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Strategies
Urban coreNeighborhoodrevitalized
CO M M E R C I A L R E A L E S TAT E I N D U S T R Y N E W S A N D I N S I G H T S F R O M N E W M A R K G R U B B Z I M M E R • V O L U M E 1 • I S S U E 2 • S P R I N G 2 0 1 6
in this issue
Going Beyond Brick and Mortar: The Evolution of CorporateReal Estate
Commercial Retail Real Estate Continues on Hot Trend for 2016
SIOR Celebrates 75 Years Across the Globe
KANSAS CITY, MO1220 Washington Street, Suite 100Kansas City, MO 64105816.474.2000 ST. LOUIS, MO8235 Forsyth Boulevard, Suite 310Clayton, MO 63105314.254.4600
EASTERN JACKSON COUNTY1485 SW Market StreetLee’s Summit, MO 64081816.474.2000
SALINA, KSP.O. Box 3224Salina, KS 67402816.474.2000
PRACTICE LEADERS
SALES AND LEASINGMark C. Long, SIOR, CCIM, LEED APSenior Vice President - Principal
INVESTMENT SALESMichael L. VanBuskirk, SIOR, CCIM, CRE Senior Vice President - Principal PROPERTY AND FACILITIES MANAGEMENTEllen Z. Darling, CPMExecutive Vice President - Principal GLOBAL CORPORATE SERVICESMatthew D. McFaddenSenior Vice President - Principal DEVELOPMENT MANAGEMENTDaniel F. MusserSenior Vice President - Principal PUBLIC SECTOR CONSULTINGDr. Troy L. Nash, HDFPVice President - Principal
SALES AND LEASING
Ben AlbersAssociate
Justin BealAssociate
Scott BernsteinManaging Director Retail Brokerage
Scott BluhmAssociate
Mike Carlson, SIOR, CCIMExecutive Managing Director Principal
Victor CascioVice President
Richard Chamberlain, SIOR, LEED, APVice President
Debora FieldVice President
John Hassler IISenior Associate
George HindeAssociate
John M. HoeferAssociate
Allan Kaufman, SIORVice President
Tracey Mann, CCIM, LEED, APVice President Director of Industrial Brokerage
Kevin McLaughlin, SIORExecutive Managing Director Principal
Joyce MurrayVice President
Nick PickardAssociate
Bernell RiceVice President
Mary Riley-CheekVice President
Chris RobertsonAssociate
Susan SmithVice President Director of Office Brokerage
Nick Suarez, CCIMVice President
Parker WebbAssociate
David Zimmer, SIOR, FRICSPresidentPrincipal
CORPORATE SERVICESAndy DoyleDirector
Matthew McOmberVice President
Warren RogersVice President ngzimmer.com
Lone Elm Logistics Center:NEW STATE OF THE ART INDUSTRIAL PROJECT OPENS JULY 2016
Current industry findings show conventional logistics centers and industrial sites no longer meet the needs of modern commercial tenants. Clients require increased ceiling clearances for higher-density product storage and cross-dockloading capabilities in locations near key intermodal transportation outlets.
Odyssey Real Estate Capital and Artemis Real Estate Partners have called on Newmark Grubb Zimmer to provide development management, leasing and property management services for a 496,150-square-foot speculative, state-of-the-art, industrial project strategically located in Johnson County, KS.
Slated for tenant occupancy in July 2016, the Lone Elm Logistics Center will serve as a premiere hub for transportation and logistics operations in the Midwest. It will feature enhanced architectural design; unmatched flexibility for tenants with significant employee and trailer parking requirements; 36’ ceiling clearance; and cross-dock design. The Logistics Center will also have the ability to accommodate multiple tenants whose space requirements range from 150,000 to 496,150 square feet.
As the nation’s most geo-centrally-located major metropolitan area, Kansas City is a clear choice for ongoing institutional-grade development. Its location in the center of the country makes it ideal for the centralization of transportation and logistics opera-tions. As the largest rail center in the United States (by tonnage), Kansas City is the heart of a rail corridor spanning coast-to-coast across the U.S. and extending from Canada to Mexico. Additionally, it is home to the intersection of four of the nation’s major interstate highways, a growing international airport, and a thriving foreign-trade zone.
