Each Wednesday, The Wrap presents a compilation of recent noteworthy
commercial real estate stories from a variety of publications.
Below are five stories that caught our eyes in recent days.
• “Trouble
in the Heartland? Rapid Rise in Farmland Values Poses Risk for Investors and Ag
Lenders Alike” by Mark Heschmeyer of CoStar.
Farmland has seen a major increase in investor interest over
the past two years as buyers look for higher returns, according to Heschmeyer.
Stocks are not getting the double-digit returns they did in
the 1990s and 2000s, making a 7 to 9 percent returns on farmland investments
more attractive to today’s investors, Jamie Shen of Callan’s Real Assets and
Alternative Investments told Heschmeyer.
One factor in farmland’s attractiveness is supply and
demand, according to Callan’s research. As the global population continues to
rise, it’s likely that demand for land and agricultural goods will also increase.
• “REITs
Relying on Technology, Sustainability to Enhance Returns” by Carisa Chappel
of REIT.com.
The economic slowdown has hindered traditional growth for
REITs, so now they are looking toward technology and sustainability to grow
their businesses and save money, according to a new report by Deloitte.
REITs are increasingly embracing technology like cloud
computing, mobile applications and social media to reach new customers. They
are also turning to more sustainable practices, which can improve the bottom
line and stock performances, according to Bob O’Brien of Deloitte. REITs with
well-executed green strategies are outperforming other REITs, he noted.
Economic uncertainty, lack of job growth, the U.S. deficit
and the European debt situation all have stymied the U.S. real estate industry,
O’Brien told Chappel.
• “Online
Stores Are Moving into the Real World” by Jessi Hempel of CNN Money.
For a while now, traditional brick-and-mortar retailers have
fought for strong online presences to compete with online retailers like
Amazon. Now, the trend is reversing, as digital brands attempt to open physical
locations as well, Hempel reports.
Examples include BaubleBar, a popular online jewelry seller,
which is opening a showroom at its corporate headquarters in Manhattan. The
firm plans to open boutiques nationwide that cater to an area’s specific
tastes.
There’s also glasses-maker Warby Parker, which has followed
suit with showrooms in nine cities and has a retrofitted school bus that acts
as an on-the-go store by traveling the country.
It’s even rumored that Amazon may be considering a physical
store as well, Hempel notes.
• “Store-Within-a-Store
Becomes Expansion Model Dujour” by Elaine Misonzhnik of Retail Traffic.
Retailers are increasingly looking at opening locations
within larger stores as a means to cut construction costs and increase flexibility,
according to Misonzhnik.
Finish Line plans to open 450 stores inside Macy’s locations,
and a number of boutiques are scheduled to open soon within JC Penney stores,
Misonzhnik reports.
There is currently no standard for calculating rent for stores
within stores, Misonzhnik writes, and in some cases the rental rate could be
higher than for equivalent standalone stores. However, a retailer who opens a
store-within-a-store has instant access to foot traffic and often has a lease
that’s shorter than the standard 10-year term, making it worth the premium in
rent, Lew Kornberg of Jones Lang LaSalle told Misonzhnik.
The department stores that are willing to let a store open
within theirs are also benefiting because doing so allows them to expand
without all of the traditional added costs and risks, according to Matt Winn of
Cushman & Wakefield.
• “Here’s
a Way to Cut Business Taxes: Tech Firms Become Real Estate Trusts” by Anton
Troianovski of The Wall Street Journal.
Some technology companies like American Tower Corp. and
Equinix Inc. are looking to convert them to real estate investment trusts (REITs)
in an effort to avoid paying taxes, Troianovski reports.
As more companies have pushed to be considered REITs, the total
market value of REITs has grown from $9 billion in 1990 to $451 billion in
2011, according to the National Association of Real Estate Investment Trusts.
Some in the real estate industry are worried about the
potential political backlash of companies taking advantage of the REIT
structure. The IRS has said “inherently permanent structures” like cellphone
towers, billboards and data centers qualify for REIT treatment, according to
Troianovski.