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How Covid-19 is changing face of commercial real estate market

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Workers are expected to return in full over the next several months as Covid-19 restrictions lift across Arizona and many employers configure how to bring everyone back to the office – or not.

One of Arizona’s leading real estate attorneys, Jay Kramer of Fennemore Craig, spoke to Chamber Business News about what to expect and gave employers advice on how to move forward.

The first challenge will be to motivate employees to return to the construction sites, said Kramer.

“People haven’t been in the office in a while, and you can commute back and forth in Phoenix for anywhere from 40 minutes to an hour,” said Kramer, a Phoenix-based partner at Fennemore. “If you go back to the office and just go to a cubicle or close the door to your office, it might not be a reason to come back. So we have to make it more pleasant, create a communal environment that is conducive to collaboration and socialization and offers people quiet spaces to work. “

After the Centers for Disease Control (CDC) lifted the restrictions, Kramer predicts that employees will be back to full capacity by the end of the year.

Kramer offered his predictions for the future and some advice:

Short and long term forecasts

In the short term, the commercial office market will continue to be bumpy, and Kramer advises staying flexible now.

“I think there will be an initial knee-jerk reaction, ‘How can we reduce the space?’ “he said.” Most companies will find themselves in a hybrid environment wondering why they need as much space as they have on any given day when only 50 percent of their employees are in the office. “

In the longer term, more office space may be needed as more collaboration spaces, social spaces, quiet spaces, and Zoom meeting conference rooms are needed, he said.

“With all of these experiential requirements, we may need as much or additional space as we need to get people back to work in the office.”

Large headquarters could become more obsolete

Expect large headquarters to disappear in favor of regional satellite offices nearby to provide greater travel convenience for employees, Kramer said. Many offices also need to be “rethought” to make them more attractive to keep staff busy for a few days a week or more.

“Instead of having a large corporate office downtown or on the 24th and Camelback, perhaps one approach would be to have two or three smaller offices in the Valley, closer to where your employees are so they have a place to go where they can be a sense of camaraderie, community and solidarity, ”said Kramer. “But at the same time limit commuting and exposure to large numbers of people.”

Time to think about flexible rental options for the future

In the past 14 months, many large corporations have been able to bear their 2020 mortgage and lease contracts because they have cut the other costs associated with running an office by up to 20 percent.

In the future, CFOs may need to consider reducing the cost of existing leases through vehicles such as subleasing. Now is a good time to think ahead about how leases can be renegotiated to allow flexibility for expansion and contraction.

“It is very difficult to change your rental agreement during the existing rental period, unless you have negotiated a shortening, expansion options or provisions for early termination or the like,” said Kramer. “So most of us will continue to have to live with our current office space.”

Subletting glut right now

With everyone trying to sublet right now, it can be difficult to find buyers. Businesses may find that they need to upgrade their offices to survive.

“The most important issues will be flexibility, and that means the possibility of contracting and expanding your space, of having options to extend your term, but also the possibility of contractually terminating your lease,” said Kramer.

With the knowledge that government orders or orders may limit the number of employees in the office, more emphasis is placed on acts of God and lease provisions and possibly convictions.

Tenants are currently in a “lever” position

Right now, the leverage is with tenants, which means landlords are more likely to work with flexible leases and other terms.

“So when you have an expiring lease you typically look at your lease 18 months before the expiration date, but you might want to look three years in advance now and see if there is anything you can do.”

The residential property boom will benefit the commercial market

In view of the burning housing market in the Valley, it can be assumed that the commercial real estate sector will also benefit from it.

“With more people, you assume that more companies, whether small or large, will either settle here or possibly relocate their headquarters or their regional headquarters to the region.”

As people move to the area, more “knowledge-based” businesses and higher salaries will follow.

“The next five years in the Valley will be good times for the real estate market. There will probably be some dropouts, but I think the trend will be very positive overall. “

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A California court just returned real estate it took from a Black family in 1924. It could be the beginning of a wave of redistribution.

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California Governor Gavin Newsom shakes hands with Anthony Bruce after signing the law to return land in Manhattan Beach to his family.Ringo HW Chiu / Associated Press

  • The state of California has returned the land that it took years ago to the Black family.

  • It is the first time black Americans have recaptured land that has been taken from them by significant domains.

  • Activists want this to be a precedent, but there are logistical hurdles.

The Bruce family gets their land back. It is the first time black Americans have successfully reclaimed land that the government has taken from them, raising hope for families like her who have lost their homes throughout US history.

