Real estate mortgage interest rates have bottomed out several times since 2008 as a Federal Reserve tool to prop up a shaky economy. Lowering interest rates can be controlled to a degree by the Fed and provide for higher cash flow for real estate investments as less of the income is used to service loan debt. The Federal Reserve Discount Rate has been zero since 2009 which has proved to be an effective tool for economic recovery, but also leaves the FED without any further control against a shaky economy because you can’t lower that rate less than zero.
Now that there is some substance to the real estate investment market, the FED has increased this rate in quarter point increases over the last two years. The Discount Rate is now at 2.25%, up from zero, and will be at 3% by the end of 2018. This slow methodical rate increase does two things. First, it gives the FED something to lower in the event there is an economic downturn. Second, it slowly raises the mortgage rates that investors pay for loans. At the bottom of the curve, the commercial property mortgage rate was at 3.25% and it is now hovering at just under 5%. By the end of 2018, this rate should be at 5.5%.
The market will respond to this rate increase. The cost of ownership goes up so profits go down. Landlords will slowly raise rents to reflect this additional cost, profits will again rise and the cost and hopefully the value of these investment properties will increase. This value increase will maintain the investor equity thus protecting them from this inflationary trend. As in past inflation cycles, it is very likely that owning real estate as well as other hard assets like gold and silver, will actually profit the investor at a greater rate than the erosion of equity caused by inflation.
No, I am not an economist, but after watching commercial real estate markets for 41 years, I am a keen observer of this phenomenon and welcome it for real estate investors. This increase in property value due to inflation is also magnified by the leverage a mortgage loan provides investors. If the property inflates in value by 5%, and if an investor has a 75% loan on the property, the equity increase for the investor is actually 20% due to having only a 25% cash investment in the property.
Moral?: Buy leased investment real estate to not only maintain the value of your dollars, but to also realize an arbitrage due to the nature of a leveraged investment!
Jeff Edberg, CCIM, SIOR is a real estate Broker Associate with Lepic-Kroeger, Realtors in Iowa City, Iowa and has been practicing professional commercial real estate sales for 41 years.
Iowa is the #1 state in the country, according to a new study from U.S. News & World Report. Gov. Kim Reynolds appeared on CBS This Morning on Tuesday to make the announcement about the 2018 Best States ranking.
“Our Best States ranking is a humbling tribute to our people who have proven time and again that in Iowa, if you’re willing to work hard, you can accomplish anything,” Gov. Reynolds said. “My top priority as governor is to build on our current success by bringing new resources and opportunities to every corner of our state. Every Iowan contributes to the success of their community and our state, and we celebrate this honor knowing that our work to build a better Iowa will never be finished.”
U.S. News & World Report is the global authority in rankings and evaluated all 50 states across 77 metrics with thousands of data points in eight categories: health care, education, economy, opportunity, infrastructure, crime & corrections, fiscal stability and quality of life. Health care and education are the most highly weighted factors in the methodology, followed closely by the economy.
Nebraska ranked #7 and South Dakota ranked #14.
Health care: Iowa ranks #3 in healthcare, up two spots from 2017
• #2 for health care affordability
• #1 for child wellness visits
• #2 for low infant mortality rate
• #3 for Medicare quality
• #5 for insurance enrollment
• #5 for health care access
• #9 for health care quality
Education: Iowa ranks #5 in education, up three spots from 2017
• #1 public high school graduation rate
• #3 for four-year graduation rates for four-year public colleges
Economy: Iowa ranks No. 17 in economy, up 13 spots from 2017
• #10 for labor force participation
• #6 for low unemployment & GDP growth
Opportunity: Iowa ranks No. 4 in opportunity, up two spots from 2017
• #3 in affordability
• #2 in housing
Infrastructure: Iowa ranks No. 1 in infrastructure, up 15 spots from 2017
I have been hearing predictions of the “bubble” popping for 9-months. This is a long and detailed read, but see what you think. If markets tank, investment real estate will be solid depending on overall liquidity in markets and the ability to finance. Real estate is always cyclic and always comes back. Happy New Year!
BIM – Building Information Modeling seems to be the next big thing. It hasn’t hit Iowa City yet, but is all over news streams on the internet. Variations have existed for years on CAD systems, but it is reaching a critical mass and is about to go main stream. I’ll be watching this trend. Interesting!
In every industry, new technology catalyzes the big leaps forward. In motion pictures, industry-quaking innovations included synchronous sound, green screens, and CGI—a technology once so little understood that when used in the making of Tron, the Academy Awards called the computer-generated imagery a “cheat” and disqualified the 1982 film from a Visual Effects nomination.
At the same time, a similar sea change was happening in the AEC industry, with architects and engineers shifting from manual drawings to CAD software. Then in the early 2000s, Building Information Modeling (BIM) started building momentum. And like CGI, BIM withstood its fair share of skepticism, often based on fears of the unknown.
