Emerging Trends in Commercial Real Estate – A Chat with Michael Lagazo about Retail

One could argue that the retail sector is one of the most rapidly changing and evolving sectors in the real estate industry.  With shifting demographics, changing customer buying habits, and advancements in technology, the sector is at a very tangible moment of flux.

To get a better sense of this flux, I reached out to retail expert Michael Lagazo to learn more about the trends and changes in the market. Michael, a Senior Associate with Rosano Partners in San  Diego, is one of the industries’ go-to authorities on emerging retail trends. Michael has been featured in the Wall Street Journal, Commercial Property Executive, and Shopping Centers Today—on top of being a regular organizer and speaker at numerous commercial real estate conferences nationwide. In fact, Michael and I postponed our discussion about the retail industry several days because he wanted to include a few up to the minute notes from his participation in Retail Live L.A.

M Lagazo Twitter

  • Fresh off the Retail Live L.A. Conference, what are some of the current market trends that we should be aware of?

First, I would like to thank Michael and Stacey Gilham for hosting an excellent networking event. Comments on the trade show floor complimented the quality of conversations directly with retailers and shopping center landlords. As promised, the food and entertainment were remarkable.

National credit tenants are finding ways to expand in an environment where value and discount is thriving. Many consumers are poorer than before the recession. Private equity firms are funding acquisition and consolidation. Majority owners are more actively participating in operations than pre-recessionary periods. Merchants are taking on more risk in pursuit of sustainable yield. For example, a national drug store chain has refinanced debt to fund expansion.

Several retailers were represented at the conference but most were food and beverage vendors including restaurant groups based on the east coast and in the Midwest expanding west to follow biotech and technology job creation from Los Angeles to San Diego, CA.

  • The retail sector has been going through adjustments over the past few years (from changes in technology, consumer buying habits, etc.), how are landlords, tenants, developers, and brokers adapting to these changes?

Value and discount merchants are competing directly with each other even occupying sites to remove a competitor’s option from a trade area. Big box retailers are embracing express or compact store formats of 40,000 square feet or smaller. Surplus retail space is being repurposed for mixed-use or office. Merchants are embracing more diverse product offerings. For example, non-club bulk item retailers are selling groceries and daily needs items in the same store as office supplies.

  •  Where do you see opportunity in the retail sector given current market conditions? Are there any new markets or niches that are small now but could take off?

Investors are purging their portfolios to free up capital to pursue trophy and class A projects. The flight to quality continues as merchants relocate to better centers. Opportunities exist in buying income producing retail assets before bottle-necked demand and mainstream rhetoric drives artificial price appreciation.

The present climate makes it easy to differentiate which shopping center got the leasing strategy right and which missed the mark. An innovative era in which in-store and e-commerce experiences are not so discrete will foster innovative concepts like BonobosWarby ParkerKeaton Row, and Hointer.

Bonobos

  • What do you find most exciting about the retail sector right now?

The convergence of technologies is changing how we live, work, and shop. Brick-and-mortar stores are still the most immersive places for shoppers to encounter a brand, however, mobile is the face of engagement. Projects like The Peterson Companies’ National Harbor and North American Properties’ Atlantic Station are examples of shifts towards experiential shopping.

Atlantic Station

Finding new ways to create a virtual place for shoppers to experience one’s brand is exciting. The technology is secondary to strategy. A linear purchasing decision has been replaced with concentric circles (circles within circles). Shoppers draw impressions about brands through interactions with friends and family, through conventional and social media, as well as engage the brand virtually on multiple devices.

  • How do you tweet so much?!

Quick editor’s note: Michael is one of the most followed commercial real estate experts on Twitter. Many real estate professionals, including myself, follow his 100,000+ tweets for breaking industry news and emerging trends. If you’re trying to gauge the pulse of commercial real estate, Michael is one of the best resources on Twitter.

I’ve always been a student of the real estate game and remain inquisitive. I stay plugged in via mobile, tablet, and PC to learn and share content that may be useful to other CRE people.

You can follow Michael on Twitter here: @Michael_MBA.

  • What excites you about Rosano Partners and working in the southern California commercial real estate market?

Managing top regional malls for leading REITs and later liquidating assets in receivership has given me a chance to solve many diverse and complex problems at times under difficult conditions. I offer retail services including agency leasing, portfolio leasing, and investment sales for investors in southern California.