The family regains ownership through a law signed by California Governor Gavin Newsom in September. In 1924, the city of Manhattan Beach used a significant area to wrest land from the Bruces, says Newsom’s office. Eminent Domain is a law that allows the government to take privately owned land and recapture it for public use. The procedure includes compensation for the previous landowners, but otherwise they have no other choice of surrendering their property.

Newsom signed the land over to the descendants of Willa and Charles Bruce, who left Manhattan Beach after facing racial harassment from the Ku Klux Klan and their white neighbors in the early 20th century. Willa and Charles turned the property into the West Coast’s first black resort and named it “Bruce’s Lodge” when racial segregation kept them away from most other beaches.

The KKK tried to burn the resort down. White Manhattan Beach residents harassed resort customers.

The city seized the land, claiming they wanted to turn it into a public park – they never did. It remained as an empty lot before it was transferred to the state, then LA County.

The Manhattan Beach government recognized the racist motive for occupying Bruce’s Lodge twenty years later in an article for the Redondo Reflex newspaper by one of the city council members who voted for it, Frank Doherty.

“We thought the Negro problem would stop our progress,” he wrote in 1945. “We had to acquire these two blocks to solve the problem, so we voted to condemn them and build a city park there. We had to protect.” ourselves.”

The story goes on

There are still obstacles to the nationwide reclamation of Black Lands

The landmark case of the Bruce family inspires others who hope it will set a precedent. However, experts say proving original ownership can be quite a challenge.

Kavon Ward, the co-founder of Where is My Land group, helped fight on behalf of the Bruce family. She told the Washington Post on Monday that she heard from more than 100 people willing to argue that they have a legitimate claim to property that does not currently belong to them.

The land of Bruce’s Manhattan Beach was relatively clear – their historical claim to the property was well documented through their resort and the violence they were subjected to. Few other cases are supported by written history.

The historical confiscation of black property is at the center of the current disparities between black and white wealth in the United States. In the first quarter of 2020, 44% of black households owned their homes while 73.7% of white families owned their homes, according to the US Census Bureau. That gap is even worse in individual cities – for example, according to a study by Redfin, only about 25% of black families in Minneapolis own their homes.

According to the Federal Reserve, the typical black family owns only about 10% of the average white family’s wealth. Phenomena such as redlining and blockbusting – the effects of which will continue even after the Fair Housing Act of 1968 was passed – are also responsible for the stagnation of black home ownership and wealth in the United States.

When it comes to significant domains, this type of relationship with ex-black owned real estate is evident: even our most sprawling national icons, like Central Park in Manhattan, are not immune.

Read the original article on Business Insider

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2022 real estate forecast paints grim picture of housing market in Texas

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According to Realtor.com’s 2022 Real Estate Forecast, released Wednesday, demand from first-time buyers will outpace the domestic real estate market’s recovery as Americans stand a better chance of finding a home but face a competitive sellers’ market.

The year will also be a mix of housing affordability challenges and opportunities, as listing prices, rents and mortgage rates are expected to rise, according to the website.

Realtor.com predicts that home sales will hit their 16-year high in 2022, up 6.6 percent year-over-year. Buyers are expected to remain active and inventory for sale is expected to begin to rebound from the recent sharp declines. The real estate agent is forecasting record list prices, skyrocketing sales and limited options to sell homes as existing property listings lag behind pre-COVID levels. The supply shortfall in the construction of 5.2 million new homes could also shrink as builders continue to ramp up production, which is expected to increase by 5 percent year-on-year.

“Whether the pandemic delayed plans or created new opportunities for a move, Americans are poised for a tumultuous home buying year in 2022. With sellers expected to enter the market due to continued strong buyer competition, we expect strong growth in the Home sales at a more sustained pace than in 2021, “Realtor.com chief economist Danielle Hale said in a statement.

“Affordability will become increasingly challenging as rates and prices rise, but working remotely can expand search areas and allow younger buyers to find their first home sooner than usual,” continued Hale. “And with more than 45 million millennials in their prime ages 26 to 35 making first-time purchases by 2022, we expect the market to remain competitive.”

Sales in the Austin Metro real estate market are expected to increase 4.7 percent, with prices expected to increase 3%. Dallas-Fort Worth is expected to see sales growth of 8.3 percent on a price increase of 4 percent, El Paso is expected to see sales increase of 10.6 percent on a price increase of 5.1 percent, and the Houston Metro region is expected to be around 2.6 percent and 2.4 percent rise percent in prices. McAllen Mission is expected to increase 5.9 percent in sales and 5.1 percent in prices, and San Antonio is expected to increase 5.1 percent in sales and 3.5 percent in prices.