So what is Building Information Modeling? It’s a software technology and design process that allows architects, engineers, builders, and owners to collaborate—wherever they are in the world—through data-infused 3D models. For example, included in each model is a database that adjusts the list of required construction materials as architects and engineers alter the design. And the model can be used throughout the life cycle of a building or infrastructure project—from design and construction to maintenance and even through demolition.
The three “Ps” of progress are processes, policies, and people, according to Bill Allen, partner and director of building information management services at Denver’s EvolveLAB. Allen sees the future of BIM in those Ps and wants practitioners to understand just how much more efficient the design process can be using the right processes. With technological developments such as machine learning and generative design, BIM will deliver possibilities yet to be realized.
Since the 2014 Winter Olympics in Sochi, Russia has vied to position itself as a worldwide hub of BIM technology and operations. Andrey Belyuchenko, director of the department of urban planning and architecture activities for the Ministry of Construction in Moscow, wants Russian firms to lead by example, showing companies how they can successfully transition to BIM technology.
Belyuchenko wants to create the template for Russia’s transition to a BIM standard, which hopefully would assuage fears around cost and implementation. To that end, he’s looking toward the United Kingdom, which delivered the first government BIM mandates and developed the terminology, quality-assurance measures, and modeling milestones essential to BIM’s success.
BIM software captures reality precisely so what stakeholders see is what they get. Data in a BIM model may include information from large-scale laser scans of the site down to the make, model, part number, and location of a specific air duct in the building.
Other benefits of BIM include efficient collaboration in the cloud, with updates that can be viewed in real time. With a 3D model, all parties can visualize the endgame. They can use variables like seasonal daylight to simulate energy performance, catch clashing elements in the structure, and resolve conflicts early. The success of a project is in the details—and making sure everyone is working from same model, whether from an office or on-site.
BIM excels at big-picture processes, but it also masters interior spaces—for example, in university facilities management. Michael Schley, founder and CEO of FM: Systems, shares four tips for facilities managers to use BIM technology during the entire life cycle of a building and as a tool to get buy-in from decision makers.
For example, Xavier University in Cincinnati, Ohio, was prompted to increase its facilities budget from $750,000 to $12 million after BIM proved the need for additional room finishes, floors, roofing, and mechanical equipment. By using collected BIM structural, systems, and performance data, campuses and other organizations can properly address ongoing operations costs.
New York City’s iconic Empire State Building and Brooklyn Bridge were engineering marvels, leaving indelible imagery of men in hard hats floating hundreds of feet in the air. But behind these black-and-white photos lie tragedies: Five men died during the Empire State Building construction, and 27 died building the Brooklyn Bridge.
Fast-forward to 2012, when New York was the first city to develop a 3D Site Safety Plans Program. The program uses BIM to create and store construction-safety plans. Using virtual tour sites, detailed building plans, and compliance codes, its goal is to minimize construction accidents and deaths. In this dangerous industry, BIM can close the safety gap by generating building specs, schedules, and checklists revealing hazards that could imperil workers, delay work, and cost more money.
John Rodriguez is an evangelist. As BIM Manager, he has shifted the California-based Fuscoe Engineering into full BIM mode. Rodriguez envisions AEC’s future as BIM-driven; the only barrier is knowledge and training. BIM adoption at Fuscoe started with an apprentice model and then grew into a more top-down, formal training of technical staff—further ingraining BIM into the firm’s work culture. And the proof is in the pudding: When a project principal requested a clash-detection report on underground utilities, Rodriguez generated it in less than five minutes using BIM. Adding in the demonstrated savings in project time and costs has made BIM believers out of the entire office.
BIM is likely already part of your AEC workflow because project teams fundamentally think in terms of real-world objects like walls, doors, floors, and ceilings. These building components are natural jumping-off points for digital modeling: Adding BIM processes addresses these known objects with design and engineering thinking at its comprehensive best. With BIM, practical expertise translates to the multidimensional model seamlessly and will quickly become an invaluable asset for companies with an intense, shared work culture like construction.
The reduction of the mortgage interest for new buyers only, a lengthened time frame on capital gains, a $10,000 cap on deductibility of property taxes and the elimination of moving expenses deduction — this bill is bad for real estate.
President Trump and the Republican congressional leadership have proposed a new tax bill. The bill consolidates some income tax rates, lowers the corporate tax rate, reduces the tax rate for certain pass-through businesses, eliminates the estate tax and takes away many long-established deductions and exemptions.
Sounds great, right?
Well, it’s terrible for housing. Really terrible.
Now, I’m not making a political statement here. I’m not writing as a Democrat, or a Republican, a BernieBro or a tea party patriot.
