Capital markets news bite: Daily fund indices showing record strength

The National Council of Real Estate Investment Fiduciaries’ (NCREIF) latest report on the performance of daily-priced fund indices (NFI‐DP) indicates remarkable strength in the sphere. The report covers the September 2021 period – the latest at the time of going to print – and the data shows the asset class had its highest monthly returns in a decade.

This would put year-to-date (nine months) returns for this group of daily-priced funds at 13.08%

Performance and make-up

The NFI‐DP at the end of Sept 21 was at 2.36%, up from 1.68% in the preceding month. According to the NCREIF, the index represents “the performance of a group of daily‐priced open‐end funds that invest predominantly in private real estate, generally ranging from 75% to 95% allocation”. The balance of allocation for these funds sits in liquid investments (including cash and securities). This makes for a “small universe of qualifying funds” and returns that are equal-weighted and gross of brokerage fees, as well as advisory and incentive fees.

Industry relevance

NCREIF’s data is used by various media and industry analysts as one element (of many) in the determination of market health. They put together various data products, of which this is one, by collecting property and fund level information drawn directly from members – usually on a quarterly basis. The NFI‐DP however is drawn monthly. They have data from over 35 000 properties and 150 funds on their database, which dates back to 1977.

National property index

The decade-high record for daily-priced fund indices (NFI‐DP) noted above is not the only record-level they have noted this year. The last results from the quarterly NCREIF Property Index (NPI) (published in August 2021, representing Q2 2021) show the highest return in the past ten years, sitting at 3.59% up from 1.72% in the previous quarter. This is the top return result since the second quarter of 2011 (3.94%). NCREIF writes, these “are unleveraged returns for what is primarily ‘core’ real estate held by institutional investors throughout the US”.

SOCIAL: What industry facts and figures do you use to inform your understanding of the state of the market?

Emerging tech and CRE: AI in CRE

AI in CRE: Beyond smart, and towards intelligence

Digital transformation as a concept incorporates advances in technology and how these are integrating into and changing all aspects of our work and personal lives. With commercial real estate (CRE), digital is truly transformational and CRE professionals and companies are grappling with the myriad ways that it is upending established processes.

This is the thinking behind a series of themed blogs, looking at the emerging technologies that have a bearing property specifically – right from construction all the way to property management. This is the second blog in the series and will delve into artificial intelligence (AI) in the context of CRE.

Understanding “intelligence”

AI is essentially machines and computer systems simulating “thinking” – not just recording and storing information, but analyzing that info and responding to it. This is built on a base of machine learning too, in which machines are “taught” what to search for and what kind of responses are required.

A practical example is a machine that is “taught” to recognize an object using a (large) database of photos. Another common type is a chatbot, a little piece of software – that has “learned” to recognize what is being asked, and has a system for deciding what info to provide in response. Siri is AI-powered too. There are plenty of other examples and nuances, but those are typical examples that most people have encountered.

Smart or intelligent?

For context, in the first blog in this series, we introduced the idea of “smart things” or the Internet of Things (IoT). A boiler that can be controlled remotely is “smart”. If that system dynamically controls itself, however, and produces insights into energy consumption correlated with use and weather patterns, then it’s crossed into AI territory.

According to Analytics Insight, AI has even been used to independently transact. Specifically, a “soon to market” algorithm that analyzed “large sums of data that included potential economic value, KPIs, property characteristics, and risk factors” selected and completed a property transaction, purchasing two buildings for $26 million.


Customer relationship management (CRM) and sales

The chatbot example mentioned above is one way in which AI can be used to manage and nurture your relationships with existing and potential clients. With both residential and commercial letting, a chatbot is a great early engagement tool as it can answer simple questions and even make appointments for viewings or meetings.

Not all chatbots are created equally, some simply are more capable than others, so be sure you understand what you’re buying before signing on the dotted line for implementation.

In the same vein, not all CRM packages have AI built into them, but as companies glean and store more customer info through their engagement with people, AI tools in CRM are expected to be more affordable and more mainstream. This includes things like lead qualification, credit memo creation, and sentiment analysis, where the system isn’t just capturing information but transforming it into useful and actionable insights.

Crunching numbers

It is precisely this – insight – where we see AI really shine, and why so many companies are investing in forms of AI on-premises and via the cloud. For example, AI tools can turn mounds of data into performance analytics for your properties. Combined with market conditions data, this can go from deep understanding to far foresight, through predictive analytics.

