Retail Conversions a Great Option for Logistics

The question as to what to do with the skeletons of the once-great American shopping scene has been on the table for years now. And, as much discussion circulates throughout the industry, little progress has been made in finding new functions for the many dead and dying retail spaces all around the country.

Over the years, commercial real estate has speculated solutions for these spaces, but none of the proposed answers has stuck. Malls to mixed-use, offices, apartments, and even schools have been potential candidates for the notoriously pending retail retrofitting projects.

But, could the solution that really works finally be upon us?

According to Prologis, the answer is yes and it’s in the form of logistics centers. Their recent report dives into why logistics facilities are the ideal replacement for failing retail assets and why now is the time for this adaptation to actually roll out. Here’s a breakdown of the findings:

COVID’s Role in Stimulating Growth

While these past few months were certainly a pain, it’s impossible to disregard the amazing amount of growth that was precipitated by the pandemic.

According to Prologis, COVID-19 has actualized more than 5 years’ worth of retail evolution in less than 5 months. This growth has been most intense in the realms of digital retail and online shopping. The report states that in 2020, online sales have accelerated to hover around annual gains of $340B. Looking ahead, Prologis predicts the percentage of total U.S. retail goods sold online will reach 25% by 2024.

The Solution: Recycling Retail

As a result of these massive gains, logistics real estate has seen a major burst in demand – and there’s a tangible need for CRE to embrace logistics as a sizable tenant.

In efforts to find viable solutions to the new challenges introduced by retail’s pandemic-inspired reformation, many brands have been considering transforming their low-performing stores into high-quality logistics centers. This strategy leverages retail’s massive physical footprint in order to solve one of its own needs.

Not All Conversions Look the Same

According to the report, the process of converting retail to logistic centers will vary depending on the asset’s format.

For example, freestanding retail is the most promising source of logistics conversions as they’re easy to reformat and plenty in number. On the other hand, the large enclosed mall asset is cited as the most complex, time-consuming, and intensive conversion project. As the open-air shopping center remains brick-and-mortar’s best hope post-pandemic, it’s not likely that these high-performance assets will be turned over to logistics.

If the trend takes hold, paying mind to the various asset types will help CRE strategize conversion potentials.

Blending the Online and the Physical

The value in converting lacking retail assets into logistic centers lies in its inherent support back into the retail scheme. Utilizing unsatisfactory store locations as logistic centers to facilitate e-commerce expansion takes the concept of blending online and physical retail to an entirely new level. Stores to logistics is a symbiotic solution for the collection of retail assets waiting to be revamped

Increasing Apartment NOI Now and in the Future

Every business experiences ups and downs. The regular rhythms of an industry are simply a part of the game.

Whether we like it or not, it seems like everyone becomes accustomed to the change in traffic associated with the year’s slow seasons. Not only is it a dependable gauge to work with, but it also represents a logical downturn of business. While it’s certain that no CRE professional is happy about the seasonal drop in demand, it’s not a sink-or-swim situation.

But, what happens when this schedule is thrown out of whack?

As a result of the pandemic, net operating income (NOI) has reached a considerable low for the apartment sector. This sluggish period for multifamily was largely unexpected as it largely deviated from the apartment sector’s seasonal trajectory.

In a period when the ban on evictions plummeted rent collections to astonishing lows at the same time that CRE’s operational costs increased, NOI took a serious hit – and even worse, it all happened in the blink of an eye.

Today’s case is an extreme example of a slow-growing NOI market, and by learning strategies to combat this decline, the multifamily sector can boost their resilience and find victory amid difficulties.

Here are 5 strategies to increase NOI in multifamily properties during moments of slow growth:

Get Serious About Filling Occupancies

Regardless of the market outlook, gaps in occupancy are preventing multifamily assets from generating their maximum returns. In times of slow growth, multifamily operators should get serious about their building’s vacancy rates as a first-response tactic.

Invest in Leasing

Once you’ve zoomed in on occupancy, it’s time to invest in leasing and marketing. Funneling leads towards your active apartment listings is key when NOI starts to dip, and a great way to do this is by personalizing the prospect experience.

Engaging at a one-on-one level provides leasing agent’s the chance to find the perfect vacancy in the building that fulfills the tenant requirements by encouraging them to tour multiple units.

Don’t Be Shy to Bolster Rent

While it’s not always wise to dramatically adjust rent margins, don’t be shy to make necessary changes. When the apartment community is seeing a significant dip in NOI, there’s no reason not to increase returns wherever possible.

Since rent is the primary factor driving NOI for multifamily, that’s the first place to look when considering profit-boosting strategies.

Screen Tenants Wisely

When so much of your asset’s success relies on timely and full rent collections, tenant screening is more important during periods of lagging NOI than usual. Reports indicate that tenant fraud has increased during the pandemic, making it even more important to maintain a diligent and astute tenant screening process that leverages technology.

Cut Down Costs

Being economic isn’t impossible – it merely requires a close look at any areas where your apartment complex may be unnecessarily cutting into profits. Double-check the books to see where you’re wasting, overspending, or employing detractive operations.

Consider these 5 strategies to assist in supporting apartment NOI both now and in the future.

Trending: Outdoor Dining Space as the New Restaurant Must-Have

2020’s pandemic-shaped outlook posed challenges to all areas of business. From office to industrial, no one escaped this year’s disruptors unscathed.