Incomparable access to I-35 via Lone Elm Road Interchange
Excellent visibility from I-35
50% real estate tax abatement
15-minute drive to BNSF Intermodal Center
20-minute drive to downtown Kansas City, MO
PROJECT ADVANTAGES
BUILDING FEATURES
36´ clear height at speed bays
52 dock doors
4 drive-in doors
50´ x 50´ column spacing
ESFR sprinkler system
30-acre site
$4.25 square foot NNN
Ceremonial groundbreaking for Lone Elm project located in Johnson County, KS.
URBAN CORE DEVELOPMENT REVITALIZES LONG FORGOTTEN NEIGHBORHOOD
Newmark Grubb Zimmer is moving to a new, modern office space, just one floor above the current location at 1220 Washington Street in Kansas City’s vibrant Central Business District. The new space features a bright and open environment with views of the downtown skyline and the Kauffman Performing Arts Center.
As a model for dynamic office design, the new space encourages collaboration with an emphasis on huddle rooms, teaming stations, and multiple touchdown areas for all associates. Additional highlights include: a state-of-the-art training room, a central café area, an outdoor terrace, desks that raise and lower, dual-screen monitors, and other technology improvements.
When the new space is completed in late spring, NGZ will join the movement seen throughout today’s modern office workplace. In this environment, employees will feed off the energy of an open work infrastructure that encourages collaboration and maintains an optimum capacity workload.
KANSAS CITY OFFICE GOES cutting edge
Like many of America’s major cities, Kansas City has experienced decline in several areas, including those located near the Central Business District. One of those is the Beacon Hill neighborhood, a close-in, single family residential area. Lying about one-half mile southeast of the Central Business District, Beacon Hill comprises 100 acres and was developed in the late 1880s.
Until the 1970s, the area was populated predominantly by middle-class African-American families. The western boundary of Beacon Hill is Troost Avenue, a major commercial thoroughfare extending north and south through Kansas City.
During the 1970s through the 1990s, many families moved out of the area and homes were either left vacant or were used for unsavory activities. As the years progressed, Troost became a racial dividing line.
The neighborhood is anchored to the west by Truman Medical Center, Children’s Mercy Hospital, and the Health Science Campus of the University of Missouri-Kansas City (UMKC).
Roughly 7,000 students and employees converge on the neighborhood each day. With the area to the east of Troost Avenue declining, the City of Kansas City decided that Beacon Hill was one of the most important neighborhoods for redevelopment.
Newmark Grubb Zimmer formed the Beacon Hill Developers partnership with Taliaferro & Brown—one of the city’s leading African-American engineering firms—and J.E. Dunn Construction, the largest commercial construction company in the area. The group contracted with the City as Master Developer of Beacon Hill.
When work began, the neighborhood had declined to a point that traditional families only occupied 13 homes. The other homes were inhabited by either homeless people or drug dealers. Trash littered every block and weeds grew around the deteriorating homes.
Most of the utilities were over 100 years old and in need of major rejuvenation. A substantial number of lots and residences had been abandoned due to unpaid taxes and were held by the City’s tax delinquency entity.
Initially, the redeveloper and the City analyzed the existing situation and created a plan for a primarily new, middle-class, residential neighborhood. Then, they evaluated utility and other infrastructure conditions. The two-year process yielded a development plan to be used to obtain the necessary funding for the venture. Additionally, the City acquired a majority of the land not previously held by the City for approximately $10.8 million.
In 2006, preparation for new development in the northwest quadrant of the area commenced with construction of a new street layout together with new utilities. Concurrently, individual sales of the better existing Victorian housing stock were made to individual owners for upgrading, vacant housing was demolished, and the land cleared for new development.
At the same time, Beacon Hill Developers acquired a substantial amount of vacant land in the neighborhood for construction of single-family attached and detached houses. The long-vacant Robinson Hospital was redeveloped into a 45-unit senior living facility, while the 47-unit Beacon Park development was being completed.
