in basis of 10% or $ 10,000 on the original gain and pays tax only on the remainder of the original gain of $ 90,000. The $ 20,000 gain on the sale of QOF investment is also subject to tax in 2023.
• Holds the QOF investment until 11/30/25 (past 7 years) and sells the QOF investment at a gain of $ 35,000:
• Gets a step-up in basis of 15% or $ 15,000 on the original gain and pays tax only on the remainder of the original gain of $ 85,000. The $ 35,000 gain on the sale of QOF investment is also subject to tax in 2025.
• Holds the QOF investment until 11/30/28 (past 10 years) and sells the QOF investment at a gain of $ 65,000:
• The $ 65,000 gain on the sale of QOF investment is permanently excluded from taxation. Must pay tax on the
deferred gain of $ 85,000 in 2026.

There are several key topics and rules that need to be followed in order to take advantage of this tax benefit. For more information, contact Jeffrey Cohen, Partner, Tax Services Leader, at jcohen@grassicpas.com or Shashi Singal, Tax Senior Manager, at SSingal@grassicpas.com. For more information on Grassi and additional services, please contact Chris Fifis, Director of Business Development at 201-808-9746.

 

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Second Annual WCRE Celebrity Charity Golf Tournament Raises $35,000

Second Annual WCRE Celebrity Charity Golf Tournament Raises $35,000In its second year, built on the remarkable success of WCRE’s community commitment and annual celebrity charity hockey event, The WCRE Foundation has successfully raised approximately $35,000 to be shared equally by 6 charitable causes within the Philadelphia and Southern New Jersey region. Over the past three years, The WCRE Foundation has now raised close to $235,000.

The Second Annual WCRE Celebrity Charity Golf Tournament which was held at Ramblewood Country Club in Mount Laurel this past Friday afternoon, is the brainchild of Philadelphia Flyer legend and WCRE director of strategic relationships Brian Propp and WCRE’s vice president and principal, Chris Henderson. WCRE welcomed 120 area business leaders and many guests to an afternoon of great golf, fun, competition and contests.

All proceeds from the event will be shared among the CARES Institute at Rowan University, the Jewish Federation of Southern New Jersey, the Alzheimer’s Association Delaware Valley Chapter, the American Cancer Society, Susan G Komen-Philadelphia and Samaritan Healthcare and Hospice. Each of these organizations benefits from WCRE’s long-standing practice of donating a portion of its proceeds from every transaction to an area charity. Learn more about this program at http://wolfcre.com/community-commitment/.

“This event was another successful gathering for The WCRE Foundation and our community partners. Special thanks to the entire WCRE team, our incredible sponsors, donors, golfers, friends and Ramblewood Country Club who all helped make our 2019 Celebrity Charity Golf Tournament a victory for 6 incredible non-profits in our community,” said Jason M. Wolf, founding principal of WCRE. “It is a credit to our friends, neighbors, and business associates that we are able to come together to improve the lives of others.”

About WCRE

WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.

Learn more about WCRE on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC.

Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.

 

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Tips for Investors Entering the Cannabis Real Estate Market

With 10 states plus the District of Columbia legalizing cannabis for recreational use and medical marijuana legal in another 23 states across the national and Philadelphia commercial real estate markets, cannabis sales are projected to grow from $10.8 billion today to about $100 billion over the next five years, according to the National Institute for Cannabis Investors.

As a result, investors in cannabis-related industrial real estate can expect exceptional returns on investment (ROI) throughout the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space. In a 2018 survey by Denver-based PropTech developer Apto, 76 percent of commercial real estate brokers handling cannabis deals in all states where the drug is legal in some form reported cannabis deals pricing above market.

This National Real Estate Investor report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Cannabis property deals may be more lucrative than other industrial transactions, but they are also more complicated, according to survey respondents. When asked to compare the difficulty of cannabis transactions involving U.S. and Philadelphia commercial real estate listings with traditional industrial deals, they answered with an average of eight on a scale of one to 10, with 10 being “most difficult.” Even so, 85 percent of brokers surveyed said they are willing to do more cannabis deals.

Investors willing to take a property through local licensing and entitlement processes for national and Philadelphia commercial real estate properties prior to leasing space or putting it on the block will realize the greatest boon in value, however, because there are limited number in any location, according to Rick Frimmer, managing director and head of the national cannabis advisory group at EisnerAmper, an accounting and advisory firm based in New York City.

Cannabis real estate values are likely to continue rising due to the supply-demand imbalance, says Clint Callan, a San Francisco Bay Area-based partner at the national law firm of Duane Morris LLP. “With cannabis, there are only so many spaces and opportunities available, which runs up the price,” he adds.

When asked how well the supply of industrial cannabis real estate in their market aligns with demand for space, respondents in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – answered with an average of four on a scale of one to 10, with one being “not in balance” and 10 being “in perfect balance.”

Commenting on survey results, Apto founder Tanner McGraw says that legalization of marijuana across more states is beginning to impact real estate markets, as local jurisdictions grapple with zoning and other issues that affect availability of sites. “Survey results suggest there is somewhat of a shortage of sites available, likely because allowable zoning has not caught up with demand,” he notes.

