June, 2019 - Sachse Construction

Is Blockchain CRE’s Missing Data Link?

Consumers often speak glowingly about new innovation, but business leaders know the value comes in its application. The much talked about blockchain technology not only creates a secure ledger for commercial real estate properties, but it also can standardize data and create interoperability between uncommunicative real estate parties or platforms. GlobeSt.com spoke to Kevin Maggiacomo, CEO and President of SVNInternational Corp. (SVN), a Boston-based full-service CRE advisory firm, to get his take on the new tech and how CRE companies can turn the blockchain buzz into bona fide benefits.

“If you ask any real estate agent today what challenges they face with technology, it’s that they don’t communicate with each other,” said Maggiacomo. “They operate in silos with near zero interoperability between systems, like property data and lead management.  The blockchain changes all of that and connects disparate applications together, allowing agents to focus on closing deals – and not on application management.   Further, the majority of the brokerage community is accustomed to working within a system where there is no data transparency or standardization. Blockchain provides for that standardization and with it comes the potential for smart contracts and the streamlining of the transaction process.”

While CRE is not known for being forward-thinking, SVN is making the leap with the goal of moving all of its data to a secure blockchain database hosted by Imbrex.io. “We understand that many in the CRE industry are claiming that blockchain is nothing more than a hammer looking for a nail right now,” says Maggiacomo, “but at some point, our institutional clients are going to demand it. Most innovations stem from a client demand, and we want to make sure our Advisors and business systems are future-proofed.”

Why would CRE clients insist on blockchain? Maggiacomo believes it revolves around clients’ increasing demands for transparency.  “With smart contracts, being able to transact transparently, where each side can clearly identify the next action item, control document flow, and process funds is a massive benefit.  Data security will also drive adoption, but the final frontier will be the incorporation of artificial intelligence to find like-kind properties, potential buyers and even run alternative scenarios.”

As to fears that this will eliminate brokers, Maggiacomo has been consistent in his belief that the only brokers who will lose jobs will be those who don’t take an advisory approach and/or don’t embrace technology. “Whether it’s the blockchain, augmented reality or smart buildings, there will soon be an abundance of information available in the market.” At a recent SVN Annual Conference, Maggiacomo spoke about how technology has disrupted numerous industries from stock trading to hospitality and the taxi industry. “These industries, like CRE, operated under artificial scarcity,” he says. “However, when data became ubiquitous the game changed. You either adapt your mind and skillset or hope you can hang onto your existing clients. But, I’ve never found hope to be a great business strategy.”

Vision Benefits Giant Makes a Power Play in Physical Store Strategy

As the lines between health care and retail continue to blur, VSP’s newest deal is poised to give the company a strong foothold in the retail marketplace.

VSP Global, whose businesses include national vision benefits company VSP Vision Care, on Thursday announced that it will acquire San Antonio, Texas-based VisionWorks — the sixth largest optical chain in the United States. In addition to acquiring VisionWorks’ portfolio of more than 700 stores in nearly 40 states, the deal will be the single largest VSP network investment in the company’s 65-year history.

“The deal aligns with the company’s “intent to pursue new retail development, acquisitions, joint ventures, and partnership opportunities to strengthen value to our clients and continue to grow our membership,” Michael Guyette, president and CEO of VSP Global, said in a YouTube video.

The transaction will close once the necessary regulatory approvals are obtained.

“This transaction is highly complementary to our business and marks a significant leap forward in continuing to fulfill our vision to provide access to affordable, high-quality eye care and eyewear to more people,” said Guyette. “With expanded nationwide access, we’ll provide our clients and members with an option for a more substantial, consistent and sustainable retail experience, further enhanced by the professional care of VSP network doctors.”

VisionWorks regards the transaction as a way to increase both companies’ “shared commitment to help people see,” said Visionworks CEO, Pete Bridgman.

“Grounded in our passion to deliver affordable quality eye care in a simple way, and strengthened by our new partnership with VSP, we will focus on advancing patient care and accessibility,” he added.