One of the worst-hit commercial sectors has undoubtedly been the foodservice industry. The restaurant scene was utterly surrounded by opposition to business success. Market closures, changing consumer sentiments, and fears of highly contagious diseases ravaged the restaurant industry all across the country.

However, restaurants are resilient. Despite the mounting challenges, this business was able to stay above water and keep pushing ahead. It’s true that not everyone made it – but many did, and it was thanks to innovation and savvy pioneering of the new normals.

The Decline of Indoor Dining

One such COVID-minded adaptation to the restaurant model was a major decline in indoor dining.

Enclosed spaces with a constant influx of guests stood as a noticeable red flag for restaurant operators striving to keep their guests safe without disrupting business. High-traffic means high-risk, and the lack of circulation paired with close proximity – both of which are inherent to the indoor dining experience – are not being viewed in the positive light they once were.

In the past, guests flocked into indoor dining rooms without a thought. After all, rubbing elbows with other restaurant patrons was viewed as a natural aspect of being out. But, as we examine these habits in light of the recent pandemic, this behavior is reckless and even irresponsible.

For both restaurant operators and guests, indoor dining is being de-emphasized at large.

Putting Emphasis on Socially-Distant Eating

When indoor dining began falling out of favor, the restaurant scene shifted into a new set-up to replace the lost amenity for their guests. The restaurant space began heavily relying on social-distancing service, including outdoor seating and a reconsideration of space.

Inevitably, this reinvention of the most popular dining model will require renovations to CRE’s physical spaces. Re-designs, new acquisitions, and layout changes are pending for many restaurants across the country.

In terms of restaurant chains, Burger King is setting the example by spearheading their restaurants with COVID-conscious designs, including touchless service and an absence of indoor dining.

McDonald’s, KFC, California Pizza Kitchen, and TGI Fridays also have similar plans in the works – further demonstrating the momentum of this new trend.

Space and Outdoor as the Winning Combo for Eateries

If the majority of restaurants had a seamless network of open-air dining areas and touchless access, the foodservice industry may not have been impacted so heavily by the pandemic. But, since these now-pivotal safeguards were not in place, too many eateries struggled under the pressure.

As we move forward, restaurants will be thinking ahead and preparing for the worst by integrating valuable strategies into their normal procedures. A new evaluation of space and outdoor eating options will set up restaurants for success – no matter what lies ahead.

In the past, the generic image of a restaurant may have been a small cozy indoor scene… but that’s all expected to change as the restaurant business applies the lessons learned during 2020 into their baseline operations. The new restaurant is looking like it will revolve around open-air integration and strategic spacing.

Delivery Drones Hitting the Sky: What CRE Should Consider

As new technologies become commonplace, the existing infrastructure is forced to adapt. Efforts to blend well with newly infused technologies oftentimes require the commercial real estate industry to make some updated considerations.

This is the scenario that CRE now finds itself in with drones. Drones aren’t necessarily a new invention, but it’s continually hitting new application milestones as this flying technology makes headway into the modern industry.

Let’s take a closer look at what’s happening with drones, and what CRE should start thinking about:

Drones in CRE

Commercial real estate has long been leveraging drone technology, so the business is no stranger to collaborating with this tool.

CRE uses drones for various purposes related to upkeep and marketing. Drones can access otherwise hard to reach areas of a building and feedback crystal clear audio and video signals to ground controls, assisting operators with maintenance and upkeep rounds. Capturing gorgeous listing photos and videos from a birdseye view is a favorite CRE application of drone tech. Drones can also be used for video surveillance of sprawling properties, saving the time and effort of an on-foot sweep.

It’s not just the commercial side of things that love drones – the residential industry does, too. Residential real estate also deploys drones to generate gorgeous imagery for listing and marketing. Across the board, drones are used in many different ways to streamline CRE needs.

2020’s Uptick in Industrial Drones

Today, a new application of drones is making headway within the commercial scene – and it’s shaking up the industrial sector.

Delivery drones are becoming increasingly popular as big-name brands, such as Walmart and Amazon, are launching these revolutionary sky-high delivery methods. Delivery drones are hitting the atmosphere and solving many pain points related to ground shipping and order fulfillment.

Will Drones Become the New Delivery Standard?

The biggest question on everyone’s mind right now is whether or not this airborne delivery method will stick around. And, if it does, what does this mean for the existing land-based supply chain network?

First of all, commercial buildings would need to re-evaluate their mail facilities. It’s doubtful that drones will be using the keypad at the front door and stepping into lobbies to drop off packages with team members. The traditional human-based system will need some readjustments to be able to facilitate this new digital model.

Establishing proper package delivery acceptance and holding areas suitable for drone access should be somewhere on CRE’s radar – especially for multifamily, office, and retail. For many CRE assets, this may even require a redesign of physical spaces. Hiring additional on-site team members to manage this new task should also be something to think about.

The timeline for drone delivery to finally catch on is still too hazy to make distinct predictions. Right now, it’s just the major players in retail who are adopting airborne delivery methods. But, once the trend is introduced into the market, it’s almost guaranteed to take off and trickle into commonplace protocols.

If this tech is rolling out now, expect a widespread permeation within the coming years.