Local jurisdictions dealing with national and Philadelphia commercial real estate listings may limit zoning for cannabis uses to specific industrial areas and impose strict security, fire, and safety requirements for cannabis operations because cannabis products are at high risk for theft and manufacturing processes use chemicals to extract compounds, such as THC and CBD oil, according to Frimmer.

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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Like-Kind Exchanges (1031 Exchanges) and Tax Law Changes

Like-Kind Exchanges (1031 Exchanges) and Tax Law ChangesThe Tax Cuts and Jobs Act (TCJA) made tax law changes that affected virtually every business and individual in this past tax year 2018 and the years ahead. One tax provision that taxpayers should be aware of is that a like-kind exchange, otherwise known as a 1031 exchange after the code section to which it applies, is now generally limited to exchanges of real property.

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Here’s what you need to know:

Beginning after December 31, 2017, section 1031 like-kind exchange treatment applies only to exchanges of real property held for use in a trade or business or for investment, other than real property held primarily for sale. Before the law change, section 1031 also applied to certain exchanges of personal or intangible property, such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property. Effective January 1, 2018 these types of assets do not qualify for nonrecognition of gain or loss as like-kind exchanges.

Generally, if you exchange business or investment real property solely for business or investment real property of a like kind, section 1031 provides that no gain or loss is recognized. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss isn’t recognized.

Properties are of like kind if they are of the same nature or character, even if they differ in grade or quality. Generally, real properties are like-kind properties, regardless of whether they are improved or unimproved. For example, an apartment building would generally be of like-kind to unimproved land. However, real property in the United States and real property outside the United States aren’t like-kind properties.

We often will recommend deferred exchanges. A deferred exchange occurs when the property received in the exchange is received after the transfer of the property given up. For a deferred exchange to qualify as like kind, you must comply with the timing requirements for identification and receipt of replacement property. The replacement property for the exchange must be identified within 45 days after the property being given up is transferred. The replacement property must be received within 180 days, or by the due date of the tax return including extensions, whichever is earlier. Real estate property includes land and generally anything built on or attached to it. Again, an exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

A like-kind exchange is reported on Form 8824 which taxpayers must file with their tax return for the year the taxpayer transfers property as part of a like-kind exchange. This form certainly assists us tax professionals in helping our client figure the amount of gain deferred as a result of the like-kind exchange, as well as the basis of the like-kind property received if cash or property that isn’t of like kind is involved in the exchange. Take a look at the form as we think it flows almost logically!

If you make a deferred exchange using a qualified intermediary, the transfer of the property given up and receipt of like-kind property is treated as a like-kind exchange. If you fail to meet the timing requirements, your transaction won’t qualify as a deferred exchange and any gain may be taxable in the year you transferred the property.

Clear as mud, eh? Now you know why we at Abo and Company insist clients retain and rely on credible and seasoned real estate professionals, qualified intermediaries in tandem with real estate attorneys well versed in this arena.

FOR MORE INFORMATION:

Martin H. Abo, CPA/ABV/CVA/CFF is a principle of Abo and Company, LLC and its affiliate, Abo Cipolla Financial Forensics, LLC, Certified Public Accountants – Litigation and Forensic Accountants. With offices in Mount Laurel, NJ and Morrisville, PA, tips like the above can also be accessed by going to the firm’s website at www.aboandcompany.com.

 

 

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Bankruptcy Provisions in Commercial Leases

Bankruptcy Provisions in Commercial LeasesLet’s examine what you need to know about bankruptcy provisions in commercial leases. Each property is unique and every relationship has its own contours that will drive the path of commercial lease negotiations. While a lease cannot account for or predict every potential scenario in the course of a commercial landlord-tenant relationship, landlords can put themselves in a better position to weather a tenant bankruptcy by understanding the bankruptcy landscape, including which provisions will be enforced and which provisions will be ignored by bankruptcy courts.

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Most landlords know that commercial bankruptcy cases generally take one of two forms: chapter 7 or chapter 11. In both types of cases, the automatic stay applies. In both types of cases, the commercial lease can be assumed, assigned or rejected within a finite period of time. A chapter 7 case is a liquidating case, while chapter 11 cases are typically reorganizations.

A tenant filing bankruptcy under chapter 7 will cease doing business. There, the court appoints a chapter 7 trustee to gather and liquidate assets and to distribute the proceeds to creditors. While the debtor tenant in a chapter 7 case is unlikely to continue the lease, the trustee may sell/assign a valuable lease to a third party. Negotiations in a chapter 7 case take place with the chapter 7 trustee, rather than with the debtor tenant.

On the other hand, a tenant filing a chapter 11 bankruptcy generally continues operations as a “debtor-in-possession.” The chapter 11 case typically culminates in a plan of reorganization, through which the debtor will outline its plans to fund payments to creditors, restructure debt and continue operations as the entity emerges from bankruptcy. Often, chapter 11 debtors seek to shed debt by rejecting above-market leases or leveraging the right to assume and reject leases by extracting rent concessions from landlords as a condition to lease assumption. Absent unusual circumstances, the court will not appoint a trustee, thus negotiations take place with the debtor tenant.

While a tenant bankruptcy filing shifts the balance of power to the tenant, defensively drafted leases may allow the landlord to retain some control and negotiating advantage after the filing of a bankruptcy.