According to Realtor.com, potential sellers are increasingly planning to enter the market this winter, although affordability will play an increasing role amid rising mortgage rates and house prices. A growing economy, strong labor market, and flexibility in the workplace should enable first-time buyers to buy houses without breaking the bank.

Home buying could also become the more affordable option, Realtor.com said, with rents expected to exceed home prices for sale in 2022. Rents are expected to rise 7.1 percent and home prices 2.9 percent year-on-year. The home ownership rate is expected to increase slightly to 65.8 percent in 2022.

Recent survey data shows that over half (53 percent) of potential buyers planning to buy their first home within the next year are millennials, according to Realtor. This first time home buyer demand is expected to exceed both new and existing home ownership. Home buyers will face fierce competition for the next three years, real estate brokerage projects as millennials look for first-time homes, Generation Z increasingly enters the housing market, and more older Americans try to downsize.

Recent survey data also shows that 19 percent of potential sellers want to move because they no longer have to live near the office, up from just 6 percent in the spring, according to Realtor.com.

Realtor.com predicts that suburbs will continue to be more popular than large urban subways as home shoppers look for relatively affordable and larger homes. The typical 2,000-square-foot single-family home price rose double-digit years (16.7%) in October, meaning buyers may have to sacrifice additional space to afford a home in their desired area.

“Our housing forecast suggests we have another dynamic year of activity ahead of us, but 2022 will also be fraught with mounting pain as we progress from the peak of the pandemic to a new normal,” said George Ratiu, manager, economic research for Realtor.com said in a statement. “With most real estate markets going to be competitive by 2022, it’s important to remember that you are in the driver’s seat on your real estate trip.

“The bottom line for buyers is making sure you are on top of your schedule and budget – and especially for younger buyers making this massive financial decision for the first time,” Ratiu continued. “For sellers, consider your local market conditions and the likely increase in the number of homes for sale, and market your prices at a competitive rate.”

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Here’s why the luxury housing market is exploding in Metro Phoenix

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In the past five years, the average home price in the Metro Phoenix market has nearly doubled. The average home price in Phoenix is ​​$ 405,000, according to Redfin market data, compared to $ 215,000 five years ago. From April through June, homes across town had their lowest number of days on the market, down from 22 days in Phoenix.

According to Redfin market reports, the average retail price of single-family homes in Scottsdale is $ 900,000, up 20% year over year. In the paradise valley. The median median single-family home sold for $ 2.8 million, up 34% year over year and more than doubling since late 2016.

ALSO READ: The 5 Most Expensive Cities in the Arizona Real Estate Market

As of October 2020, 32.7% of Scottsdale homes have sold above list price.

The luxury real estate market is subject to the same trends as the rest of the market. Low inventory levels, supply chain issues with new builds and demand, and rising prices are affecting both markets.

At the same time, people are migrating to the county for the same reason as the rest of the luxury market. Maricopa County is one of the fastest growing areas in the country and much cheaper than other areas.

Babbi Gabel, founding partner of RETSY.

“The same house that someone here could buy for $ 6 million would have cost maybe $ 12 million in the Bay Area,” explains Babbi Gabel, founding partner of RETSY.

About half of the houses that Gabel’s customers are looking for are second homes.

But what makes a luxury house luxury? Gabel describes them as homes that are custom built, have bespoke finishes, or have a unique aspect, starting at around $ 1.5 million.

Five to ten years ago, Scottsdale and Paradise Valley weren’t a $ 5 million market; today, prices average between $ 4 million and $ 6 million. Increased material costs have led to more expensive conversions and new builds in the luxury housing market.

“We’re starting to see new builds in the $ 7 million to $ 20 million price range. That was completely unknown five years ago, ”she explains.

Buildable land also contributes to rising prices. In places like Paradise Valley, which is surrounded by inland land with no room for expansion, home builders are paying nearly $ 2 million per acre. In order for the new building to be profitable, they have to build at a much higher price per square meter.

Gabel says that like the non-luxury market, inventory is lower than ever, but demand is still high. She notes that she had 571 active listings in Scottsdale in 2020 and down from 333 listings in 2021. And like the rest of the market, homes have multiple listings and sell quickly.

“There are times when the luxury market does its own thing, but what we’ve seen in the past three years is just one insane market across the board,” says Gabel. “My partner and I currently have 20 buyers valued at over $ 2 million who are looking here in the Valley. We can’t find anything. “

She predicts that these trends will continue in the future.

She concludes: “In the next four to five years, growth and demand will continue to drive the housing market. Provided there is nothing unpredictable and interest rates or inflation do not go up. ”

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