May 2018 - Sachse Construction
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Month: May 2018

Sportswear-Maker Puma to Open New York Flagship on Fifth Avenue

by Sachse Team

German sportswear-maker Puma SE has signed a lease deal to open a flagship store on Manhattan’s Fifth Avenue shopping corridor, creating a marquee location that will be the first of its kind for the company in North America.

Puma is taking a three-level, 24,000 square-foot space at 609 Fifth Ave. at 49th Street, according to SL Green Realty Corp. , the real-estate investment trust that owns the building. The real-estate investment trust has launched a redevelopment that will include double-height storefronts that wrap around the building.

Puma Chief Executive Björn Gulden described the location as iconic, situated on one of the most prestigious streets in the world. While Puma has stores in the U.S. and Canada, none has the breadth of the company’s product categories this location will showcase, said Russ Kahn, senior vice president of retail for Puma North America.

“For the past several years PUMA has been focused on becoming the fastest sports brand in the world and we feel now is the perfect time to show the world who we are,” Mr. Gulden said in a statement.

Puma joins other sportswear companies such as Nike Inc., Under Armour Inc. and AdidasAG , which have leased space along the Fifth Avenue shopping corridor. The district hasn’t been immune to the effects of online retail growth, which has caused turmoil among traditional bricks-and-mortar retailers in the past few years.

In the first quarter of the year, the average asking rent on the lower stretch of Fifth Avenue from 42nd to 49th streets, which encompasses 609 Fifth Ave., declined 5.4%, to $1,060 a square foot, compared with the same quarter last year, according to real estate services firm CBRE Group Inc. Asking rent on the stretch of Fifth Avenue from 49th to 59th streets dipped 0.5%, to $3,700 a square foot.

Train Depot Changes Ownership Ahead of Expected Ford Announcement

by Sachse Team

The long-empty Michigan Central Depot and a former book depository in Detroit’s Corktown neighborhood have changed ownership from the billionaire Moroun family to an entity linked to a New York law firm.

The moves come ahead of an expected mid-June announcement that Ford Motor Co. will revive the buildings as part of a new Detroit urban campus.

Representatives for the publicity-shy Morouns did not reply to requests for comment Wednesday. Ford spokesman Said Deep declined to comment directly on the ownership swap, deferring to the company’s previous statement that it expects to grow its presence in Detroit and will share details in the future.

Last week, Ford’s business teams for autonomous technology and electrification moved into another Corktown facility known as The Factory at Michigan Avenue and Rosa Parks Boulevard. The facility is about four blocks east of the former train station.

The Dearborn automaker aims to create a hub for its self-driving and electric vehicle divisions in the Corktown neighborhood on the southwest edge of downtown, multiple sources familiar with the ongoing negotiations for Michigan Central Depot have told The Detroit News.

The former train station, at 200 15th Street, and the former Detroit Public Schools book depository building, next door at 2231 Wabash, are two of the locations where multiple sources say Ford aims to set up shop.

The warranty deed for the train station was transferred this month by the Moroun-owned MCS Crown Land Development Co. LLC to New Investment Properties I LLC, linked to the law firm Phillips Lytle LLP. No price was given.

On the same day, the Moroun company transferred ownership of the book depository to a separate entity called New Investment Properties II LLC, also linked to the New York law firm. That has a contract price for $8 million.

 The limited liability companies were formed earlier this year. According to online records, Phillips Lytle LLP  formerly represented Ford’s lending arm, Ford Credit, in a lawsuit.

There could be “a whole host of reasons” why the properties are now controlled by new entities, said Eric Larson, a veteran in many major local commercial real estate deals. He’s president and CEO of Larson Realty Group in Bloomfield Hills. One possible reason is that the Morouns may still have an ownership stake, but he said “this wouldn’t be a typical unless there was a tax benefit.”

More typically, creating a new ownership entity is to give a complex deal “a bit of breathing room,” Larson said. “This is a very large complex project” that would involve many more legal steps, he said.