The news comes on the heels of the debut of VSP’s first physical location. Opened under the Eyeconic banner and located in Chicago’s trendy Bucktown neighborhood, the store is designed to serve as an extension of VSP’s Eyeconic e-commerce site, connecting products, services and a VSP network doctor to retail-minded consumers. A second Chicago location is set to open on July 13.

Obsolete Office Buildings Offer Investors a Myriad of Opportunities for Adaptive Re-Use

Older office buildings with high vacancies often suffer from lack of access to mass transportation or require significant infusions of capital to compete for tenants in today’s market. Landlords struggling with low occupancy may want to consider converting older office buildings to uses with higher demand for the location, including housing, hotels, schools, retail, start-up incubators, industrial facilities or even urban gardens.

For example, Fairfax County, Va. was struggling with 18 million sq. ft. of unoccupied office space. A local planning workgroup looked at the opportunities for recycling old office buildings into apartments, schools, co-working spaces and food incubators and recommended zoning changes that did not require changes to land use plans. In 2015, the county’s Board of Supervisors approved the recommendations, but with the caveat that the buildings be in an area zoned for mixed uses or industrial.

Since then, the county has seen old office buildings converted to schools, live-work units and apartments, with more adaptive reuse projects in the works.

A five-story, 99,350-sq.-ft. office building located across the street from Seven Corners shopping center in Falls Church, Va. was acquired by the local school district for $9.37 million, or about $94 per sq. ft.  The building was redesigned by Lauren Perry Ford, an architect at Cooper Carry, to house Bailey’s Upper Elementary School for the Arts and Sciences, which now serves 764 students.

Meanwhile, in Springfield, Va., Immanuel Christian School, a private school offering classes from kindergarten through eighth grade, plans to expand its curriculum to high school at a nearby office building in Alexandria, Va. The school leased 27,000 sq. ft. of former office space to convert to classrooms and administrative offices by the upcoming fall quarter. It has plans to acquire the entire building.

In Falls Church, Va., a 10-story, 173,000-sq.-ft. office building that had been empty for about four years was converted to rental housing, which is in high demand in the area, according to Sophia Fisher, a senior planner in the Fairfax County Planning Department. The project by local developer Cafritz Interests, which specializes in adaptive reuse, completed the conversion of the office space to 200 live-work units known as e-lofts Alexandria in 2016.

Cooper Carry architect Steve Smith notes that building urban schools, especially high schools, is challenging for school districts, since they typically require 30 to 40 acres for sports and other activities. It can be difficult to assemble that much land in an urban environment. His firm redesigned a 56-acre IBM campus, with an 11-story, 507,093-sq.h-ft. office tower in Atlanta, as North Atlanta High School. That project, which also features a scenic lake, assembly building and 942-car parking deck, also converted existing, on-grade parking lots into athletic venues for baseball, softball, football, tennis and track.

Smith recently redesigned a 13-story, 625,000-sq.-ft. office building in Old Town Alexandria, initially built in 1970, into a multifamily mixed-use property. The project, by local developer Perseus TDC | Real Estate Investment & Development, is currently under construction and will include 520 apartment units; 34,000 sq. ft. of retail space; and a variety of amenities to appeal to young professionals, including a rooftop pool and indoor dog run.

There are costly challenges to recycling obsolete buildings to other uses, according to Smith, but also tremendous advantages over new construction, including quicker delivery to market than ground-up development, typically with significant savings over projects started from scratch. There is also often a design advantage in the case of historic buildings, which often have unique design elements.

In the case of the Alexandria office building at 200 Stovall, which was rebranded The Foundry, Smith says, “The building has good bones, great views and was in an excellent, walkable location nearby a Metro station. But its life as an office building was over,” he adds, noting that low ceilings and no parking made it unmarketable as office space.

Converting the building to residential use, however, presented design and structural challenges and hidden issues in walls. The structure is oversized for residential at 120 ft. by 378 ft. and was designed on a 20 by 20 grid with lots of internal columns, making it difficult to break into apartment units. It also had asbestos that had to be removed and contained wiring and plumbing inconsistent with residential use.

The building’s extra width was overcome by creating large balconies that are recessed under the roof into units. Unneeded elevators were removed and their shafts filled with amenity and storage spaces.