I’m just writing as a real estate industry professional. And I’m writing to other real estate professionals to say — this bill is really bad for you and your clients, and you should be doing everything you can to fight it.
It’s almost a joke, a pastiche of anti-housing policies, a ghastly tapestry stitching together a patchwork of terrible ideas that are going to severely depress real estate markets across the country at a time when homeownership is already at a historic low of 63.9 percent.
Why? Well, it’s bad enough that the tax bill will negatively impact property values by reducing the mortgage interest deduction, changing the capital gains extension on residences, capping property tax deductibility and some other terrible stuff. That’s bad for homesellers, homebuyers, homeowners — and us — because what’s bad for all of them is usually bad for us.
But even worse than that, the new bill actually makes it more expensive to move! And that’s not good. We want people to move. We make our living when people move.
So we need greater motility, not less. Indeed, most of the markets in this country need inventory because homeowners with historically low interest rates already have a lot of incentives to stay put and hold on to those rates.
But this bill is going to hurt housing in a lot of ways.
Let’s count them:
The bill reduces the value of the mortgage interest deduction — but for new buyers only!
The tax bill lowers the mortgage interest deduction cap from $1 million to $500,000, which will particularly impact people in high-priced markets (and luxury buyers elsewhere in the country). Owning a high-priced home is going to be a lot more expensive under the new law.
It doesn’t necessarily incentivize homebuying, it just encourages people to buy larger houses. I know all that. So if Congress wanted to get rid of the mortgage interest deduction entirely, I wouldn’t love it, but I could live with it.
But the new bill does something really, really stupid — it puts the $500,000 cap on new buyers, but keeps the $1 million cap for existing homeowners. On its face, it’s an attempt to be fair, to help current homeowners preserve a tax break they depended on when they bought their home.
Think, though, about what that does for motility — the rate at which people move. If I own a home with a mortgage between $500,000 and $1 million, I can now deduct all my mortgage interest.
But if I sell my home and buy something else that’s the same price, or more expensive, I’m not going to be able to deduct as much of my interest as I do today.
So why move? I’ve probably got a great rate. I can deduct maybe all of my mortgage interest. And most of my payments for the next 10 years or so are interest payments.
So I stay put. And that person who would have bought my house stays put. And the person whose house I would have bought stays put. And the agents we would have all hired? They don’t make any money.
In other words: bad for sellers, bad for new buyers, and bad for agents and brokers.
The bill requires people to say in their homes longer to get the capital gains exemption.
Tax law has long helped homeowners and facilitated motility by allowing them to exempt the capital gains on their primary residence. If you’ve lived in your primary residence for two of the past five years, you can exempt up to $250,000 of your capital gains ($500,000 for married couples filing jointly).
So what does the new tax bill do? It makes you stay in your home longer — you have to own and live in the home for five out of the last eight years. On top of that, you might not even get the exemption if you make too much money.
Now, I get that most people aren’t lucky enough to generate more than $250,000 of capital gains by living in a home for just two years. So I’m not sure how many people this will affect.
But that’s sort of the point. How much money could we be saving by requiring someone to live in a home for three extra years in order to claim the exemption? Why should it matter? And if it’s a small amount, why put that disincentive to moving in place?
The bill makes homes with high property taxes much less attractive.
Currently, the federal government allows you to deduct your state and local taxes and your property taxes from your federal tax bill. That makes sense, insofar as it feels unfair to tax you on money you already used to pay your state and local taxes.
Now, for some people, this might not be a big deal. Depending on where you live, you might be thinking, “well, that should be enough, what kind of idiot would buy a house with more than $10,000 in property taxes?”
Two thumbs pointing at this guy. And at everyone who lives in my neighborhood, county, and frankly, region.
I pay a lot more than that every year in property taxes. I’m not going to tell you how much because it’s embarrassing. But I live in New York, which has some of the highest property tax rates in the country. So it’s something I deal with, both as a homeowner and a real estate professional.
Maybe you’ll discount this because you live in a low-tax state, and you won’t be impacted. But for a lot of people, this change makes it much more expensive to own your own home. And that’s not good for housing generally.
The bill eliminates the deduction for moving expenses.
Right now, you can deduct expenses if you’re moving for a new job or a transfer for your existing job. This may not seem like a big deal, but when your move costs you upward of $10,000, that might mean a deduction worth $3,000 or $4,000.
No, it’s not going to make the difference between someone moving and not moving, particularly if you get transferred or take a new job.
I don’t think many people are going to decide to stay put because they can’t deduct their expenses anymore. But it’s just another example of how this new bill depresses the incentive to get a new home.
The bill makes second homes and vacation homes much more expensive.
If you work in a second-home market, realize that this bill just reduced the value of every home in your market.
Why? Well, figure that anyone buying a second home is probably in the 39 percent tax bracket (otherwise, they most likely can’t afford a vacation home).