The impact of the sale and potential redevelopment of arguably the largest symbol of Detroit’s decline is hard to overstate. Vacant since 1988, the former depot is a 504,588-square-foot, 18-story building that sits on 4.9 acres of land, according to CoStar Group, a commercial real estate information service.

The book depository, sometimes called the Roosevelt Warehouse, has been empty for decades. In 2009, the building was so wide open that a homeless man was found dead at the bottom of a frozen elevator shaft.

Multiple sources familiar with the situation have told The Detroit News that negotiations between the Morouns, the long-time owners of the buildings, and the Blue Oval have accelerated in recent weeks as the deal to buy the properties takes shape, and Ford moves to assemble nearby land to build an urban campus in Detroit.

Ford is also said to be interested in a block-long facility known as The Alchemy behind The Factory.

In May, The News reported a mystery sale of a dozen empty lots in the neighborhood, which hinted at a larger land deal.

Corktown strikes a sentimental chord with Ford Motor Co. Executive Chairman Bill Ford Jr. His ancestors hailed from the county in Ireland for which Detroit’s oldest neighborhood is named.

“I’ve seen Detroit at its best, and I’ve seen it at its worst,” he said in December when the company announced its purchase of The Factory. “We want to be part of it.”

For the last decade, the rebirth of Corktown has been defined by a decidedly hip retail community, ranging from hand-crafted cocktails to farm-to-table restaurants and independent retailers.

Planting a flag in Corktown could help Ford attract young technology workers whomight otherwise work in Silicon Valley or other attractive tech centers, as Bill Ford and CEO Jim Hackett and his team push to give the company a facelift, slim down, and prepare for “Autos 2.0.” Ford has announced an $11 billion global investment in electric vehicles, promising to launch 40 new EVs by 2022.

The train station opened in December 1913 and had been owned by the billionaire Manuel “Matty” Moroun since 1995. Through the years, there have been plans for renovation, but none became reality. A 2001 proposal called for converting the building into an international trade and customs center. In 2003, Mayor Kwame Kilpatrick announced a plan for it to become the new Detroit police headquarters.

In 2011, the Moroun family said they would hire crews to begin to remove asbestos-laden caulking and glazing from the huge arched first-floor windows that provide a view to the once-elegant lobby with marble pillars.

In 2013, the Detroit City Council passed a resolution that ordered Moroun to destroy the landmark building, which is on the National Register of Historic Places. The Morouns ignored the order.

The estimated cost to renovate the 18-story building is somewhere between $100 million to $300 million, Moroun officials have said in the past.

Corktown expansions from Ford would complement an already-underway 10-year renovation of its world headquarters campus in Dearborn, and a $60 million mixed-use development in west Dearborn.

One-Time Emerging Apartment Markets Are Becoming Emerging Office Markets

by Sachse Team

As multifamily rents in core markets have continued to climb, investors, office tenants and residents alike have turned their attention to secondary markets. According to JLL’s Investment Outlook report, secondary markets accounted for 50 percent of all U.S. office transactions last year, due to slowing demand and oversupply of product in core markets.

Renters

The San Francisco Bay Area, home to many of the top performing tech companies in the U.S., boasts some of the highest rents in the country. Several cities throughout the Bay Area were ranked in the top 10 for rent increases in 2017. San Francisco continues to lead the nation with an estimated median rent of $4,000 per month.

With easy access to several public transit options, many employees of San Francisco-based companies are opting to commute from suburban neighborhoods just outside of the city to avoid peak rental rates. These outlying cities offer not only a lower cost of living, but often a higher quality of life than the overpopulated urban cores. They provide access to the cultural attractions and other amenities of the city, as well as recreational options of their own, such as new, hip restaurants, without the crowds, clutter and traffic.

Tenants

The migration of renters and employees has begun affecting office tenants, causing many employers to relocate to suburban markets as well. Secondary markets offer a strong value alternative, allowing employers to retain and attract top talent, while paying less rent.

This is especially true for cities with a strong tech presence in addition to a broad variety of service industry opportunities. Tech companies lead the office market overall, and are the driving force behind the demand for open and collaborative workspaces. Because these secondary markets tend to be less saturated and offer more square footage, they are able to accommodate the “live, work, play” dynamic that these office tenants are looking for.