Very big thank you to Michael Lagazo for his insight into the retail sector! The best ways to keep up with Michael are through Twitter and Rosano Partners.

RE:think – Parking

What’s one of the biggest pains when planning and developing property?!

PARKING – It’s big, it’s messy, and it engulfs entire city blocks and parcels everywhere!

What’s one thing people always gripe about in any dense, urban area?!

NOT ENOUGH PARKING – There is never enough of it.

Based on the points above, parking is both a blessing and a curse (nothing new here). Despite this constant struggle between parking as a nuisance and parking as an amenity, there are opportunities in some cases to completely rearrange how parking is designed and developed.

Here is a collection of projects that challenge conventional methods and RE:think parking.

1111 Lincoln Road, Miami—Robert Wennett

1111 Lincoln

1111 Lincoln Road—Miami is what you get when you put famed architects Herzog & de Meuron with an unconventional development and visionary developer Robert Wennett. I could go on and on about how the team flipped the notion of parking on its head and came up with something completely new, but the video below does the project way more justice than I could.

This project wasn’t always viewed as a massive success. Many critics doubted its viability while it was under construction and even when it became operational. Flash forward a few years, and we can now see how visionary it was and continues to be.

200 Eleventh Avenue, New York—Young Woo & Associates

200 Eleventh Avenue (aka Sky Garage Condominium) in West Chelsea is the first en-suite sky garage high-rise in the country, elevating the owner’s car right into his/her apartment building.  Completed in early 2010, the project was nearly entirely pre-sold despite the ongoing economic crisis, thanks in part to its “papparazi-proof” en-suite elevator.

Parking Young Yoo

Terminal Nord, Hoenheim, France—Zaha Hadid

Zaha Hadid designs some of the most exotic buildings in the world. Her design for the Terminal Nord in Hoenheim France uses parking compositionally with the entire development site. The aerial image below shows how the parking lot—while still a large, uninterrupted mass—is integrated artfully into the design of the whole site.

Zaha ParkingZaha Parking 2

Parking lot at the University of Copenhagen

Asphalt and other surface parking materials create durable, mobile surfaces that are ideal for automobiles and heavy traffic, but they also completely seal up the land they cover. Porous, permeable paving, like seen in this Copenhagen parking lot below, alleviates the need to block the land from breathing at the surface.

Pavers 1

Solar Panel Parking Lot

EEPro Solar developed some of the world’s first photovoltaic carports. According to the company:

Our carports are ideal for large parking lots, and for a wide range of users from business and buildings, to amusement parks, ski resorts, major transportation centers and even the country’s largest malls. What’s more, it’s possible these very structures could become revenue generators, selling energy ports for plug-in hybrids and other vehicles.

 

EEPro has solar carports for single, double or entire parking lots that can be installed on existing parking lots or parking garages with steel rods. Modular systems allows fast scalable solar carports to be installed. Let your company be more “Green” by installing solar carports to reduce summer heat inside the cars along with producing solar energy at the same time.

PV Parking

Want to learn more? Check out these links here and here.

Autostadt – Germany

You can’t have an article about rethinking the parking lot and not bring up the Autostadt in Germany. This car museum, adjacent to the Volkswagen factory in Wolfsburg, features two glass car silos. The silos store new Volkswagens that were recently completed in the factory.

Germany Parking 1

Customers in Germany have the option of picking their cars up from the Autostadt silos in person.  The Autostadt supplies the customer with free entrance, meal tickets and a variety of events building up to the point where the customer can follow on screen as the automatic elevator picks up the selected car in one of the silos. The car is then transported out to the customer without being driven at all, and the odometer is thus on “0”.

Are car silos the parking solution for congested city centers worldwide? Probably not (imagine what the cost/SF would be!), but they sure are beautiful and intriguing.

Germany Parking 2Car Stacking

Now for a more utilitarian approach to car stacking. Spend any time in cities like New York, Chicago, or San Francisco and you’re bound to see one of these parking lots. Car stacking isn’t the solution for every urban center, but it does drastically increase the usable density of an urban parking lot.  For certain parking situations where space–and not time–is at a premium, car stacking does the job.

NYC Parking 1

Will parking go away anytime soon? No. However, the projects above attempt to rethink how we use and interact with parking. So, while parking may always be a nuisance to some and an amenity to others, it doesn’t always have to be so static.

Analyze more Real Estate Deals with the Help of this Technique

8227630067_2c5fa565fc

I’m going to make a not-so-bold assumption. Ready?! Here it goes:

You’re a very busy person.