7 Bankruptcy Provisions in Commercial Leases

(1) Tenant bankruptcy triggering lease termination
Bankruptcy provisions in commercial leases that would terminate a lease or modify other rights of a bankrupt party upon the filing of a bankruptcy petition are known as ipso facto clauses and are unenforceable under the Bankruptcy Code. Bottom line: Don’t waste your leverage trying to incorporate or keep an ipso facto provision in the lease.

(2) Waiver of the automatic stay.
The filing of a bankruptcy petition automatically triggers a stay of all activities to collect a debt, including efforts to obtain possession of property. To avoid the delay associated with the  imposition of the stay, consider including a provision requiring the tenant to waive the protection of the automatic stay or a waiver of the right to contest a motion by the landlord for relief from the stay. The remedy, if enforced by a court, allows a landlord to obtain relief much sooner than it would otherwise be entitled, particularly because courts are reluctant to grant stay relief in the early days of a bankruptcy case. Bottom line: Whether this provision is worth fighting for depends on your jurisdiction. Not all courts will enforce a pre-petition waiver of the stay, and even if they will, the waiver will generally not be “self-executing”. The blessing of the court is needed. Therefore, to avoid the imposition of sanctions that accompany a violation of the stay (or the voiding of stay-violating activities), landlords with waivers in a lease should consult with counsel on filing the appropriate motion with the bankruptcy court before pursuing eviction or collection activities.

(3) Adequate Assurance Definition.
Under the Bankruptcy Code, in order for a bankrupt tenant to assume a lease, it must provide the landlord adequate assurance that it will meet its future lease obligations. The Bankruptcy Code does not define “adequate assurance”, but the parties can define the concept in the lease to narrow the issues in bankruptcy court litigation. Adequate assurance provisions often require the tenant provide assurances as to (i) the source of future rent, including that any assignee is similarly situated, financially, to the tenant at the time the lease was signed, (ii) the stability of the percentage rent, if applicable; and (iii) non-disruption to the tenant mix in the center or complex. Bottom line: A lease containing specific understandings of ambiguous bankruptcy concepts will carry greater weight with a court interpreting a tenant’s post-petition obligations to its landlord.

(4) Shopping Center Provisions.
While bankruptcy courts do not favor limitations or conditions on the assignability of a lease, shopping center leases receive special treatment and, as a result, shopping center landlords have greater leverage in post-petition assignment negotiations. Therefore, if a property can reasonably be considered a shopping center, including a provision indicating that the property is a shopping center may afford a landlord with additional leverage and protections. Any shopping center lease should require that any assignee of the lease in a bankruptcy adhere to exclusive use (or other use restrictions), co-tenancy and tenant mix requirements. Bottom line: Ensure that any
shopping center lease contains provisions that protect the future viability and maintain the integrity of the shopping center if a tenant lease is assumed and assigned in bankruptcy.

(5) Security.
Cash may be king, but, generally, security deposits become property of the debtor’s estate once a bankruptcy petition is filed, limiting the setoff rights of a landlord and requiring motion practice in the bankruptcy court. A letter of credit, coupled with a lease provision allowing the landlord to draw upon it after default and without notice to the tenant, generally falls outside of “property of the estate” and therefore provides more ready access to cash to a landlord whose tenant has filed for bankruptcy. Bottom line: Securing the tenant’s obligations under the lease by collateral that falls outside the umbrella of “property of the estate” puts the landlord in a better position to recover costs when dealing with a tenant in bankruptcy.

(6) Guarantors.
A corporate parent or affiliate guaranty provides additional security for the tenant’s lease. Frequently, however, that guarantor often files bankruptcy at the same time as the tenant, and the landlord’s claim against the guarantor becomes one of many unsecured claims that will receive cents-on-the-dollar recovery. Personal guaranties from tenant equity holders may provide more protection because of the “skin in the game” and a reluctance of many individuals to file personal bankruptcy. Bottom line: The newer the business or the more limited financial history of your tenant, the more compelling a case for obtaining personal guaranties.

(7) Forecasting Trouble.
Bankruptcy provisions in commercial leases that require the submission periodic financial statements, balance sheets and cash flow statements from a tenant and any guarantors will allow a landlord to monitor the performance of its tenant. Leases containing financial covenants provide a mechanism for a landlord to call a default if financial performance declines. Having a heads-up to financial distress can allow the landlord to exercise remedies quickly and potentially in advance of any bankruptcy filing. The automatic stay does not apply to leases terminated pre-petition, so moving quickly to terminate in a distressed situation may give the landlord a valuable edge in regaining possession of the property outside of the bankruptcy court. Bottom line: The more you know about your tenant’s finances, the better you can react to a deteriorating situation, whether by exercising remedies or bolstering the security for the tenant’s obligations under the lease.

The contents of this article are for informational purposes only and none of these materials is offered, nor should be construed, as legal advice or a legal opinion based on any specific facts or circumstances.

Have questions about about bankruptcy provisions in commercial leases?