So let’s say they are buying that $1 million beachfront home, getting an $800,000 mortgage.
At today’s rates, they’ll pay about $5,000 per month as a mortgage payment, most of which (at least for the first few years) will be interest. Thus, if they pay $60,000 per year in interest, they get a deduction of about $24,000, which means their effective payment is $36,000 a year.
Now, under the new law, they can’t deduct that interest. So maybe they can no longer afford $60,000 a year in second-home payments. If they can only afford that effective $36,000 per year that they were paying under current law, their buying power just got slashed by about 40 percent.
Maybe they’re rich enough, or they’re getting a tax break in this bill in some other way that allows them to buy that same $1 million home even without the tax deduction. So maybe you won’t see a big hit in your second-home prices. But maybe you will.
First, real estate investors can still deduct the interest on their loans and property taxes without any cap. Homeowners can only deduct their mortgage interest up to $500,000, and property taxes up to $10,000, but there’s no cap for investors.
That’s because investment property deductions for interest or taxes are not itemized deductions. Rather, they’re deductions in computing net rental income.
Indeed, the tax bill specifically exempts real estate investors from a new 30 percent limit on business interest deductibility, so it’s especially favoring them compared to other business owners.
Second, the bill preserves many other tax advantages for investment real estate: the deductibility of maintenance costs and depreciation, the like-kind exchanges and so on.
Third, one of the major tax changes in the bill — conferring a 25 percent tax rate on so-called “pass-through businesses” — could reduce the tax rate for passive real estate investors who buy and manage buildings through LLCs or partnerships, which is almost all of them.
Now, I have no problem with maintaining or improving the tax advantages for investment real estate. That’s great. I just don’t get why the new law should be so bad for the residential real estate market and at the same time be so good for the investment real estate market.
OK, let’s sum it up.
The new tax bill is only bad if you’re a:
Seller: You might not be able to exempt your capital gains when you sell.
Buyer: You might not be able to deduct your mortgage interest on your new home or your moving expenses.
Homeowner: You might not be able to deduct all your property taxes.
Second homeowner: You can no longer deduct your mortgage interest.
Agents: Homebuyers are losing incentives to buy a home, and homeowners have lots of incentives to stay put to keep their full mortgage interest tax deduction and to wait out the exemption for their capital gains.
I don’t know … that seems like a lot of people.
Finally, you might say, “well, this might be bad for me personally, but I’m a patriot, so if it’s good for the country I’m for it!” OK, I get it. I agree. I’d be willing to make sacrifices if I felt that they went to the common good.
But why are we the only ones who have to be patriots? And why are we making sacrifices for all these other people, who seem to be doing pretty OK right now:
Corporations, which get a huge tax cut from 35 percent to 20 percent, and can repatriate their offshore profits at a major discount.
Hedge fund owners, who get to keep their carried interest loophole, and pay capital gains rates on what is really ordinary income.
Business owners (like me!), who might get to pay a 25 percent rate on their income, rather than the rates paid by their employees.
I do politics on my own time. When it comes to my day job, I only care about the facts and how they impact my industry, my business, my workforce and my clients.
And the fact is this is not a good tax bill for real estate and housing.
Joe Rand is the chief creative officer of Better Homes and Gardens Real Estate — Rand Realty, a real estate brokerage in New York City’s northern suburbs, and the author of the forthcoming book Disruptors, Discounters, and Doubters: Five Changes the Real Estate Industry Needs to Make for a Client-Centric World.
Article image credited to Christopher Halloran / Shutterstock.com
3 Different Types of Commercial Real Estate Leases
There are three basic types of commercial real estate leases. These leases are organized around two rent calculation methods: “net” and “gross.” The gross lease typically means a tenant pays one lump sum for rent, from which the landlord pays his expenses. The net lease has a smaller base rent, with other expenses paid for by the tenant. The modified gross lease is a happy marriage between the two. While terms vary widely building by building, this basic overview will help businesses shop for the best deal possible.
Gross Lease or Full Service Lease
In a gross lease, the rent is all-inclusive. The landlord pays all or most expenses associated with the property, including taxes, insurance, and maintenance out of the rents received from tenants. Utilities and janitorial services are included within one easy, tenant-friendly rent payment.
When negotiating a gross lease, the tenant should ask which janitorial services are provided, and how often they are offered. Excess utility consumption beyond building standards is sometimes charged back to tenant; so if the tenant is a big consumer of electricity, this point should be clarified in the lease as well. The tenant pays his own property insurance and taxes.
A benefit of this type of lease is that it is supremely easy for the tenant, which can forecast expenses without worrying about an unexpected lobby maintenance charge, for example. The landlord assumes all responsibility for the building, while tenants concentrate on growing their businesses.