With the downturn of 2008 approaching, demand for the fledgling new neighborhood was dormant. In 2011, UMKC was considering the development of student housing on the land it owned adjacent to their Health Sciences building. Hugh Zimmer went to UMKC Chancellor Leo Morton and proposed that Beacon Hill Developers build a student housing facility for UMKC on land in Beacon Hill.
Zimmer emphasized that this could be the spark that might energize the overall development of this adjacent neighborhood and make a major step in the breakdown of the long-standing racial dividing line.
Planning commenced for a voluntary proposal to build a 245-bed student housing facility in the neighborhood at the corner of 24th & Troost. The proposal was presented by Morton to the Curators of the University, who also embraced the idea.
Mayor Sly James, Chancellor Morton, and the Beacon Hill Developers group highlighted the ceremonial groundbreaking in late 2013. The group joined hands and crossed Troost from west to east to break ground for the new facility.
The $34 million project was completed in time for the Fall 2014 academic semester, and quickly filled with students from the Hospital Hill Campus as well as the Volker Campus, located nearly four miles south of Beacon Hill.
New homes—ranging in cost from $250,000 to $450,000—ultimately changed the roadway between 24th and 30th Streets. Troost Ave. was also modified from a busy, four-lane arterial to a two-way traffic lane with on-street parking.
Today, Beacon Hill provides an attractive, safe, and diverse housing opportunity for those interested in single-family homes over multi-story developments within the urban core. New investment in the area now exceeds $100 million. The population of the neighborhood also contains a large number of young professionals, working not only in the adjacent Hospital Hill area, but throughout the urban core.
ABOUt Newmark grubb zimmer
Newmark Grubb Zimmer is a full-service commercial real estate company that provides a range of services—sales and leasing; property and facilities management; and owner representation for public and private development projects, global corporations and public-sector consulting.
Regularly recognized as one of the top brokerage firms in the region, NGZ manages more than 7.5 million square feet of office, medical, industrial, and retail property, and serves as a corporate real estate advisor for an assortment of local, regional, national, and international companies. Offices are located in Kansas City, Lee’s Summit, St. Louis, MO, and Salina, KS.
market reportMARKET REPORT AS OF DECEMBER 31, 2015For the most up-to-date information, visit ngzimmer.com.
Newmark Grubb Zimmer is constantly monitoring market indicators, as well as tracking and analyzing supply and demand drivers, cyclical patterns, and industry-leading trends. As NGZ continues to evolve its presence in Kansas City and St. Louis, NGZ research now offers its clients an industry-leading analysis of current and relevant industrial, office, and retail conditions. Rather than rely on third-party data sources, our data acquisition efforts involve inputs from advisors in the field—the analysts and brokers executing transactions. The following research reports examine the multi-faceted Kansas City and St. Louis markets.
OFFICE MARKET:Kansas CityThe Kansas City office market ended the year with a record number of sales, setting the stage for a dynamic 2016. Institutional investors are actively trading assets in the Midwest due to higher cap rates and better returns on capital than found on the coasts. With market vacancy at an eight-year low, expect rental rates to continue to rise as new deliveries to the market are kept in check.
St. LouisThe St. Louis office market ended the year with a 40.0% increase in sales activity compared to the prior year. With cap rates in the area potentially reaching 7.0 to 8.0%, investors view 14 months of declining vacancy and 10 months of rising rental rates as indicators of a tightening market. As construction levels remain sparse, expect solid sales activity to continue for 2016, as investors continue to examine core plus and value-add opportunities.
INDUSTRIAL MARKET:Kansas CitySpeculative construction starts, large-scale deliveries and significant tenant commitment announcements within the Kansas City metropolitan area were plentiful in 2015 and will continue in 2016. With an average of 3.6 million square feet of net absorption over the past three years, the market’s need for new space will be supplied by significant project announcements—including the Lone Elm Logistics Center.
St. LouisThe St. Louis industrial market realized 2.3 million square feet of new deliveries in 2015, an eight-year high that is nearly double the output of 1.2 million square feet in 2014, and a substantial increase over the 0.5 million square feet delivered in 2013. With market vacancy at a nine-year low, expect large-scale Class A developers to enter 2016 with additional speculative construction and owner-occupied offerings.