Investors

Because office employment in secondary markets is rapidly increasing, demand for office space is driving investor interest in those markets. Residents are seeking lower rents, while investors hope for higher yields and more product availability. Outlying markets offer much more available office product at a lower rate.

For example, Olive Hill Group strategically acquired an office property, The Courtyard, located in the Culver City submarket of Los Angeles, to capitalize on the growth of the tech-focused tenants in nearby Silicon Beach. By transforming that asset into a creative office space, we met the demands of emerging tech start-up companies and provided an alternative to the more expensive offices in Playa Vista.

According to a report by CBRE, investor appetite for assets in secondary markets has continued to increase for the fourth consecutive year. By acquiring office space in these gateway markets, investors obtain the same quality product and tenants at a lower cost, higher returns and better cap rates.

Conclusion

Many major metropolitan areas are still experiencing high levels of construction, which may eventually lower rents and reinstate the balance of supply and demand. While investors certainly need to be aware of the shift occurring, certain core markets will likely remain unaffected.

That said, office investors that focus on emerging submarkets will have an easier time finding attractive investment opportunities and won’t be impacted by the oversaturation we see in some urban cores. The office sector overall remains a strong contender for investors, and we project that secondary markets will continue to gain traction through 2018.

Developers Are Bringing Crystal Lagoons Amenities to U.S. Multifamily Communities

by Sachse Team

Earlier this year, Metro Development Group unveiled a long-awaited, landmark amenity at its Epperson community in Wesley Chapel, Fla. The 7-acre artificial lagoon, newly filled with 11 million gallons of fresh water, is the first of its kind in the U.S. Suitable for swimming, boating, and other nonmotorized water activities, the lagoon will be the centerpiece of the community’s amenity village and beachfront area.

While the man-made lagoon from Chile-based Crystal Lagoons is a new concept to American consumers, it won’t be for long. Epperson represents the crest of the tidal wave, so to speak, in the trend toward massive water-based amenities. It is one of 140 such lagoons now in the planning, design, or construction stage in U.S. residential developments, both single- and multifamily.

Developers and builders say that while the lagoons come with a high price tag—an estimated $600,000 to $650,000 per acre—they’re worth it for the attention they bring.

“The demand has been incredible,” says Greg Singleton, president of Tampa, Fla.–based Metro Development Group. More than 200 contracts have been signed at the single-family home community, and Singleton attributes at least some of those sales to the development’s unique water amenity.

The feature has been a hit with multifamily product, as well.

“It’s been pretty consistent around the world that as these lagoons are built and people realize what this amenity is, it has a dramatic impact on interest in renting apartments in those communities because of the lifestyle it offers,” says Uri Man, managing partner of Miami-based UM Development and former CEO of Crystal Lagoons.

Crystal Lagoons’ main appeal is its ability to transform most any land asset, even lots in the middle of the desert, into valuable “beachfront” property, according to Kevin P. Morgan, executive vice president of Crystal Lagoons U.S. Corp. This lets developers create communities on less-than-desirable tracts of land.

What Is a Crystal Lagoons Amenity?
In unfiltered man-made water bodies, such as retention ponds and reservoirs, algae and sediment accumulation produce murky-green water and a proliferation of bacteria. Swimming pools have traditionally used high levels of disinfectant and mechanical filtration to produce clear water, but this method is neither environmentally friendly nor economically viable for pools larger than 1 acre.

The exclusive Crystal Lagoons technology, in contrast, utilizes ultrasound waves and strategically applied microbiocides to bypass the need for conventional disinfectant and filtration. According to Crystal Lagoons, this method produces clearer, safer water than other large-scale filtration technologies.

The technology’s ultrasound devices emit a frequency into the water that causes suspended dirt and other particulates to clump together. The resulting mass sinks to the bottom of the lagoon floor, where a patented suctioning device removes the bottom layer of sediment from the lagoon.