The first two levels were combined to provide higher ceiling height for retail space, and three levels of parking were added on top of the building. Other structural modifications were required to meet today’s building codes and strengthen support for the three parking levels and ramps.

This included the introduction of sheer walls to separate units from balconies and an extra rebar and an additional slab with insulation in between were added to the existing slab on parking levels.

The costs for adaptive reuse projects can be estimated fairly accurately, Smith says, but developers/investors need to leave wiggle room in proformas for unexpected contingencies.

For example, it’s unknown what will be found inside the building walls until they are opened up. But some potential issues—for example, asbestos—can be anticipated based on when the building was construction.

Meanwhile, while historic buildings are generally well built, Smith says that developers/investors should expect at the very least to replace electrical and plumbing systems to meet code requirements.

Rezoning may also be required, depending on the building’s location.

Minneapolis-based architect Ryan Schroeder, a principal at PlanForce Architecture + Design, says that his firm has redesigned old office buildings as alternative learning facilities, school administrative offices and an indoor trampoline park.

No matter what the new use is, these types of buildings can be acquired for significantly less than replacement cost due to a dip in their marketable lease rate or abandonment, according to Schroeder.

Old office buildings are also good candidates for restaurants, he adds, noting that a Minneapolis developer converted an office building into a very successful indoor dog park and restaurant called Unleashed Hounds And Hops, where dog owners can unleash their pets and have a burger and beer while the dogs play.

Class-B and -C office space is also being converted to industrial use to meet high demand for “last mile” industrial facilities in urban centers, according to Pete Quinn, Indianapolis-based national director of industrial services, USA, with real estate services firm Colliers International. While this would have been considered a ridiculous proposition 10 years ago, he says that office landlords dealing with falling occupancy rates are increasingly undertaking such conversions.

Developers are also converting office buildings into hotels. Two examples include Hyatt Place at 1522 K Street in Washington, D.C., a former office building that Cooper Carry redesigned as a hotel, and an adaptive reuse project by Indianapolis developer Kennmar, which is in the process of converting a downtown Indianapolis office building at 141 E. Washington St. into $25 million Marriott-branded boutique hotel.

The rise of co-living, another sharing economy concept, offers additional opportunities for investors, especially in cities in the throes of a housing crisis that forces young adults and retirees out of the housing market. For example, The Collective, a London start-up, converted an old office building in London into the largest co-living building in the world, The Collective Old Oak, which provides 550 beds.

Updated Standard for Liquid Applied Flashing for Exterior Wall Openings Released

The American Architectural Manufacturers Association (AAMA) has released an updated specification establishing minimum performance requirements for liquid-applied flashing used to provide water-resistive seals around exterior wall openings in buildings.

The standard applies to fenestration products, such as windows and doors, as well as other through-wall penetrations. AAMA 714-19, “Voluntary Specification for Liquid Applied Flashing Used to Create a Water-Resistive Seal around Exterior Wall Openings in Buildings,” was last updated in 2015.

“Liquid-applied flashing products are seeing increasing application for sealing building interfaces, including flashing around windows and doors,” said Jim Katsaros (DuPont Building Performance Solutions), chair of the AAMA Flashing Committee, in an AAMA news release. “These products offer many performance advantages, including outstanding adhesion to a wide variety of substrates, ultimate conformability for complex geometries and, in many cases, vapor permeable water-resistant seals.”

The AAMA 714 document also sets minimum durability requirements for these materials. Both the International Residential Code and the International Building Code reference AAMA 714.

Construction Wearables’ Futuristic Features are More Feasible than You Think

Imagine a futuristic construction environment where employees are individually and automatically alerted to a hazardous situation prior to a would-be accident occurring. Workers’ levels of fatigue are monitored and measured one by one and the worker is warned when he or she is too close to moving equipment, edges or dangerous areas. A system autonomously informs them and their supervisors if an immediate behavior change is required to prevent injury.

Well, this type of jobsite is more feasible than you might think.