RETAIL MARKET:Kansas City & St. LouisBoth the Kansas City and St. Louis metropolitan retail markets were well-positioned as retailers made preparations for the year’s most important shopping season—fourth quarter. Limited available space in active retail corridors and shopping centers continued to drive vacancy lower and boost retail rates to new heights. Development continued on projects offering consumers new shopping experiences not afforded by e-commerce limitations.
INDUSTRIAL MARKET Kansas City St. Louis Nationwide
Average Asking Rent (Price/SF) $4.40 $4.12 $5.68
Vacancy Rate (%) 5.6% 6.8% 6.5%
Net Absorption (SF) - YTD 1,694,477 924,866 55,900,000
OFFICE MARKET Kansas City St. Louis Nationwide
Average Asking Rent (Price/SF) $18.14 $18.87 $28.93
Vacancy Rate (%) 13.0% 14.5% 13.8%
Net Absorption (SF) - YTD 70,963 1,793 17,200,000
RETAIL MARKET Kansas City St. Louis Nationwide
Average Asking Rent (Price/SF) $12.40 $11.74 $15.10
Vacancy Rate (%) 7.7% 7.1% 5.7%
Net Absorption (SF) - YTD 979,920 978,426 77,600,000
Ceremonial groundbreaking in late 2013 marked by Mayor Sly James, UMKC Chancellor Morton, and the Beacon Hill Developers group joining hands and crossing Troost Avenue, from west to east.
Newmark Grubb Zimmer revealed their new floor plan to their employees and associates this past January.
Commercial realestate continues ITS hot trend for 2016AS WE HEAD INTO 2016, REAL ESTATE CONTINUES ON A HOT PACEWITH TWO MAIN THEMES: EXPERIENCE AND INVESTMENT.
Going beyond brick and mortar: The evolutionof corporate real estate
Competition in today’s global markets has forced many corporations to focus on corporate real estate assets as a major piece of their financial puzzle. With the exception of salaries, fixed assets are often the highest operational expense. In fact, many of the Fortune 100 companies spend more than a billion (yes with a “B”) annually on real estate related tax-deferred operating expenses.
Even small to mid-sized companies are writing sizable checks each month and paying millions annually to keep their offices, retail centers, factories and warehouses up and running. However, despite all the spending, it’s only been in the last decade that corporate real estate solutions have been viewed less as a corporate cost center and more as a means to generate productivity, growth, and collaboration.
Beyond the transactional and often reactive approach to managing real estate, “portfolio optimization” is a term that has found its way into the everyday corporate vernacular. Simply understanding the operational cost of your real property assets is only one facet of many to be considered.
Companies with even a handful of holdings are now consistently and proactively evaluating areas such as site location, consolidation, space utilization, sale/leaseback options, 1031 tax-deferred exchanges, lower cost relocations, and facility management outsourcing. All of these are critical paths to optimizing corporate assets and improving the company’s financial health and sustainability.
The shift in thinking is not only a result of a broader focus on cost but also due to changing workplace environments and technology. Advances in supply chain and logistics technology allow for just-in-time deliveries, meaning less inventory and warehousing (and thus less required space) at corporate sites or retail locations. Technology has enabled open and collaborative offices, allowing for a smaller overall footprint and often a more vibrant and productive workplace.
Law firms have dumped big law libraries in exchange for online research. Likewise, accounting firms are utilizing cloud-based storage and eliminating the need for physical storage space. These changes are proving to be financially meaningful. In addition to increased productivity and a happier workforce, corporations are also cutting operational expenses by as much as 25%, which drops straight to the company’s bottom line.
Cost constraints have also led companies to reevaluate their ownership interest in real estate. Many have determined that their company is not a real estate investment firm and would rather not tie up money in brick and
mortar. They are selling their buildings and leasing them back or moving into more efficient offices and facilities, then plowing profits into operations and technology. A leased property not only provides for geographic flexibility in changing markets, but also allows for an adaptation of physical size in the event of expansion or contraction in business.