In a net lease, the landlord charges a lower base rent for the commercial space, plus some or all of “usual costs,” which are expenses associated with operations, maintenance, and use that the landlord pays. These can include real estate taxes; property insurance; and common area maintenance items (CAMS), which include janitorial services, property management fees, sewer, water, trash collection, landscaping, parking lots, fire sprinklers, and any commonly shared area or service.
There are several types of net leases:
Single Net Lease (N Lease)
In this lease, the tenant pays base rent plus a pro-rata share of the building’s property tax (meaning a portion of the total bill based on the proportion of total building space leased by the tenant); the landlord covers all other building expenses. The tenant also pays utilities and janitorial services.
Double Net Lease (NN Lease)
The tenant is responsible for base rent plus a pro-rata share of property taxes and property insurance. The landlord covers expenses for structural repairs and common area maintenance. The tenant once again is responsible for their own janitorial and utility expenses.
Triple Net Lease (NNN Lease)
This is the most popular type of net lease for commercial freestanding buildings and retail space. It is known as the net net net lease, or NNN lease, where the tenant pays all or part of the three “nets”–property taxes, insurance, and CAMS–on top of a base monthly rent. Common area utilities and operating expenses are usually lumped in as well; for example, the cost for staffing a lobby attendant would be part of the NNN fees. Of course, tenants also pay the costs of their own occupancy, including janitorial services, utilities, and their own insurance and taxes.
Landlords typically estimate expenses and charge tenants a portion of these expenses based on their proportionate, or pro-rata share. A tenant who leases 1,000 square feet of a 10,000 square foot building would be expected to pay 10% of the building’s taxes, insurance, and CAMS, for example.
Triple net leases tend to be more landlord-friendly, and tenants should carefully review NNN fees and negotiate caps on the amounts they can be raised annually. An NNN lease can also fluctuate from month to month and year to year as operating expenses increase or decrease, making the company’s expense forecasting tricky and sometimes frustrating.
There are tenant benefits in the NNN leases, however. Transparency is an excellent perk, since tenants can see business operating expenses in relation to what they are charged. Cost savings in operating expenses are passed on to the tenant rather to the landlord. In addition, the monthly rent in a NNN lease is potentially lower than in a gross lease, as tenants have a higher level of responsibility for the building.
Absolute Triple Net Lease
This is a less common option that is more rigid and binding than the NNN lease, where tenants carry every imaginable real estate risk, for example, being responsible for construction expenses to rebuild after a catastrophe, or for continuing to pay rent even after the building has been condemned. Aptly called the “hell-or-high-water lease,” tenants have ultimate responsibility for the building no matter what.
Modified Gross Lease
As the gross lease is more tenant-friendly, and the net lease tends to be more landlord-friendly, there exists a compromise lease for the convenience of both parties. The modified gross lease (sometimes called the modified net lease) is similar to a gross lease in that the rent is requested in one lump sum, which can include any or all of the “nets”–property taxes, insurance, and CAMS. Utilities and janitorial services are typically excluded from the rent, and covered by the tenant. Tenants and landlords negotiate which “nets” are included in the base rental rate.
The modified gross lease is more popular with tenants, because its flexibility translates into an easier agreement between tenant and landlord. Unlike the NNN lease, if insurance, taxes or CAM charges increase, the lease rate would not change. Of course, if those expenses decrease, the cost savings is passed on to the landlord. As janitorial service and electricity are not covered, tenants can better control how much they spend compared to a gross lease.
Summary of NNN Lease, Modified gross, or Full Service Commercial Leases
When evaluating options for office space lease, it is important to compare the different lease options with an eye toward all expenses, and not just the base rental rates. NNN base rental rates tend to be much lower, with additional expenses added for the real monthly rate.
Market forces will tend to even out rental rates for comparable properties, regardless of type of lease. Tenants should expect to pay roughly the same amount with an NNN, modified gross, or full service lease for similar quality office spaces in the same area.
The most important rule of commercial leases is for tenants to read their leases carefully, and clarify exactly what expenses they have responsibility for. Circumstances under which additional charges will occur should be identified and caps negotiated.
Reposted from: Mike Cobb, Senior Vice President at Colliers International
The Corridor Business Journal has announced the ‘2017 Coolest Places to Work’. According to the site, this list “honors local companies that have created the most engaging and rewarding work environments.” Companies in Kirkwood’s region can nominate themselves, but are selected for the list based on a Worker Satisfaction Survey.
The winner of the 2017 Coolest Place to Work will be announced at the ‘One Cool Evening’ event on September 14. But, in the meantime here are the companies in the running (listed alphabetically):
Aerotek Branded Apparel
de Novo Marketing
F & M Savings Bank
Higher Learning Technologies
Iowa City Ambulatory Surgical Center
New Bohemian Innovation Collaborative (NewBoCo)
New York Life – Cedar Rapids Office
NewBo City Market
Oaknoll Retirement Residence
RSM US LLP
Strategic Financial Solutions
Travel Leaders / Destinations Unlimited
Van Meter Inc.