Wearable technologies are making a significant splash in the market. As construction professionals, you might be asked to provide your opinion on this new technology, see a demonstration at a conference or participate in a pilot program. These requests will only increase as wearable technology becomes more prevalent in the construction sector.

Wearable technology presents the opportunity to improve safety, reduce injuries, improve efficiencies and enhance quality of life for construction workers.

While this technology is in the early stages of adoption, it shows tremendous promise for companies seeking to improve critical areas that drive efficiency, profitability and safety.

Defining wearable technology

An internet search for “wearable technology” returns thousands of definitions. The definitions apply to various industry sectors including healthcare, manufacturing and construction. In order to better understand how wearable technology can help contractors achieve their goals, though, let’s settle on the definition Amerisure’s risk management team uses.

Construction wearables are devices, generally including a computer or advanced electronic device, worn on a construction worker’s body, clothing, or personal protective equipment, designed to collect and deliver data about the worker’s environment, activities and biometric conditions. The technology has the ability to detect and warn the employee of the potential for injury, or reduce the seriousness of an injury when one occurs.

Objectives are achieved by providing portable and timely access to sensors, computers and electronics. The industry’s emerging access to multifunctional technology and its ability to collect and analyze relevant data is revolutionizing worker protection.

How wearable technology can improve safety

Wearable technology will realize its objectives in numerous ways:

  • Devices can provide audible or vibration alarms to warn workers when they are too close to danger, such as moving equipment or a leading edge.
  • Devices may warn the individual of a hazardous physical movement — such as bending, twisting, reaching or lifting.
  •  Devices may caution a worker when they are nearing exhaustion.
  •  Devices can alleviate muscular and skeletal joint stress by assisting with lifting or working overhead.
  • In emergency situations, devices can alert emergency personnel and lead rescuers to the injured worker’s location.

Types of wearables

Predictions identify the widespread use of wearable technologies in construction over the next seven to 10 years. Currently, several technology and insurance companies are partnering with contractors to run pilot programs that test various types of wearables.

Typical types of wearables currently being piloted, or in limited use on construction sites include the following:

  • Visual wearables — devices that use optical aids in or on glasses, visors and hard hats to produce images for remote viewers and/or the wearer.
    • Visual wearables can bring value to training, troubleshooting, quality control and other situations where visual representation of a concept is needed. This type of wearable connects field employees to remote technical/supervisory employees, allowing both parties to view items simultaneously. Sharing visual information overlaid on actual work environments can enhance instructions, training and verification of practices and materials. Another benefit of this type of wearable is that field workers’ hands remain free to work while they are discussing solutions or working through an issue.
  • Tactile wearables — devices that work as an exoskeleton to increase the user’s strength and durability.
    • Tactile wearables are designed as exoskeletons that provide extra strength or endurance to the wearer. They also limit the force on the wearer’s muscular skeletal frame. Force is constantly monitored and the wearable responds to protect the wearer. The potential for strains, sprains and back injuries can be reduced, while simultaneously increasing a wearer’s capacity and endurance.
  • Sensing wearables — devices that can sense a worker’s biological, environmental and physical conditions. In addition to sensing conditions, the device analyzes data using edge computing and warns the employee of hazardous situations that can lead to an injury.
    • Sensors come in many forms including badges, actuators, biosensors, gyroscopes and more. They record and evaluate the wearer’s physical condition, location and environment. These wearables can sense location, impact, motion, temperature, vital signs and blood gases and evaluate and interpret the data to provide actionable information.
    • Sensors can also be deployed in numerous configurations that make wearing them simple, easy and unobtrusive. Methods of deployment can include attachments to hardhats, safety glasses or personal protective equipment. Clip-on wearables can be attached to shirts, vests and belts. Edge computers can be contained in wrist bands or clip-on devices. Wearables can also be embedded in the sole of shoes or worn as insoles.

Wearables not only have value for individual workers — they can enhance a company’s ability to manage safety experiences as well. Most wearables feed data to customizable dashboards, which allows a company’s leadership to view and evaluate performance data associated with the entire organization, specific jobsites, job categories, job functions and employees. This data and subsequent analysis helps identify specific areas of exposures that have the potential to increase injuries. It also provides the opportunity to alter operations prior to accidents or injuries. In Amerisure’s ongoing pilot program, wearables decreased unsafe lifting behaviors by up to 38 percent.