I make this assumption because the nature of our business requires us to constantly be on our toes, continuously change direction, and know the intimate details of our projects and deals. Don’t worry, I’m not lamenting over this. It’s what makes real estate exciting! It just comes with the territory when we jump into the real estate game.

Effective time management was the name of the game for me this week because, even compared to most weeks, it was particularly busy. Hard deadlines, multiple projects in various stages, due diligence on new work—it was all there (and organized in a perfect storm that can only make for a busy week).  So I wanted to try a new time management technique to organize my time in order to take on and complete all the work I set out to do.

I was originally going to write another piece. Frankly though, because this technique worked so well, I thought I’d share it right away. It’s not groundbreaking, revolutionary, or necessarily specific to us real estate professionals. But it did help me take on a mountain of projects this week.

If you want to take on more work, analyze that extra cash flow projection, or triple and quadruple check your existing deals, this technique could help you effectively manage your time.

It’s called the Pomodoro Technique.

Pomodoro Technique 1

The name is derived from a common kitchen timer found in Italian households that’s shaped like a tomato (see image above). You simply use a timer to structure 20-25 minute periods of work in intervals followed by scheduled breaks. Seriously, it’s really that simple!

While the technique is simplistic in design, it is also deeply rooted in psychology. The principals behind it—compiling tasks, scheduling specific work sessions, forced periods of rest and rewards—offer powerful ways to organize one’s workflow when faced with work on numerous scales, in various stages, and in tight intervals (sounds like the real estate game!).

The next time your to-do list is taller than a venti cup of coffee, set your timer to 20-25 minutes and clear out all distractions. Then, after the timer goes off, stop all work and take a quick five minute break. Use this break to reward yourself with a web surfing session (YouTube and ESPN are my favorites), a light snack, etc. Then repeat this cycle again.

The crux of the exercise is to be diligent about the structure. I found that five minutes could quickly turn into ten minutes and ten minutes could quickly turn into 20 minutes. By treating the timer like a rule and not an option, I learned to trust the exercise and not just “try” it.

Clock 1

Here’s what I took away from the exercise after using it for an entire week.

  • I could track my progress more easily.
  • It was strange at first, but I improved my workflow as I went along. I let fewer distractions get in my way.
  • Since each block of time was limited to 20 minutes, I could easily get laser-focused on a specific issue, problem, or task (perfect if you have multiple projects you want to analyze, but are not sure where to start).
  • Large tasks were much easier to understand and break down into smaller chunks because they were only worked on in a short period of time (which became consecutive short periods of time…and added up).
  • The break periods were true breaks. Despite having a busy week, I didn’t feel guilty about my quick breaks because they were built into the system.
  • In order to be a truly effective technique, I had to abide by the timer guidelines (no fudging it here and there).

I decided to deviate from specific content on real estate this week because I know how frustrating it can be to be ambitious about one’s work yet get a “deer in the headlights” feeling when tasks start to pile up. We all want to be everywhere, know everything, and not miss a beat. This technique gave me noticeable results in a short period of time. I hope it can do the same for you. If not, all it took was a timer and 25 minutes of your time. Good luck!

The Perfect Path to Developing Real Estate

Real Estate Development `1

A version of this article originally appeared on BiggerPockets.

Many real estate professionals want to develop their own properties at some point in their career. So what is the perfect path to developing real estate?

I’ve gotten this question a lot lately. It’s one that I’ve run past mentors of mine and one I continue to tease out myself. If you’re looking for a quick answer, you can quit reading now because I don’t have one. Frankly, I don’t think there is a perfect path for anyone. Of the development professionals I’ve worked with, they all come from various walks of life, disciplines, and levels of experience.

The diversity of answers I get seems to allude to the exact characteristics that make real estate development so damn exciting!  As with other real estate strategies, development pulls one in many different directions—no day is really ever alike. The amount of people you collaborate with throughout the life-cycle of a project is lengthy. And they all have an important role to play in the project—of which you, as the developer, are the main conductor.

If you’re interested in real estate development, where exactly is a good place to start? Given my reluctance to nail down a specific path, here are some professions, skills, and backgrounds that tend to gravitate towards a career in real estate development.

Bank Image

Finance – Investment banking, mortgage brokerage, private lending

Why? Development is rooted in financial principals and can’t occur without them. Having a keen understanding of finance is crucial for any project. Because of their financial acumen, people in a financial role understand the financial risks involved in any project. Many finance professionals find themselves transitioning into real estate development because their skills in financial modeling, planning, and management are needed throughout the life of a project.