“We’ve now figured out how to filter only 1% of the body of water—the part of the lagoon that contains all the dirt,” says Kevin P. Morgan, executive vice president of Crystal Lagoons U.S. Corp. “So we’ve avoided the filtration of 99% of that body of water, therefore making it relatively cost-effective to go mass-scale for developers.”

The disinfecting process is conducted via a series of injectors and water-quality sensors installed throughout the lagoon. The injectors apply controlled pulses of microbiocides at intervals and patterns derived from the growth cycles of local algae and bacteria, disinfecting the lagoon without the need to maintain high levels of chemicals in the water.

“We measure what’s happening in the atmosphere, and based on those unique conditions, whether it’s in Austin, Texas, or Washington, D.C., or Dubai, or Singapore, all of those conditions are going to be different,” says Morgan. “So, therefore, we measure what’s happening in those unique conditions, and, based on those inputs, we will disinfect the body of water when and if it’s necessary.”

The company’s local development partners are responsible for the construction of the lagoon’s basin and the upkeep of its surrounding amenities. The additive cycles are all managed remotely by a Crystal Lagoons Control Center, which is located in each Crystal Lagoons office worldwide. Gallon for gallon, this technology uses up to 100 times fewer chemicals than conventional swimming pools or drinking-water treatment processes, and requires only 2% of the energy needed by conventional filtration systems, according to Crystal Lagoons.

The lagoons can operate with any type of water, based on local availability. A 7- to 10-inch-thick freeboard allows the lagoon to catch rainwater, and, in certain climates, including Florida, the lagoons are projected to be replenished by rainfall for most of the year. All together, the lagoons use up to 30 times less water than a golf course and one-half as much water as a land park of the same size as the lagoon, says the company.

Crystal Lagoons executives are looking to improve on the firm’s model, especially in the U.S. “This year alone, we’re bringing so many new innovations to our current U.S. and global clients that are making this a lot more cost-effective to build and to build it in a much shorter period of time,” Morgan says. “When I say shorter, before, it could be done in nine to 12 months; now, it could be done in six months, even less. So that’s really important to us—shortening the overall cost, of course, and then the ability to build [the lagoons] quickly.”

Upcoming Projects
From the start of its worldwide expansion, Crystal Lagoons has had its sights set on the U.S. and its master planned community developments of single-family and apartment housing. As of now, Crystal Lagoons’ “big six” target markets are Florida, Texas, Arizona, Nevada, California, and Hawaii, though the concept is also gaining traction in Georgia and the Carolinas. Morgan attributes this focus to the states’ warmer climates, though he notes that lagoons can be frozen into skating rinks and used 12 months a year in any part of the world.

“A lot of the East and West coasts has been chewed up with development, so developers are trying to figure out, ‘How do I go create value inland?’ ” says Morgan. “The way to do that for them has been, ‘If I can create a Crystal Lagoons amenity, I can build a lot more real estate and density around it and create my own waterfront destination.’ ”

Crystal Lagoons has signed deals with a number of Texas developers, including the Terra Verde Group and its Windsong Ranch community, which includes multi- and single-family product. Crystal Lagoons’ Florida projects, which make up almost a third of all lagoons in development in the U.S., include Metro Development Group’s five lagoon projects, two 7-acre lagoons at the Sole Mia rental towers by LeFrak and Turnberry Associates in Miami, and a 15-acre lagoon at the upcoming Lake Nona Resort in Tavistock Development’s Lake Nona community in Orlando.

Lake Nona Resort, which will encompass 80 condominium units and 250 guest rooms when it’s complete in 2020, is designed around the water feature, including a section where the eight-story resort cantilevers over a portion of the lagoon. It’s intended to bring a beachfront vibe to the site, even though it’s 60-some miles from the ocean.

“For us, the lagoon was a placemaker,” says Bernardo Fort-Brescia, principal of Miami-based Arquitectonica, the project’s architect. “Generally, buildings with a geography are more valuable, more successful. And the geography gives identity to the place.”