 

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Open Office Etiquette

Open Office PoliciesThe open office presents some etiquette concerns. Let’s examine Policies, Protocol and Politeness as it relates to the open office environment. Cost considerations and space utilization can direct an organization’s decision to move from private to mostly open space. However, achieving strategic goals and supporting a firm’s mission, brand message and culture often play a more significant role. By improving collaboration and communication, flattening hierarchies and eliminating siloes, open environments can catalyze the innovation businesses seek.

Removing barriers and creating a more efficient footprint brings additional benefits. Open office environments can enhance workplace flexibility and provide the agility to meet evolving business needs. Infusing a workplace with natural daylight helps achieve sustainability and wellness initiatives.

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Transforming a workplace to a more open setting creates an opportunity to drive other organizational changes.
A successful approach to the shift is pragmatic, holistic and begins well in advance of occupancy. It continues through the actual transition and includes regular updates and checkins. Developing and introducing appropriate guidelines, expectations and etiquette to the workforce will help streamline your firm’s adjustment to its new environment, minimizing downtime and lowering stress levels. This paper provides advice on the process for developing workplace protocols and presents an example of guidelines for a hypothetical company that addresses some typical hot button issues.

SIMPLE PROCESS FOR DEVELOPING WORKPLACE PROTOCOLS

Before the move

Gain leadership support and sponsorship. An effective shift begins at the top. Active and visible leaders play a critical role in times of change. It is important to involve them early in the process as they provide the authority and influence necessary for a successful workplace change. An employee’s direct manager also plays a significant role in providing specific information and reinforcing change principles.

Introduce the open office concept. Using multiple forms of media and approaches, educate employees on the changes taking place and the business reasons for the change. Maintain a positive, informative tone while highlighting ways it will benefit them as well as the organization.

Initiate a transition from the old environment to the new. Provide the support and tools necessary to assist employees in the change. For example, shredding and scanning materials ease the move to digital records. Consider offering incentives or sponsoring a company-wide contest for purging physical files.

Involve employees in creating guidelines. Including employees in the process will further engage them, solidify “buy-in” and sidestep a perception that change is “being done to them.” An appropriate level of engagement can give employees a voice, without setting unrealistic expectations of influence.

Assemble a small group of employees who represent different areas of the business that will be moving to the
new space.

Using the sample guidelines we have provided, brainstorm a list of no more than 5 to 8 issues relative to adopting an open workplace that the group feels should be addressed. Within that list, include these three areas of concern: audible distractions, privacy and uninvited interruptions.

Employee representatives can then solicit input from co-workers on the specific issues, such as common sources of noise in the office, and the collective team can create a short “rule” or guideline that addresses each issue. Some issues may require more than one guideline.

• Consult with Human Resources to assure compliance. Your Human Resources representative should be
involved to ensure that any guidelines you create align with existing policies. • Confirm that the appropriate infrastructure is in place. Security and shared spaces reservation systems should be functional; individual and team workspaces should be fully equipped and accessible. Storage and supplies should be available. All elements of technology, including hardware, power and connectivity, must be available, serviceable and reliable. Be sure to provide proper training to employees and managers on how to use new spaces and technologies.

DURING THE MOVE

• Deliver guidelines. Use the release of guidelines as an opportunity to reiterate your message and celebrate the mission. Depending on the number of employees involved in the change, you can incorporate the guidelines with other training meetings related to the move. If that is not practical, the guidelines can be posted on the corporate intranet and/or presented via “lunch & learn,” webinar, town hall or other method appropriate to your organization’s size and culture. Guidelines should also be a component of onboarding materials for new hires.

• Make the change a positive experience. Celebrating the move process with events and consistent visuals and messaging acts to reinforce a positive experience. Consider providing a welcome letter from leadership and a small office-related gift to each employee on move day.

• Distribute all essential materials and guides. In addition to the sample guidelines presented, develop a printed series of handouts such as office plans, technology instructions and codes, and any other needed guides that employees can refer to.

• On move day, have staff on-hand to resolve problems and answer questions.

• Lead by example. Managing a successful change starts in the C-suite. Encourage all levels of the organization to follow the suggested guidelines on a daily basis. Users will be more inclined to accept their new workstyle upon seeing senior leaders adopting the new workplace norms.

AFTER THE MOVE

• Monitor and adjust. Assess the successes and shortcomings of the change process. There is no substitute for regular face-to face conversations and walking around to see if policies are working and being adhered to.
Build in means for users to submit feedback on how they feel the guidelines are working after about 90 days. Based on insights learned, policies can be tweaked as needed.

A well-executed plan will aid in acceptance of a new environment. Moreover, knowing their input was considered and future feedback welcomed will engage and encourage employees to embrace their new space.

CLICK HERE TO SEE THE SAMPLE GUIDELINES FOR OPEN OFFICE POLICIES, PROTOCOL AND POLITENESS INCLUDED WITH THIS ARTICLE

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Mall Outlook Darkens as Online Sales Surge

A couple of the more than 2,200 numbers buried deep in this month’s Census Bureau report on retail sales in the national and Philadelphia commercial real estate markets may add to mounting concerns for U.S. shopping mall investors about the growing threat from e-commerce.

The report shows that for the first time, non-store retail sales (including e-commerce sales) in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – totaled more than those for the department stores that anchor most traditional Class B and Class C malls.