Furthermore, it is this kind of insight that many believe is needed, firstly to bolster post-pandemic recovery, but also to take CRE to the next level as a sector.


NAI Pleasant Valley Announces New Agent- Lorin Schultz CCIM

Lorin Schultz, CCIM Joins NAI Pleasant Valley as Vice President

AKRON, OHIO – October 22, 2021,  NAI Pleasant Valley, a leading global commercial real estate brokerage firm, announced today that Lorin Schultz, CCIM joined the firm as Vice President. “We are excited to welcome Lorin back to the NAI Global family,” said President Alec Pacella.

Lorin has significant experience in commercial real estate, particularly in the office market around Akron. She joins NAI Pleasant Valley after spending several years at Colliers and NAI Cummins, where she secured purchases of substantial properties, including Merriman Valley Parkwood Plazas, and procurement of leases for companies such as Tegron and J.M. Smucker Company. Previous to joining the real estate profession, Lorin was a broadcast journalist for NBC stations in Columbus and Youngstown, Ohio.

Lorin holds a Bachelor of Arts Degree in Mass Media Communications from The University of Akron.  She became a licensed realtor in 2003 and later earned CCIM designation in 2009. Lorin currently belongs to the National Association of Realtors and Leadership Akron NEXT 10.

About NAI Pleasant Valley

NAI Pleasant Valley is the Northern Ohio office of NAI Global, the leading global commercial real estate brokerage firm. NAI Global offices are leaders in their local markets and work in unison to provide clients with exceptional solutions to their commercial real estate needs, locally and globally.

To learn more, visit www.naipvc.com

Robotics in CRE: How automation is changing the real estate value proposition

From smart buildings and smart cities to AI and machine learning, there’s little room for doubt that the world is rapidly moving towards a fully tech-enabled society. Forward-looking commercial real estate (CRE) professionals are embracing these new capabilities, and revolutionizing the way we add value to commercial real estate operations.

In the previous article, we discussed the impact of IoT (the Internet of Things) and Artificial Intelligence (AI) in CRE. In part three of this ongoing series, we examine the role robotics plays in moving real estate into the future.

Hard-working hardware

One of the areas where the use of robotics in CRE has really taken off is drone-assisted operations. Drone technology is being used to target some key challenges faced in the industry. 

Processes that used to be far more complicated and expensive, like aerially mapping a property, can now be accomplished in a fraction of the time, and at a lesser expense. Part of the benefit is that drones allow developers and marketers to tell a story, as the development unfolds week by week in stunning images from on-high. Large construction sites can also be more easily managed when material stocks and inventory are being monitored with drones.

Another use of the tech is cutting down the time spent on surveying properties for maintenance and compliance purposes. Aerial surveys can easily reveal damage or deterioration and allow owners to address the problem sooner. 

Drones equipped with specialized imaging cameras can also detect major issues like gas leaks or help pinpoint areas of heatloss for energy optimization. Given the drive towards cleaner, more energy-efficient buildings, this is a technology that is likely to become a cornerstone of future CRE operations.

Virtual presence

Robots have also gained some traction working in building interiors. Machine technology can be used to map interior spaces and even, to present them to prospective tenants. 

San Francisco-based operator Zenplace uses small telepresence robots to show properties, complete with a screen for the realtor to interact with clients – all from the convenience of the office. This means a more convenient process for prospective tenants, who can gain access to a property using an app on their phone while cutting down travel time for the agent.

A bot by any other name

Another area where robotics is taking CRE by storm is software robots aka “bots”. Robotic Process Automation (RPA) is the use of bots to automate mundane and repetitive tasks that would otherwise need to be done by human workers. This means time-intensive work like document management or invoice processing can be outsourced, leaving brokers free to focus on larger strategic goals and more creative problem-solving. 

Using RPA, brokerages can also extract large amounts of untapped data from existing databases. This is likely to be an increasingly useful application in years to come, as digitization in CRE increases and large volumes of new data start pouring in from a slew of smart buildings being added to existing portfolios. 

What the bots can’t currently do is analyze that data – the creative interpretation that task requires is best left to humans.

Reimagining Logistics Assets

On the back of a burgeoning e-commerce industry, robotics is also adding value through streamlined logistics processes. The landscape of logistics assets is changing, with a movement towards micro-distribution centers and multi-purpose retail spaces opening up new opportunities. 

In a research report from the Commercial Real Estate Development Association (NAIOP) these new trends, and the robotics enabling them, are explored in detail. Some key findings are that previously underutilized spaces, including areas in malls or old parking garages, are finding new purposes as distribution sites that help solve the Last Mile problem of logistics. 

