Michael Schnabel | Capstak Co-CEO
Here’s my weekly wrap up of the five most interesting commercial real estate articles.
Amazon is now valued at $356 billion, which is enough to make any traditional retailer worried. Well, Nike and Coach are pushing back by “creating unique and captivating in-store experience.” These stores are focusing less on the product, and more on the person. In the article Dr. Lisa Haddock, marketing lecturer at San Diego State University’s Fowler School of Business, illustrates this point, saying, “You don’t have to use a personal shopper, but just having a person there—interaction—creates value and everything in marketing today is creating value.”
All eyes have been on the Fed, as speculation about rising interest rates becomes reality. While the commercial real estate has their eyes on the Fed, it appears they too have their eyes on commercial real estate. On Tuesday, commercial real estate featured in the Fed’s twice-yearly report delivered to Congress, and it was the fifth time in a row that it was mentioned in these twice-yearly reports.Currently the sector is highly leveraged, and if the prices fall, the collateral value gets crushed. Couple that with the continued decline of cap rates in primary markets, and it leaves the future of the industry up in the air.
Most people can’t wait to think of a future where they don’t have to own a car. But, the biggest impacts of autonomous vehicles may be seen in the commercial trucking industry – at least in the short-term. Currently, $1 out of every $10 of the US gross domestic product is related to transportation activity, and the American Trucking Association says there is a shortage of 48,000 drivers. Will connected trucks be able to fill this gap, and what is the impact going to be for the commercial real estate industry?
On Wednesday, the Urban Land Institute announced a partnership between ULI’s Greenprint Center for Building Performance and Measurabl. This partnership will improve sustainability and building performance tracking, helping to reduce commercial real estate’s environmental impact – Buildings are responsible for 40 percent of energy consumption, 25 percent of water consumption, and 33 percent of total global greenhouse gas emissions. This partnership will include more than 20,000 commercial buildings covering 3.7 billion square feet around the globe – over $1 trillion in assets.
There is a lot of concern about what will happen to renewable energy under the new administration, but the sunset provisions for the Investment Tax Credits (ITC) and/or Production Tax Credits (PTC) last until 2021 and 2019 respectively. After 2021, the residential credit will drop to zero and the commercial and utility credit will drop to a permanent 10%. After that, it depends on the tax reform agreed upon by the white house and congress. If investors’ demand for renewal tax credits drops after the tax reforms, “a shortage of tax equity could raise the cost of capital for developers who would be forced to raise their PPA prices by as much as 70% to 80% for wind projects and 35% to 40% for solar projects.”