This Co-Star report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Non-store retail sales in February, the most recent month reported, totaled $59.77 billion involving U.S. and Philadelphia commercial real estate listings. E-commerce sales account for about 88 percent of that volume.

The total for general merchandise national and Philadelphia commercial real estate properties housing retailers, the category that includes department stores, totaled $59.74 billion. Ten years ago, general merchandise store sales outpaced non-store sales by 47 percent.

The figures contribute more gust to the intensifying headwinds for shopping mall investors in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – whether they are property owners, lenders or real estate investment trust and commercial mortgage investors.

“Class B and C malls in particular are driving weaker loan performance as they generally have less favorable locations, weaker anchor profiles and are particularly vulnerable to competition, both from other malls and internet sales,” Fitch analysts said in a recent report. “Losses of foot traffic and sales have led to additional store closures with increasing mall vacancies affecting property-level cash flow, thus putting pressure on loan performance.”

Overall, there have been more than 5,800 store closings reported this year among national and Philadelphia commercial real estate listings. That elevated level of closings could lead to a widening gap in performance between property owners with more Class A malls than those with more Class B and Class C malls, Morgan Stanley & Co. analysts reported this week in their outlook for upcoming REIT first quarter earnings results.

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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Protecting Vacant Real Estate

Protecting Vacant Real Estate

In a time when layoffs and foreclosures are widespread, your firm may be forced to manage vacant real estate. The insurance risks and liabilities associated with owning vacant property can be extensive, and to ensure you are adequately protected, it is important to know these risks. In addition to purchasing comprehensive insurance coverage, there are numerous preventive strategies for maintaining vacant properties to reduce risk and liability.

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Potential Risks of Vacant Real Estate

There are a host of risks and concerns associated with owning vacant real estate. Vacant buildings are an obvious target for theft, trespassing and vandalism. For example, the rising cost of copper has given rise to an increase in the theft of copper pipes from vacant properties. In addition to any loss or property damage that may occur, keep in mind that the owner of a property can be held liable for criminal activities or accidents that take place on the premises.

In addition, vacant properties are susceptible to undetected damages, such as fire, water damage, electrical explosions, wind or hail damage, and mold. A study by the U.S. Fire Administration shows that approximately 30,000 fires occur every year in vacant buildings, costing $900 million annually in direct property damage. Many of these incidents occur in vacant buildings due to small, undetected maintenance issues; someone in an occupied building would have recognized and handled the problem before it caused a larger loss.

In certain facilities, there may also be environmental hazards that the owner needs to consider. Facilities that are used to store chemicals or other pollutants should ensure that such materials are removed or securely stored— the owner may be held liable for any hazardous materials that contaminate groundwater or other nearby natural resources. Also, underground fuel tanks present serious challenges and thus should be frequently and carefully inspected by professionals.

Other Ways to Mitigate Risk with Vacant Real Estate

In addition to extending coverage, there are some simple steps that owners of vacant property can take to limit their risk and liability.

Prevent vandalism: Notify local authorities of vacated properties so they can watch for criminal behavior.

Maintain an “occupied” appearance: mow the lawn, have mail forwarded or picked up regularly and install light timers and/or a security system.

Limit liability: Make sure the property is free from significant hazards (e.g., broken railings or steps, broken windows) that could cause injuries to anyone on the property—this could include police officers, maintenance workers, firefighters or even trespassers.

Avoid damage: Performing regular maintenance on the property can decrease the odds of sustaining damage. Make sure the heating system and chimney are cleaned and inspected regularly. Have the plumbing system winterized to prevent frozen pipes. Periodically inspect roof, insulation, attic, basement, gutters and other areas of the property for any necessary repairs, mold, damage or other problems. Consider installing smoke detectors that are tied to a centrally monitored fire alarm system so the fire department will be notified in the case of an alarm. Remove all access material and combustibles from in and around the building.

Insuring Vacant Residential Properties

Most insurance companies include a clause that the homeowner’s insurance will expire if a home is left vacant for more than 30 or 60 days. This leaves the property owner financially vulnerable for all previously noted risk. However, many insurance companies do offer vacant property insurance, also known as vacant building insurance or vacant dwelling insurance.

Insuring Vacant Commercial Buildings

Vacant commercial buildings are more difficult to insure because they present greater risks, including increased chance of theft, malicious damage and burst pipes. It is important to disclose all relevant facts when seeking insurance, including the reason for the property’s vacancy and a schedule of any work to be done on the property. Because of the increased risks and liability associated with a vacant property, these types of insurance tend to be costly—ranging from one and a half to five times the cost of a property insurance policy. It is important to look beyond the price and consider the suitability and comprehensiveness of the coverage being purchased.

For more information about vacant property insurance and other strategies to help protect your assets and mitigate loss from vacant real estate, contact us today at (856) 489-9100.

vacant-real-estateBrian Blaston
Commercial Lines – Manager
Hardenbergh Insurance Group
phone: 856.489.9100 x 139
fax: 856.673.5955
www.hig.net

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Preventing the Most Common Cause of Property Loss

the Most Common Cause of Property LossWhether you count your career in months, years or decades…it doesn’t take much time to see this pattern: the overwhelming majority of the property losses you face are liquid based events. Your “Location, Location, Location” will be interrupted by “Water, Water, Water” because it is the most common cause of property loss. The risk is present year round, whether it’s a flood that’s weather driven, or it rains inside your space due to a plumbing break or roof leak. Due to its threat level to life safety, fire receives our attention to protocols by way of building design, code compliance, annual inspections, drills, materials selection and more. However, the rate of incidence of fire is extremely low compared with the frequency, and high cost of property damage and business interruption caused by water. With this in mind, it’s a great return on your investment of time, to initiate or review your team’s plan for response.