Given their location in urban and suburban centers, these new types of logistic assets are blurring the lines between logistics and retail. Landlords and owners can now install logistics mini-sites in existing buildings, largely thanks to automated storage and retrieval systems that shrink the operational footprint. It’s a new way of imagining space and how assets can best be put to work. 

An additional interesting trend is that larger logistics assets are now often being established further away from city centers. While this may sound counter-intuitive, with greater automation the need for on-site staff decreases, and companies can take advantage of cheaper land and operations costs in more remote areas. The NAIOP report goes on to quote ABI Research’s projection that, by 2025, some 4 million commercial robots will be hard at work in over 50 000 warehouses.

The human face of robotics

By now, you could be forgiven for thinking that this sounds like the start of a robot revolution that will put a lot of people out of work in the long run. The truth is, we are far from independently functioning robotics and AI. 

Advances in these technologies allow people to do their jobs faster and more easily, taking a lot of the monotonous aspects out. As rapid-fire data-handling, logistics, and site management become the norm, there will also be an even greater need for people to oversee those processes. And the potential robotics offer for improving CRE operations means more ways to add value for customers and CRE professionals alike.

What’s happening in … Panama City?

Nestled on Panama’s Pacific coast, Panama City is a bustling commercial hub that houses the regional headquarters of multinational giants like Caterpillar, Dell, BMW, and Philips. The city combines an eclectic mix of towering high rises, commerce districts and old, colonial areas like the charming Casco Viejo. 

An international trade hub

Progressive tax laws and the ease of setting up a business in the country have contributed to robust growth. The country is a top economic performer in Latin America and holds a unique position of global trade importance due to the presence of the recently-expanded Panama Canal and the world’s second-largest free trade zone. 

Panama has therefore established itself as a trade and logistics hub, with a lot of the resultant economic activity concentrated in, or near, Panama City. Thanks to this focus on a services-based economy, Panama also attracts large amounts of foreign direct investment (FDI), leading the Central American region in 2019 with $4.835 billion claimed.

The flip-side of having an economy rooted in world trade and foreign investment is that the pandemic hit Panama particularly hard. The country recorded a 17.9% GDP contraction in 2020.

CRE crunch through the pandemic

Due to the hard lockdown measures implemented from March 2020, real estate sales in Panama City came to a halt. As in many other cities, industries like tourism also took a hefty hit, and the retail sector faced challenges as the hard lockdown extended into June.

For Panama City’s office market, the pandemic came at a particularly inopportune moment, hot on the heels of an oversupply phase in 2019. The boom in office construction was the result of a period of sustained growth during 2013-2015, which saw a large amount of development undertaken in subsequent years. 

At the end of 2020, the office property sector recorded a vacancy rate of 24.2%, with increasing competition between rentals. This includes Class A and A+ offices, which showed a 25.7% to 26.5% increase in vacancies quarter-on-quarter by Q4 2020.

Similarly, in the first quarter of 2021, general property prices in the city have dropped, following a 10-15% drop-off in rents in 2020.

A strong recovery expected

Despite the hard impact of the pandemic, the overall investment sentiment in 2021 is positive. Early in the year, Panama gained a vote of confidence with the extension of a $2.7 billion precautionary credit line by the International Monetary Fund (IMF). 

The city has also resumed key development projects, like a twin cruise ship pier that will open up new tourism opportunities to bolster the local economy. And as far back as May 2020, Forbes listed Panama City as a strong contender for an investment with a short-term horizon, even in the midst of the pandemic downturn.

Charting a course

This strength is reflected in the extensive measures being taken by the Panamian government to encourage investment and build confidence.

According to President Laurentino Cortizo: “We have an economic recovery plan that has five pillars. We cannot talk about economic recovery if we do not have a good vaccination strategy […] that’s the base of that. We do have programs for small, medium-sized enterprises. We have infrastructure projects that generate quite a lot of employment. We have also […] some resources for our financial sector, and the bigger economic activities, for example construction. And the last one […] is related to the attraction of foreign direct investment.”

The reopening of international travel in October 2020 also saw an influx of FDI, as buyers jumped at the lower prices on offer in the Panama marketplace. Property tax exemptions and the opportunity to obtain resident status through real estate investment are additional contributing factors to the country, and Panama City’s, appeal.

Click here for the details of NAI Global’s regional partner in Panama.