Commercial and residential brokerage

Why? Brokers know the pulse of the market and know how, why, and when a property sells. Developers that come from a brokerage background tend use their local knowledge to exploit market gaps and imbalances. Because of their intimate knowledge of rent levels, vacant properties, lease structures, etc. they can recognize certain development opportunities where others can’t.

Law

Why? Development requires strict adherence to local, state, and federal laws. Developers often lean on their trusted legal council to guide them through these complexities. Having a background in real estate law can help any developer understand how to navigate this part of the process.

architecture 1

Architecture

Why? Architects are responsible for designing and creating the physical spaces we all use. Because of their intimate knowledge of design, building construction, space utilization, usability, and space programming, architects have a vital skill-set needed to develop properties. Architects constantly work at multiple scales—from the high-level vision down to the specific details. This ability translates perfectly into development because developers are constantly switching gears between different disciplines and scales. The best developers I know, similar to many architects, are able to communicate their vision and then tell you exactly how the details will help execute that vision.

Property Management

Why? One can finance, design, build, and lease a property all they want. But if it isn’t operating correctly, its value diminishes quickly. Property managers understand many of the nuances that make a property operate smoothly and efficiently.

Municipal/government

Why? Ask any developer what stage typically takes longer than expected, has the most uncertainty, and can quickly stall a project and they’ll likely answer with the entitlement process (strong runner up is securing financing). Developers that come from a background in zoning, compliance, permitting, and other local government roles have a keen understanding of this process and can use it to their advantage throughout the development life cycle.

architecture 2

Entrepreneurship

Why? Development, at its heart, is an exercise in creating something out of nothing. Entrepreneurs have skills that align quite nicely with real estate development. While their backgrounds might not always be in real estate or any of the professions mentioned above, an entrepreneur’s ability to plan, promote, sell, manage, and ultimately grow a company is directly transferable to development.

So there you have it. If you want to break into real estate development, you’ve got many options and opportunities to leverage your skills and background. There really is no tried and true path to developing real estate. Of the developers I know that are successful on a long-term basis, they all have a hunger for learning, are deeply passionate, and have deep knowledge of a specific discipline—then expanded their wheelhouse from there.

Leading a Growing Property Management Team with Andy Ashwal

Andy Ashwal, Executive Director for KW Property Management’s new office in New York City, is someone that truly understands the big picture when it comes to property management. With a background in development and construction management, his perspective on managing real estate comes from understanding properties from many different scales. Andy and his team are responsible for managing thousands of residential units and multi-million dollar operating budgets in Manhattan–all while leading expansion efforts in a constantly changing market.

I sat down with Andy to chat about how to successfully lead a property management team and how he strives to deliver a unique product in one of the most competitive real estate markets in the country (if not the world). In our chat, you can see how he communicates the importance of managing the big picture as well as every detail of his property portfolio. Thanks for tuning in!

You can learn more about Andy and KW Property Management here and on Twitter @KWPropertyMgmt.

The Importance of Due Diligence with Frank Gallinelli

I sat down with Frank Gallinelli to have a chat about the importance of due diligence in real estate investing and development. Frank is the Founder and President of Realdata, Inc., is an author of three books on real estate investing (you can find them here), and is a professor at Columbia University’s Master of Real Estate Development program. So when I needed to find a special guest expert on the subject, Frank was the very first person that came to mind.

Without further ado, tune in and grab some of Frank’s wisdom!

If you want to learn more about Frank’s work, be sure to check out:

RealData.com

Mastering Real Estate Investment

What Every Real Estate Investor Needs to Know About Cash Flow…and 36 Other Key Financial Measures

Insider Secrets to Finding and Financing Your Real Estate Investments: What Every Real Estate Investor Needs to Know About Finding and Financing Your Next Deal

10 Commandments for Real Estate Investors

How to Develop Real Estate – A Chat with Developer Greg Hutchings

I recently sat down with developer Greg Hutchings to have a chat about the parallels between real estate development and entrepreneurship. Greg is a successful developer and educator with a specialization in mixed-use and multifamily properties. In our chat, Greg explains why entrepreneurs are attracted to development, what skills are needed to successfully complete a project, and how one can learn more about the industry.

Thanks for tuning in!

Stay tuned for more chats with real estate professionals!