Download Printable Article (Preventing the Most Common Cause of Property Loss) >>>

Preventing the Most Common Cause of Property Loss

HOW READY IS YOUR STAFF TO CONTAIN A WATER LOSS? (the most common cause of property loss)

6 Quick Questions before the next emergency

• Is my staff aware of the Safety hazards of a water event, and how to safely navigate them?
• Is a diverse cross-section of my staff knowledgeable and trained in how to shut off the water?
• Are key 24/7 contacts for subs such as plumbers, electricians, alarm and remediation contractors at your fingertips and in hard copy? Is the information published and posted in a logical, accessible manner?
• Do I have an app with a closed group, or group text pre-loaded for my crisis team and I to communicate during an emergency?
• Is my staff trained in how to divert water in a multi-floor water release, and how to conduct an assessment of the extent of damages?
• Do we have basic tools on hand such as shop vacs for extraction, plastic sheeting to cover and protect contents, and clear bags to remove (but not dispose of) water impacted items?

SAFETY FIRST

• Make certain the area is safe for entry, free of electrical hazards. A licensed electrician is required to manage the following:
• Water impacted basements housing electrical and HVAC
• Equipment and appliances not rated for submersion
• Any wiring, outlets, and panels that have come in contact with water
• Coordinate with a licensed mechanical contractor to inspect and verify HVAC equipment if affected by water damage.
• Contact Alarm & Elevator contractors as needed.
• Determine Category of Water Source (Clean or Contaminated).
• If Flood or Sewage water, PPE and environmental testing are recommended.

ADDRESS THE SOURCE

Address the source and stop water from flowing into the building. Multiple people in various departments should be trained in how to shut off the water. Photomapping and signage to demonstrate the location and instructions for shut off valves is key.

INSPECTION & INITIAL CLEANUP

• A Thorough Assessment is the Foundation of a Successful Recovery. Missed areas and issues create costly secondary damage down the road.
• Direct and/or capture water in a manner that is efficient and prevents further infiltration and damage. For example, when water pouring from floor to floor, direct water into one stream through one deliberate opening in the ceiling tiles, instead of many points.
• Walk the building to determine extent of damage. Use the “360 degrees” approach. Work from the source room/area, up & down, side-to-side, follow gravity as water seeks its lowest point.
• Inspection Tools Include: High powered flashlight, Hygrometer (Temp & Humidity Monitor), Moisture Meter, Thermal Imaging camera, painter’s tape for waterlines & mark out and floor plans.
• Document via photos & video.
• Move sensitive equipment, cover & protect contents.
• Extract standing water, set drying equipment.
• Manipulate contents in a manner to promote proper drying. For example, move lateral cabinets away from walls, roll back carpet and carpet pad.
• Remove saturated contents, do NOT dispose, document, allow insurance adjuster to determine if salvageable. Save potential faulty parts and subcontractor logs in the event subrogration (legal means of seeking other another party’s resources for financial recovery) measures apply.

COMMUNICATION

• Review your Organizations Chain of Command & Procedures for Internal Reporting.
• Make sure your “phone/text tree” and alert systems are ready to activate your response, and to provide notifications to management, staff and occupants.
Tip: A few basic notification templates developed in advance will go a long way towards saving time and stress during a crisis.

For more information about the most common cause of property loss, Contact:

Christine Messina

 

Christine Messina, Vice President
AllRisk Property Damage Experts
TeamAllRisk.com
877.247.5252 24 Hrs
609.634.9960 cell
christine@allriskinc.com
Connect with us!
https://www.linkedin.com/in/christine-messina-b836073

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Baby Boomers, Retailers Could Change Commercial Lending

Some of the industry’s top commercial real estate mortgage bankers expect business to stay just as strong in the national and Philadelphia commercial real estate markets in 2019 as it was in the past two years even as the economy shows signs of slowing.

The Mortgage Bankers Association predicts loan origination in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – will only reach $530 billion in 2019, essentially on par with 2017 and 2018.

This report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

The amount of financing in the fourth quarter of 2018 beat the year-earlier period by 14 percent, the group said. It suggests that commercial and apartment lenders apparently have not been scared off by government shutdowns, stock market volatility, looming global trade wars and other headline events. And this follows almost a decade of recovery involving U.S. and Philadelphia commercial real estate listings tipped from one of the nation’s worst real estate collapses, as analysts and economists wonder how long this recuperation can last.

Indications for the immediate future of both national and Philadelphia commercial real estate properties are for steady lending activity, bankers agree.

For 2018, “the market as a whole ended the year roughly flat compared to 2017, continuing a plateau we’ve seen in mortgage borrowing and lending since 2015,” said Jamie Woodwell, vice president of commercial research for the mortgage bankers’ group.