The resort’s waterfront amenity package is still in progress, but Tavistock intends to choose features that will facilitate well-being and socializing between patrons. “Designing the whole campus around fitness and performance is key,” says Scott Gasaway, the firm’s head of construction. “We’re still in the exploration phase, but we’re looking at opportunities to create social interaction.”

The first Crystal Lagoons amenity to break ground in South Florida will be the first of the two lagoons at Sole Mia in Miami. The master planned community’s first phase will contain 400 rental units distributed across two residential towers, also designed by Arquitectonica, which will be ready for move-in by April 2019.

The residential buildings will be connected by an amenity deck, which will include an elevated pool and sky park on top of a shielded garage designed to match the community’s rounded railings and steel-and-glass aesthetic.

Sole Mia’s first lagoon and its associated beachfront will be located adjacent to the towers, with canoeing, sailing, kayaking, and paddleboarding activities available to residents. The lagoon and residences will be surrounded by 37 acres of open green space interspersed with walking trails.

The 183-acre community is zoned for 4,390 single-family and multifamily units, and over 1 million square feet of retail and commercial development is also in progress, including office spaces, dining, shopping, and entertainment. The second lagoon will be built in Sole Mia’s second phase.

The Future of Shopping Will Include Body Mapping, Robot Assistants and ‘Just Walk Out’ Stores

by Sachse Team

t’s been a while since I had any paper money in my wallet.

I can also hardly remember the last time I bought a piece of tech in a brick-and-mortar store. If you, like me, pay mainly with credit or debit cards, and buy things on Amazon AMZN, +0.17%  rather than in a store, the next 10 years will be made for you.

The future of shopping can easily be summed up in two words: convenience and speed. So let’s talk about the upcoming overhaul of shopping experience.

Try before you buy — ‘couch version’

We’ve all been there — you spent hours scouring shops in your favorite mall for a particular piece of clothing, only to find it doesn’t look as good on you as you thought it would. In the future, you’ll be able to try on any clothes in the comfort of your home.

All you will need to do is stand before your PC camera (or this really cool smart mirrorby OakLabs), and select the item you’d like to try on. Software will use your physique to construct a 3D model, and overlay it seamlessly over the video feed, syncing with your every move. The 3D model will then don the clothes, and you will be able to see how they look on you.

Companies have already started exploring this concept: FITLE creates a 3D model of the online shopper by allowing them to scan themselves using their phone. A scan is then used to estimate a person’s size with greater accuracy. Bodymetrics does the same thing, albeit with higher fidelity, at a brick-and-mortar store. Its software then provides a series of recommendations (by brand, fit and size) for the shopper’s body type.

Never run out of coffee

That’s right, you’ll never run out of coffee. And not just coffee. Anything that can be put in a special (internet-of-things-powered) container will be tracked, and you’ll receive an alert when you’re close to running out of an item.

Two things can happen at that time: The system will automatically order a refill for you, or you will have an option to do that yourself. If you’re tech-savvy, you can make such container by yourself if you follow these instructions. Or — provided their project gets funded — you can get a nice, polished version by WePlenish that can order items for you. As you can see, products like these aren’t too far away, but I see them becoming mainstream only as a follow-up to the greater IoT (internet of things) adoption.

Robots, robots everywhere

Robotic assistants that can lead you to your item, carry your shopping bags, or act as a security guard will proliferate in years to come. Piaggio, the company behind Vespa scooters, has already created one such assistant, named Gita. Gita is a small, blue, orb-like robot, capable of carrying your shopping items, and navigating the environment at 22 miles per hour.

As far as security-guard robots go, you may have heard of Knightscope’s Dalek-like robot, K5. While it still has a long way to go, and at best is more of an unarmed support unit for real officers than a stand-alone security product, it is a sign of a trend that will only keep improving.

Big data, meet bigger data, meet AI

Brands and companies are already collecting terabytes of data on us every day. Each browsing session is logged, every order documented, resulting in a customer profile that helps them sell you even more items and services. By analyzing this data, brands can, with great accuracy, determine your age, gender, income and much more.