Veridian Credit Union
It’s unclear which will take the title, but these are all great companies to work for. And even though Townsquare Media didn’t make the list, we’re great too! See what we’re all about here at Townsquare Cedar Rapids in the video below. Happy job hunting!
This prediction for 2018 commercial real estate may effect the Iowa City / coralville / North Liberty and other Johnson County Areas reports Jeff Edberg, CCIM, SIOR at Lepic Kroeger, Realtors in Iowa City.
A consultant who predicts a 2018 end to the current commercial real estate cycle says the industry will see fewer office and retail property sales, but more multifamily sales as millennials eschew homeownership.
Christopher Lee, president and CEO of Los Angeles-based commercial real estate consultancy CEL & Associates, said the industry shift is a based in part on “generational” factors. Those factors include younger workers spending less time in the office, a homeownership rate 10 points below a mid-2000s peak, and manufacturing productivity increases fueled by automation and robots.
Change is coming even as the commercial real estate market flourishes in the current post-recession boom, Lee told about 200 people gathered Tuesday for a NAIOP Minnesota event in Golden Valley.
“This is a great time to be in real estate, but you’ve got to be on your game,” Lee said. “We’re in the seventh inning. Our cycle is about to end.”
The most immediate trend the industry needs to address is the end of the current cycle, Lee said. He predicts an industry downturn will start in 2018 and won’t reverse until the next up cycle starts in 2023. By that point, he said, industry giants including CBRE will have grown through consolidation.
The current generation of brokers will see their work dictated more by data and analytics than by “intuition” and “gut feel.” That is a change from the current cycle, which Lee said has focused on “capital, asset and entity rebalancing” after the Great Recession.
NAIOP brought Lee in for the program to give its members a wider market perspective, said Mark Reiling, a member of NAIOP Minnesota’s board of directors and president of SR Realty Trust.
“It’s a wake-up call to hear there’s danger in the comfort zone,” he said in an interview.
Lee’s presentation, “Megashifts & Real Estate Cycles,” gave outlooks for each sector of the commercial real estate market.
Retail: The viability of property in this sector will be heavily impacted by internet retail sales expected to grow to $532 billion by 2020. Still, the sales volume of Minneapolis-area retail properties increased 25 percent between 2015 and 2016, bucking a national trend of decreasing sales, Lee said.
Office: Lee said office sales are slowing as users require less space. Space requirements for workers that sat at 350 square feet for baby boomers may drop to less than 100 square feet for the generation of workers following millennials, Generation Z. Office sales in the Minneapolis market dropped 12 percent between 2015 and 2016, Lee said.
Industrial: Sales in the Minneapolis market were down 23 percent between 2015 and 2016, Lee said. The number of manufacturing workers will drop in the future, he said, because automation and robots will reduce the need for human workers.
Multifamily: This sector has done the best recently and is “the darling of investment capital,” Lee said. Sales of multifamily properties increased 65 percent between 2015 and 2016 in the Minneapolis market, he said. Multifamily will remain strong as national homeownership drops to about 59 percent in the coming years from a peak of 69.2 percent in the mid-2000s, Lee said.
Event attendees had a range of reactions to Lee’s presentation. Mark Kolsrud, a senior vice president with the Minnetonka office of Colliers International, said he doesn’t need convincing that the end of the current cycle is coming. Commercial properties are currently leasing and selling at a premium, but those prices will “soften” over the next two years, he said.
Property owners, Kolsrud said, should take advantage of the market while it’s strong.
“I think it’s clear that today is a good time to be selling your real estate,” he said after the event.
Wayne Kuykendall, a vice president with Bloomington-based Frauenshuh, said he can already see building owners competing for tenants that need less space.
“If the market doesn’t expand, i.e. if the body count doesn’t expand, then everyone is trying to get a piece of the pie that is smaller and smaller,” he said.
Offering amenities such as transit access, child care, and on-site food service can help some older buildings compete with newer properties, Kuykendall said.
Coming real estate cycles will see the industry operate in new ways, Lee said. The next cycle, which he predicts lasting until 2028, will be marked by consolidations that put most transactions in the hands of just a few brokerage firms. A cycle between 2033 and 2038 will see transactions heavily influenced by artificial intelligence, and leasing in the oceans and in outer space, he said.
The web is chock full of awesome research, survey results, and insights about retail. You could spend hours digging around looking for quotable bits of information.
To make it easy for you, I compiled 100 different statistics about retail, eCommerce, customer experience, and a whole bunch of related topics. Use this post as a singular place to find lots of data points to use for whatever purpose you need.
Current sales value of eCommerce retailers is $294 billion. 
Sales value of eCommerce retailers expected to reach $414 by 2018. 