These were among the key points from the Washington, D.C.-based trade group, which represents lenders, investors, developers, and others involved in commercial real estate financing.

Financiers avoid retail: Blame the rise of ecommerce and retail chain store closings, but MBA figures show loans in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – posting relatively anemic growth in the past year. They were up 1 percent in the fourth quarter from a year earlier in 2017, compared with 32 percent growth for apartment loans and 28 percent growth for industrial loans.

Aging boomers haven’t yet spurred a healthcare lending boom: US. growth for healthcare and senior-housing-related lending was up 61 percent year-over-year for the fourth quarter, but analysts said aging baby boomers still comprise only a fraction of development and lending activity.

As banks get queasy, others stand by: Even if banks dealing with national and Philadelphia commercial real estate listings are getting skittish about how long the good times can last, a multitude of other financiers stand ready to step in, and the fastest growing contingent includes debt funds. Numerous prominent firms in financial management and private equity have established funds geared primarily to lending to third-party commercial investors and developers, and they are finding rewards even in a tight interest rate environment.

For more information about Philly office space, Philly retail space, and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need – a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

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Office Space Decommissioning – The Overlooked Embedded Cost of Moving

Office Space DecommissioningThis article talks about how important Office Space Decommissioning is when moving to a new space.

Here’s a secret that no one ever tells you about moving – the bulk of your relocation costs are NOT transitioning your belongings to the new space. The fact is, office space decommissioning is a significant factor in your budget, sometimes adding up to 3-5 times that of the actual relocation itself.

Office Space Decommissioning Is More Than Just Moving Out

All too often, clients miss the not so obvious “other move” when it comes to their office relocation. Clients split their time and attention operating their core business while also focusing on the “new” space and the endless questions, details, and decisions that are required to get that space ready to unveil. The “old” space, as well as the furniture in it, is often overlooked. If you think you can just leave the furniture and the cleaning for the landlord, you are mistaken!

The problem is that neglecting to properly decommission the old office space leaves you exposed to a wealth of unnecessary costs.
The majority of commercial leases contain very specific requirements as to how the old space needs to be turned back over to the landlord. If not, it’s your deposit that hangs in the balance, just waiting to satisfy those obligations you signed off on in your original lease long ago. The removal of unwanted furniture and equipment can be an expensive undertaking, especially if not handled properly, and your landlord is well within his rights to apply your deposit to those costs.

Most commercial leases require that the occupied space be left “broom swept.” This means that all contents, freestanding furniture, workstations, office/IT equipment, shelving, racking, etc., must be completely removed, and all floors left cleared of debris and vacuumed. That also means following through on tiny details like removing any data/IT cabling that you’ve added while in residence. Overall, you need to return the space back to its original condition prior to your occupancy. Your lease should spell out the specific requirements and standards you will be held to.

So how do you protect your deposit? You need a detailed plan and a schedule! The easiest way to satisfy your lease obligations and get your deposit back is to consult a professional who is well-versed in handling the office decommissioning process. When you partner with the right commercial removal company or transition management company, they can help you properly navigate and negotiate your exit. Most standard moving companies aren’t experienced enough to guide you through this process, and handling it yourself elevates your “soft cost exposure.” Most people over value what they have, don’t fully understand what they’re required to do, and then end up running out of time. The reality is that there is a very tight timeline when you move and the space needs to be vacated. Why wait on a potential buyer to purchase unwanted assets, when it elevates your risk of exceeding that timeline and paying a costly penalty to your former landlord? You need to understand the cost of the distraction to your core business while focusing on something that is only likely to yield a marginal return.

When you value the assets you will not be moving to your new space, factor in the time it takes to liquidate them. It’s often best to hire an expert to advocate for your bottom line, and help you sort it all out in an efficient and expeditious manner. There are three outcomes in an office decommissioning: net positive, net zero, and net negative. To achieve “net positive,” the liquidation of furniture and/or equipment yields a positive cash return and is clearly the optimal outcome to strive for. To attain “net zero,” you can choose to donate contents to a local charity for re-purpose, or have a third-party company remove them at no cost. While you don’t make any money on the transaction, you save the potential cost of having to remove the contents yourself. For those items that simply don’t have much or any value, and need to either be recycled or disposed, you’ll find yourself in a “net negative”
position. Although there’s a nominal return for recycled items, the cost for disposing valueless items leaves you with a fee that an office decommissioning expert can help minimize. You don’t want to incur unnecessary storage costs for assets that won’t garner you a net positive return on that investment.

Quite frankly, there is an enormous difference between a transition management expert and a standard moving company. Before you sign with a relocation company, discuss with them the decommissioning services that they provide. Pin down the price for the services that you need, and compare that cost with hiring various removal providers. Most commercial movers overlook office space decommissioning, and this portion of the job can cost many times your relocation fee depending on how much of your existing furniture you will be taking to your new space. Once you have the transition team in place, establish a facility decommissioning plan and lock in hard dates and deadlines.

Make sure that the company is reliable, and that the personnel have the necessary skills to execute the plan. Often times, it is not worth the risk of going with the vendor with the lowest bid, as the cost for additional “buy back days” at your old space can quickly eclipse those cheap vendor savings.