In 10 years, as IoT matures, and it becomes even easier to do more shopping faster, your profile will consist of a plethora of orders, cancellations, comments, clicks and IoT interactions. Who better to make sense of all that noise than AI? It will take in all of these entries and connect the dots, creating a perfect picture of you. Using these results, websites and robotic assistants will be able to “read your mind,” and offer you relevant products and services before you even ask. To me that sounds both scary and exciting.

Delivery speed

I want it, and I want it now. Well, now you can have it with the Amazon Prime subscription on a select list of items. Other giants are also experimenting with same-day delivery service — Google GOOG, -1.43%  introduced Google Express, and Walmart WMT, -0.07%  has Walmart Grocery.

It will take some time, however, before this type of service becomes a worldwide norm. Obstacles like logistics, delivery vehicles and expenses need to be overcome in the most optimal way, but once that happens, delivery robots, drones and personal shoppers scurrying about to get you your items will be a common sight.

Today, shipping expenses are still too great to allow for greater adoption — many things (both hardware- and software-related) need to happen before the practice becomes sustainable for smaller companies.

Shopping speed

Checking out is a bummer. Unless you’re shopping at Amazon Go. The experimental store features no lines and no checkouts — just you, your smartphone and your shopping bag. “Just walk out” shopping is in its early stages, but it’s bound to take off, provided Amazon’s experiment proves to be a success (and it sure seems like it).

The concept is simple: You walk in, get the stuff you need, and the AI tracks the items and charges you for what you took after you exit the store. In brick-and-mortar retail world, this is a game changer — this practice will definitely spread, once other brands figure out how to do it easier and cheaper than Amazon.

Watch Out for These 8 Retailers — They’re Ready to Grow in the US

by Sachse Team

Big brands like Toys R Us and Bon-Ton liquidating their businesses might paint a gloomy picture for the retail industry, but smaller brands say there couldn’t be a better time to grow.

Direct-to-consumer businesses like Bonobos and Warby Parker have paved the way from online stores to bricks and mortar. Others are following — in droves — and could help fill the glut of vacant real estate on the market in the U.S.

Like Warby Parker and Bonobos, these up-and-coming brands are being cautious, opening locations at a measured pace and setting up primarily where they have large followings online. In turn, mall and shopping center owners are all vying for their business. But many upstart retailers are also generally tougher negotiators than traditional ones and come to real estate owners with unique requests as the companies map out growth.

It’s more common today, for example, for lease deals with online retailers to extend for just 18 to 24 months, also offering an optional kick-out clause where the retailer can terminate a contract early, Brandon Hoffman, a senior associate at Ashkenazy Acquisitions, said at the annual ICSC RECon conference in Las Vegas this week. “Trying to explain 10 years to some of these young brands [is hard] because some of them haven’t even been around that long.”

Growing retailers to keep on your radar include Adore Me, Outdoor Voices and MM.Lafleur. Below are eight brands looking to open more stores across the U.S. as they expand beyond the internet, where many of them started.

Cuyana 

Cuyana, the women’s clothing brand built around offering shoppers “fewer, better things,” is opening its first physical store in New York on Wednesday. It already has two in California. Co-founder Karla Gallardo said the business is “going to be moving at a much faster pace than we have before,” setting up shop in “key cities.” As for going into U.S. malls, Gallardo said the “setup needs to change for us to enter.”

Untuckit 

Unlike Cuyana, Untuckit has already established a strong presence in the retail landscape across the country but is still looking to grow. The company has grown its product mix from button-down men’s shirts to a women’s line and options for kids. CEO and co-founder Aaron Sanandres has said Untuckit should have about 50 stores open by the end of this year. Untuckit is also known to have signed leases with some of the top-tier mall owners, including Simon and GGP.

Rebag 

Rebag earlier this year opened its second permanent store in New York — on Madison Avenue — joining its flagship location in SoHo, which debuted last year. The shops, designed like high-end boutiques, are filled with shelves full of second-hand handbags. The business has been running online for roughly four years and initially tested pop-up stores before determining it wanted to settle down for a longer term.