In 2015, 200 million digital shoppers will spend an average of $1,700/person. 
Two thirds of eCommerce customers are “webrooming”. 
93% of retailers that seek a POS want inventory management capabilities built in. 
In 2014, online shoppers in the U.S. spent $1,611 versus $1,151 in Canada and $1,162 in Europe (translated from British Pounds on June 25). 
60% of adult Americans are happy to know they won’t have to shop in a crowded mall or store. 
71% of shoppers believe they will get a better deal online than in stores. 
Generation X spends $561 on average online, 15% more online than Generation Y who spends $489. 
Only 28% of U.S. small businesses are selling their products online. 
U.S. average conversion rate is 3.06% in Q4 2013. 
China is expected to generate $562.7 billion in eCommerce revenue. 
Despite having ultra-low incomes, Generation Z spends the highest percentage (9%) of their income online. 
40% of men and 33% of women aged 18-34 say they would ideally “buy everything online.” 
Cart Abandonment Statistics
$4 trillion in merchandise was abandoned in online shopping carts in 2014. 
65% of retailers have a shopping cart abandonment rate that is higher than 50% 
66% of online consumers abandon their cart because of problems with the payment process. 
23% of shoppers will abandon their shopping cart if they are forced to register an account. 
54% of shoppers will purchase products left in shopping carts, if those products are offered at a lower price. 
28% of shoppers will abandon their shopping cart if presented with unexpected shipping costs. 
Statistics About Online Marketplaces
Four times as many sellers reach 1 million sales on Amazon versus eBay. 
63% of sellers only sell on marketplaces. 
29% of sellers aren’t satisfied with their channel management software. 
72% of sellers don’t use a marketplace management tool. 
Customer Experience Statistics
By 2016, 89% of companies plan to compete on the basis of customer experience. 
63% of consumers feel a coupon is the most valuable form of mobile marketing. 
89% of consumers began doing business with a competitor following a poor customer experience. 
U.S. brands are losing approximately $41 billion each year due to poor customer service. 
65% of consumers have cut ties with a brand over a single poor customer service experience. 
63% of online consumers said they were more likely to return to a website that offers live chat. 
40% of global consumers said they prefer self-service over human contact for their future interactions with companies. 
64% of people think that customer experience is more important than price in their choice of a brand. 
Customer Loyalty Statistics
The probability of selling to a new customer is between 5 and 20%. The probability of selling to an existing customer is between 60 and 70%. 
It costs 6 times more to attract a new customer than to retain an existing one. 
Loyal customers are worth up to 10 times as much as their first purchase. 
62% of consumers feel that the brands that they’re most loyal to have not done enough to reward them. 
If you resolve a complaint in your customer’s favor, he or she will do business with you again 70% of the time. 
75% of shoppers belong to up to 10 loyalty programs. 
62% of Millennials feel that online content drives brand loyalty. 
Brick & Mortar Retail Data
Current sales value of U.S. brick & mortar retailers is $3.9 trillion. 
94% of total retail sales are still generated in brick & mortar stores. 
Half of brick & mortar retailers are “showrooming”. 
72% of young shoppers research online before purchasing in a store. 
Two thirds of in-store shoppers will check prices on their phone before making a purchase. 
In the U.S., 3.8 million retail establishments support 42 million jobs. 
98.6% of retail businesses employ fewer than 50 people. 
Less than 25% of major retailers track store traffic. 
Statistics About Omnichannel
Three out of four customers are more likely to visit your store if your online info is useful. 
Digital interactions influence 36 cents of every dollar spent in a brick & mortar store. 
22% spend more at the store if digitally influenced. 
55% of online shoppers would prefer to buy from a merchant with a physical store presence over an online-only retailer. 
Two thirds of customers have made a purchase in the last 6 months that involved multiple channels. 
84% believe that retailers should be doing more to integrate their online and offline channels. 
Only 8% of companies said they currently provide a ‘very integrated’ customer experience. 
Mobile Commerce Statistics
57% will not recommend a retailer with a poorly designed mobile site. 
66% of time spent with online retailers is on mobile. 
174 million U.S. consumers (72%) now own smartphones and 93 million (38%) now own tablets. 
53% of consumers are willing to share their current location to receive more relevant advertising. 
57% of consumers are more likely to engage with location-based advertising. 
70% of online transactions occur on a mobile device. 
43% of consumers will visit a competitor’s site next after a negative mobile shopping experience. 
More than 80% of U.S. shoppers want the ability to check for nearby product availability. 
94% of smartphone users look for local information on their device. 90% take action after the search. 
Social Commerce Statistics
25% of U.S. consumers will consult social media before buying gift. 
40% of 18- to 34-year-olds are likely to use social networks for gift ideas. 
62% of consumers share local deals with friends. 
78% of small businesses attract new customers and engage current ones using social media. 