So what is the takeaway from all of this? Simply that companies that focus all their time and effort on “hard costs” of relocation will be blindsided by the much more important “soft costs” of the move. A transition management expert minimizes your company’s exposure to lost revenue by reducing the distraction to your core business and curtailing downtime. Consult with an expert, and the savings on office space decommissioning will more than likely pay for the actual relocation.

About Argosy Management Group, LLC
Argosy Management Group (AMG) is a leader in office relocation and logistics project/move management. AMG services companies throughout the U.S. and worldwide. AMG delivers a wide range of comprehensive services: move management and transition planning, space planning and furniture needs, office and industrial relocation and liquidation, storage solutions and asset management, furniture disassembly and installation, and I.T./data center relocation.

AMG

For more information contact:
Shawn O’Neil, Partner
609-744-4112

Paul Sipera
609-760-8312

Argosy Management Group, LLC
7905 Browning Rd., Suite 112
Pennsauken, NJ 08109
www.argosymg.com

 

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Commercial Building Life Expectancy Isn’t What It Once Was

Commercial Building Life ExpectancyBuilding life expectancy isn’t what it used to be. What to do with obsolete commercial buildings and how to prevent your portfolio from falling into the trap. Buyers, owners, investors and developers of real estate are facing questions regarding how properties are valued in the current market, especially where there are problems appraising a property’s highest and best use. More specifically, this question focuses on reversion value.

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Commercial Building Life Expectancy – Multiple Cases

Recent Class B or lower valuation projects (as well as some lower level Class A properties) have presented serious, widespread questions from a valuation standpoint. The main question is simple: What should be done with “obsolete” buildings?

Historically, such a question became pertinent only after 50-100 years. Buildings were “built to last,” and most were designed to be updated over time. Part of the reason for that long horizon was that ample land was available for expansion. Another was that zoning was very prescriptive and clearly defined in many ways. Lastly, fixed real estate was a capital-intensive asset class.

In the past five years alone, that question, however, is now being asked about buildings that are only 20 to 30 years old. Many buildings that have been constructed in the last 30 years or so, like suburban office buildings and parks, retail centers and malls, some well located industrial parks and even sports stadiums, now face the wrecking ball because they are, effectively, obsolete. Some investors report that many U.S. submarkets, for a variety of uses, are “under-demolished.”

What is driving Decreased Commercial Building Life Expectancy?

The short answer is technology. The longer answer is human interaction with technology.

Historically, most companies had fairly simple operations and spatial needs, so real estate decisions were driven by location and/or resources, with physical building changes limited by cost and location. The current digital revolution, however, is changing that—literally at the speed of light. Locations are not as “fixed” as they were previously, and businesses’ physical space needs tend to change quickly due to technological shifts. Flexibility will be the key to long-term survival in all industries, including real estate.

Traditionally, real estate has been a fixed asset acquired at high prices compared to most assets. Such requirements mandated long lead times, high fixed costs, significant capital resources, segregation of uses, long-term contracts (i.e., leases and mortgages) and zoning. The industry faces the challenge of adapting fixed physical space needs, and all that goes along with it, to meet the new reality of demand for change at the snap of a finger, and how to underwrite office or other spaces that will likely shift to “creative space” when re-financed (at lower rents, not higher).

Possible Solutions to Decreased Commercial Building Life Expectancy

From a valuation standpoint, there are two traditional factors: zoning/legal issues and physical utility. To maintain real estate flexibility, underwriters, analysts, municipalities and all industries will have to consider:

1. Revised zoning codes that stress density/form over use. The economic lives of buildings are getting shorter and it may be necessary to re-configure space more quickly. This change, however, often runs afoul of local zoning ordinances, minimally, as it relates to uses. If structures in the future are more generic in form, site-specific codes may have to be revised to reflect multiple future uses. By “pre-coding” such code requirements, one of the major impediments to re-development (generically, all permitting costs) can be streamlined for material cost savings and faster re-use. Urban areas already have an advantage in this regard due to greater densities and uses. Suburban areas will need to adapt this concept, or face an even stronger “back to the city” trend than currently in the market. Otherwise, suburban office parks and similar “obsolete concepts” could risk vacancy. All jurisdictions, in order to retain and attract industry—their tax base—will have to re-write zoning laws to allow rapid flexibility.

2. In terms of physical utility, architects and engineers will have to design buildings that can be quickly adapted to alternate uses at a reasonable cost. Aesthetics will still be important. Those who are able to successfully design and build the most flexible buildings first will fare the best. Prime locations will also continue to have great importance. These locations, however, will not be limited strictly to traditional site selection parameters. The key will be how flexible the site and/or building improvements are perceived to be for needed changes due to technological shifts that dramatically alter market demand for that space.

The combination of these elements will require a shorter-term view, and investors and municipalities should incorporate some level of alternate use analysis, even from the original construction date. Underwriters would then have the benefit of downside underwriting (to consider future conversion costs)—on a current basis.

For many years, zoning and functional utility have simply been boxes to check during the valuation process. Moving forward, and given the rapid clip of technological change, it is now time to remove it from a box and think about a real exit strategy beyond the end of a lease or mortgage term.

peter-cordua

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