Outdoor Voices 

Outdoor Voices, similar to Untuckit, is fairly well established in the world of retail, but the online athletic apparel upstart still has big plans. Founder Tyler Haney told CNBCearlier this year that the retailer plans to open five more shops by the end of 2018. She wouldn’t count out having one store in every state in the U.S. one day. The brand has really exploded of late, with some shoppers moving from Lululemon to Outdoor Voices for its pastel-colored leggings.

LaFleur

Women’s apparel retailer MM.Lafleur is one example of a company following the “pop-up to permanent” trend. The company had previously run a showroom in New York before signing a long-term lease in the Bryant Park neighborhood earlier this year. MM.Lafleur has amassed a loyal following online, and its new store is known for superb customer service — shoppers schedule appointments ahead of visiting to secure a fitting room.

Adore Me

Adore Me is starting to take L Brands’ Victoria’s Secret by storm. The lingerie company, born online, is planning to open as many as 300 stores over the next five years. Many of the initial locations are slated to roll out in New York; Adore Me currently has one showroom for NYC customers to try on items.

Suit Supply

Suit Supply runs about 100 stores globally, namely in the U.S., China, the U.K. and Russia. The company opened its first location in the U.S. (having started internationally) about seven years ago but still has its eyes set on growth in North America, a market that’s increasingly being flooded with suit sellers like Indochino and other bespoke retailers. It’s been reported recently that Suit Supply is embarking on a hiring spree in the U.S. before it opens additional shops.

Thredup  

Online clothing thrift store Thredup opened its first store in an outlet center in Texas last year and now has plans for more than 100 locations. The consignment chain is considered a notch up from Goodwill but not as high-end as TheRealReal, which also runs a handful of stores in the United States. According to Thredup CEO James Reinhart, the goal is to make the stores as personable and convenient as possible, accepting returns and making better-educated purchases of inventory for each location. Similar to T.J. Maxx and Ross Stores, these shops will offer a “treasure hunt” experience but with used clothing.

 

Where Fun Follows Function: New Study Reemphasizes the Value of Play in the Workplace

by Sachse Team

Perkins Eastman has released a highly annotated study that suggests that employees are more likely to be open to discovery when their workplaces are infused with a state of play, which the study’s authors define as engaging in activities for the pure enjoyment of the process.

“The right kind of play has an essential role in producing innovation,” the authors state. They elaborate that a sense of being removed from external pressures “leaves us open to different perspectives and experiences.” The authors also see play as an effective social connector, “helping to form trusting relationships or to open up lines of communication.”

The study cites numerous books and papers that examine this topic. One of its touchstone is the Hungarian-American psychologist Mihaly Csikszentmihalyi’s book Creativity: Flow and the Psychology of Discovery and Invention, which provides examples of innovations in art and science that burbled to the surface as a result of specifically not focusing on work. Ransom Stephens, the author of A Look at the Neuroscience of Innovation & Creativity in Art, Science & Life, calls this phenomenon “defocusing into insight.”

This “Google-ization” of the office, where play and work mingle, only leads to discovery, says Perkins Eastman, when play is “serious.” Its study quotes Bruce Nussbaum, a professor of design at Parsons The New School of Design, who wrote: “In serious play there are rules, there is competition, there are winners and losers. Above all, there is learning, the kind of learning that allows you to navigate unknown areas, make unusual connections, and achieve new goals in unforeseen ways.”

 

The study offers several instances where the built environment has increased creative output. It singles out IDEO, the global design and innovation consultant, whose longtime partner Tom Kelley credits his company’s success to a culture of playfulness and collaboration.

IDEO’s offices don’t feel like typical office spaces, Perkins Eastman notes: “Wide-open floor plans provide a flexible backdrop for communal tables and various types of meeting areas. Displays of Post-it-covered walls, outlandish prototyping experiments, and bicycles suspended from the ceiling send the collective message to employees that here, anything goes.”

Kelley describes each IDEO office as a collection of “neighborhoods,” where people are grouped together on a project-by-project basis, as opposed to their skill set or expertise.