Construction Workers Need Continuous Skills Upgrades

To succeed in the coming decades, construction workers will need continuous skills upgrades, according to a report by the Autodesk Foundation and Monitor Institute by Deloitte.

The research outlines a comprehensive framework for examining the skills gap challenge and specific opportunity areas for investment. “We need to understand the effects of technology adoption, how to mitigate the risks, and how to ensure that long-term incentives for success are aligned for all parties,” according to a news release.

The report highlights four key points about how to address the skills gap in U.S. construction and manufacturing:

  • Training workers for new technical skills is important, but these skills can quickly become obsolete if they are not explicitly tied to more foundational and transferable capabilities
  • The accelerating pace of technological change necessitates workers engage in continuous “skills upgrades,” requiring workers to imagine – and navigate – very different career pathways
  • Continuous learning requires shortening the metaphorical distance between learning and work, which is most effective when learning is embedded into work and work into learning
  • Closing the skills gap requires addressing a broader set of challenges facing workers: in the marketplace for jobs, at work, and in policies and practices that affect the broader “social determinants of work”

New Joint Center Housing Report Foresees Steady Rental Demand Over the Next Decade

As the nation’s economy continues to improve, the number of Americans forming households in the U.S. has recovered to a more normal pace. Ironically, the multifamily engine that helped sustain the housing market under bleaker economic conditions has been sputtering a bit as things have gotten better.

That assessment comes from The State of the Nation’s Housing 2019, the annual tracking of the nation’s housing pulse conducted by the Harvard Joint Center for Housing Studies. As has been the case in past reports, this year’s survey found persistent disparities in supply and demand, especially in affordable housing stock. Home values varied widely, too: they were more than five times greater than incomes in roughly one in seven metro areas (primarily on the West Coast), compared with less than three times in about one in three metros (primarily in the Midwest and South).

On the renter side (which is predominantly multifamily), households fell for the second consecutive year in 2018, a stark contrast to the increases of the 12 preceding years. Despite that decline, rents are rising at twice the rate of overall inflation.

“The growing presence of higher-income renters has helped keep rental markets stable,” says Daniel McCue, a senior research associate at the Joint Center. “This has maintained demand for new apartments, even as overall rental demand has waned.” At the lower end of the market, the number of units renting for under $800 per month fell by one million in 2017, bringing the total loss from 2011–2017 to four million.

Looking forward, the report authors expect rental growth to be solid, with 400,000 additional renter households per year expected between 2018 and 2028. Whether these projections come to pass depends on a number of factors, including economic conditions, housing affordability, and the pace of foreign immigration.

Construction rebounds

Multifamily construction starts last year picked up after two years of decline, rising 5.6% to 374,100 units. With the exceptions of 2015 and 2016, multifamily construction was higher in 2018 than in any other year since 1988. However, given the previous two-year dip in starts and the lengthy construction process for larger apartment buildings, the number of multifamily completions fell 3.6% last year, to 344,700 units, the first annual decline since 2012.

Modular Construction can Deliver Projects 50% Faster

Modular construction can deliver projects 20% to 50% faster than traditional methods and drastically reshape how buildings are delivered, according to a new report from McKinsey & Co.

Modular carries a potential cost savings of up to 20%, but there is a risk of up to a 10% loss if delivery or material costs spike, the report says. The global market is primed for the sweeping change that factory-built construction offers.

To realize all of modular’s benefits, the building team must choose the right design and right materials as well as overcome challenges in design, manufacturing, technology, logistics and assembly; and take advantage of locations where they can achieve scale and repetition. Public sector owners and regulatory agencies are well positioned to drive the industry toward modular.

Up to now, prefabricated housing has achieved a sustainable foothold in only a few places, including Japan and Scandinavia, the report adds. That may change as labor shortages become more acute and the industry adopts new, lighter-weight materials and digital technologies that enhance design capabilities and variability, improve precision and productivity in manufacturing, and facilitate logistics.

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