41% of independent retailers rate social media as a “very effective” marketing tactic. 
71% of consumers who experience positive social media care are likely to recommend that brand to others. 
85% of orders from social media sites come from Facebook. 
Orders for referrals from Instagram average $10 more than Facebook ($65 versus $55, respectively). 
Social commerce is predicted to be 5% of online retail revenue in 2015. 
33% of consumers have reacted to a promotion on a brand’s social media page. 
Statistics About Reviews & Recommendations
Above “the fold” product recommendations are 1.7 times more effective than those below. 
Shoppers spend 50% more after talking with a brand ambassador. 
55% of shoppers say that online reviews influence their buying decision. 
36% of consumers spend 30+ minutes comparison shopping before making a decision on purchasing a commodity product; 65% spend 16+ minutes doing so. 
73% of consumers prefer to do business with brands that personalize shopping experiences. 
Statistics About Digital Marketing & SEO
54% would consider ending their relationship with a retailer if they are not given tailor-made, relevant content and offers. 
42% of independent retailers rate email marketing as a “very effective” marketing tactic. 
Small retailers’ average marketing budget is 4-5% of gross revenue. 
Conversion rate is 5.5 times higher for customers who clicked on a personalized product recommendation. 
44% of online shoppers begin by using a search engine. 
13% of consumers said that a blog post had inspired a purchase. 
91% of eCommerce retailers saw a lift in their SEO rank thanks to social referrals. 
Statistics About Shipping, Fulfillment & Returns
64% of retail shoppers think delivery speed is important when purchasing online. 
44% of shoppers are more likely to purchase online if they can pick up in the store. 
62% of shoppers are more likely to purchase online if they can return the item in the store. 
83% of shoppers would shop online more, knowing they could have free shipping. 
27% would purchase an item that costs more than $1,000 if offered free returns. Only 10% would, otherwise. 
47% of all online orders include free shipping. 
Same-day delivery revenue is expected to increase to more than $620 million in 2015. 
Holiday Shopping Statistics
Almost 20% of U.S. retail sales come during the Christmas shopping season. 
The average U.S. shopper expects to spend $718 on holiday gifts. 
Miscellaneous Retail Statistics
Approx. 2/3 of the U.S. GDP comes from retail consumption. 
27% of customers make an impulse purchase at the register. 
Next to the register merchandise is only 1% of total retail space, but can account for 7% of revenue 
Consumers spend 12-18% more when using a credit card versus cash. 
One in four mobile shoppers in the U.S. is over the age of 55. 
87% of global consumers factor in Corporate Social Responsibility into their purchase decisions. 
Sources & Citation Info
To be completely clear, none of the statistics in this blog post are based on nChannel research. This post is simply a curated collection of statistics from around the web. We compiled this list to show a) how much research attention gets put on this topic and b) to give you a convenient place to find data, when you need it.
(Maybe you can use this when you need ammo for convincing your boss you need a multichannel management platform.)
We welcome and encourage you to link to this post, but for any formal or academic purposes, we ask that you cite the original source of the data.
The links below are where we found the statistics. We encourage you to follow through to these sites for more many more statistics and valuable context for many of the ones we’ve shared.
Retail’s Main Event: Brick & Mortar vs. Online, RetailNext
Retail’s Impact, National Retail Federation
13 Alarming Stats About Retail in Digital, Digiday
15 Holiday Retail Stats That Every Marketer Needs to See, AdWeek
2014 US Retail Industry Overview, About.com
Hold the Phone: 66% of Time Spent With e-Retail is on Mobile, Internet Retailer
How Proximity Marketing Is Driving Retail Sales, Forbes
15 Retailer Resources, Stats and Tactics, SnapRetail
Speed of Delivery Is Important for Retail Shoppers, Accenture
Trends in Retail Show US Consumers Plan To Spend More on Holiday Shopping, Accenture
12 Illuminating eCommerce Stats from January-March 2015, eConsultancy
5 Ecommerce Stats That Will Make You Change Your Entire Marketing Approach, Kiss Metrics
40 Amazing Online Shopping And Ecommerce Statistics, Selz
Five 2015 Ecommerce Stats & Trends You Should Know About, PixelMEDIA
5 Stats Every Ecommerce Business Should Know, Gigya
7 Statistics About E-Commerce Shoppers That Reveal Why Many Consumer Stereotypes Don’t Apply Online, Business Insider
13 Startling Customer Service Statistics, Parature
10 Useful Customer Experience Statistics For Your 2015 Strategy, Neosperience
38 Powerful Customer Experience Stats for 2015, Christine James of HissingKitty
10 Statistics from the Online Marketplace Seller Survey, Web Retailer
12 Retail Trends and Predictions for 2015, Vend HQ
U.S. Social Commerce – Statistics & Trend, AdWeek
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