To inform its suggested design solutions, Perkins Eastman turns to a recent paper, “Elements of a Successful Playspace: Enhancing Physical, Cognitive and Social Experience,” written by the nonprofit Project for Public Spaces, which considers three overarching concepts for a successful play environment: physical, social, and cognitive.

 

For companies that want to promote creativity and innovation through play, Perkins Eastman recommends:

Personalization — Giving employees the freedom to personalize their workspaces can be an effective strategy.

Access + Linkages — Collaboration can increase the

rate at which new ideas are generated and played out—an important competitive advantage when it comes to innovation. Bringing people together can raise the level of enthusiasm surrounding new ideas, as well as increase the chances of follow-through.

Variety + Choice — It notes that IDEO’s Kelley emphasizes that hierarchy is the enemy of playful and productive work environments. A company culture that communicates that everyone’s ideas are important is a fertile environment for innovation. It is for this reason that IDEO has strived from its beginning to maintain a flattened corporate structure. IDEO employees are categorized by four “levels of impact” based on their skills and responsibilities.

Investors Still Can’t Get Enough of Industrial Properties, Experts Say

by Sachse Team

Despite increasing valuations and compressed cap rates, industrial/logistics real estate remains “the prettiest girl at the dance,” says Mark Glagola, senior managing director of the Mid-Atlantic capital markets group at brokerage firm Transwestern. “Investors are buying at lower caps, but supply is overwhelmed by demand,” he notes.

A total of 56.8 million sq. ft. of industrial space was absorbed nationally in the first quarter of 2018, causing industrial vacancy rate to drop to a record low of 4.7 percent nationally, according to a capital markets report from Cushman & Wakefield. In more supply-constrained coastal markets, including Southern California and New Jersey, vacancy is hovering around 1.0—2.0 percent or lower.

“Investors look at the fundamentals and can get comfortable with the high prices due to rent growth potential,” says Jack Fraker, vice chairman and managing director of CBRE’s global industrial and logistics practice. Fraker points out that when rents are growing at 5.0 to 10.0 percent annually, “it quickly makes up for the low yields the first year.” According to the Cushman & Wakefield report, asking rents were up 5.8 percent in the first quarter.

“A market find, from an investor’s perspective, is an asset with a ‘vintage lease,’ one executed between 2009 and 2015, with near-term rollover, says Fraker. “This is because the tenant rents are way below market, which provides an opportunity to mark rents to market.” Fraker notes that today, there is a 90 percent probability that tenants will stay in place because they have nowhere else to go.

Activity is happening everywhere, even in markets that have not typically been as strong, because the fundamentals are so good—strong rent growth, low vacancy and a healthy amount of new construction, according to John Huguenard, international director of industrial capital markets with real estate services firm JLL.

Industrial deals led growth in capital markets in the first quarter, with a 36 percent increase in transaction volume year-over-year, notes the Cushman & Wakefield report. A total of $15.9 billion in industrial transactions were recorded during the quarter, representing 20.8 percent growth in year-to-date sales, according to a JLL Q1 2018 Investment report.

Investors, both institutional and private, are entering tertiary and secondary markets where they’ve never been before, because rent growth is similar to primary markets, notes Huguenard. As a result, cap rate compression currently is greater in secondary markets than in primary markets, down 50-75 basis points in the first quarter of 2018 compared to 15-25 bps in primary markets.

Foreign investors are also contributing to deal growth, investing in big portfolio acquisitions, Huguenard says, noting that such transaction now often exceed $1 billion in value.

Glagola notes there are far more investors looking for deals than assets available. Fraker says that this is the first time in his 30-year career that industria/logistics real estate is the most popular asset class, noting that CIOs at pension funds like industrial real estate because it provides the most reliable, predictable returns of any asset class and requires the least capital outlay for tenant improvements.

All three experts believe the industrial/logistics market still has a lot of runway, predicting that this asset class will remain strong for the next 18 to 24 months, before beginning to slow. In fact, Huguenard says, “Industrial is just now hitting its stride, and landlords seeing exceptional rent growth because it’s not overbuilt.”