In the past decade, the growing complexity of this evaluation spurred the formation of national service providers focused squarely on corporate services. Growing out of traditional brokerage firms, corporate service groups focus on the entirety of a corporation’s real estate portfolio. A good corporate service provider acts as an extension of a company’s real estate department or for many smaller firms, becomes the real estate department itself.
In leading-edge companies, corporate real estate must be looked at from a myriad of angles. It can optimize profit and growth and can also be an efficient, cost-effective tool that works with technology and corporate culture. Moreover, executed well, corporate real estate solutions will positively affect the workspace, the workplace, and the bottom line.
Experience and investment appear to be the two main themes present in the retail market heading into 2016. Retailers and developers continue to drive consumers away from their computers and into shopping experiences.
Today, modern developers are creating lifestyle centers that cater to a mixed-use tenant. In this landscape, retail sales are supported not by other retailers but instead by hotels, office space, residential condos, luxury apartments and entertainment areas.
Low interest rates and demand exceeding the supply has created a strong retail investment market and one that has seen the lowest cap rates in recent memory. As new construction in the market is at the highest level in five years, both Kansas City and St. Louis have become attractive options for local, regional, and national developers and retailers.
As retail vacancies decline, a shift can be seen toward a landlord market for those with well-positioned real estate. With over two million of retail square footage in leasing assignments between Kansas City and St. Louis, vacancy rates are dropping and deals are being done as retailers attempt to reposition themselves or enter the market for the first time. During fourth quarter of 2015, Newmark Grubb Zimmer represented landlords in the following transactions: Sylvan Learning Center, Mr. Goodcents Subs, and State Farm.
The tenant side of the business has been extremely active as well. Hacienda Mexican Restaurant hired NGZ to bring their new fast-casual concept, Wet Burrito, to the market. The goal of Wet Burrito is to serve every customer in less than three minutes, with flavors similar to those featured at Hacienda. The first restaurant will open this spring in Clayton, Missouri, with more to come later. Other retailers, such as The Burger Joint and Birdie’s Chicken have been retained with the desire to expand their presence in the St. Louis market. NGZ is also working with a new financial firm in the market who will be opening nine locations in Missouri and Southern Illinois.
Recent investment data indicates that investors are investing into retail properties. In St. Louis, transactions by NGZ included over $14 million in retail investment sales with name brands such as IHOP, Buffalo Wild Wings, PDQ, and Mattress Firm. Furthermore, due to high demand and a robust market, NGZ recently sold an investment property for three times the appraised value within one month of being on the market.
A strong retail investment market was visible in Kansas City as well with the sale of the Country Club Plaza. The current ownership, Highwoods Properties announced in January that it had reached an agreement to sell the iconic upscale retail district for $660 million to a joint venture between Taubman Centers and The Macerich Company. The sale is only the second time the Plaza has been traded in its 93 year history and is expected to close in February of 2016.
Real Estate Operational Expenses
look for us at these conferences:
NGKF Industrial Strength Connections Summit/ ChicagoSeptember 2016
SIOR Development Day/ Kansas City September 22nd
IAMC Fall 2016 Professional ForumIndianapolis October 8th-12th
SIORFall Conference/New YorkOctober 20th-22nd
IAMCActive Corporate Real Estate Executives Spring ForumNew OrleansMarch 12th – 16th
SIOR2016 Spring World ConferenceSan DiegoApril 13th – 16th
ICSC Las VegasMay 22nd - May 25th
NGKFAffiliate Principals Fall Conference/ChicagoSeptember 2016
PORTFOLIO OPTIMIZATION
Amount of Square FeetNumber of Sites
The SOCIETY OF INDUSTRIAL AND OFFICE REALTORS® is the leading professional commercial and industrial real estate association. With over 3,000 members in more than 630 cities in 37 countries, SIOR represents today’s most knowledgeable, experienced, and successful commercial real estate brokerage specialists.
SIOR (SIR) dates to the late 1930s when the United States was on the verge of entering World War ll. SIR was instrumental in locating existing, and immediately available, plant space that could be utilized for the production of defense and—later—war material. Over 200 brokers from across the United States and Canada surveyed suitable facilities and reported their findings to the War Department (now the Department of Defense).
These 200 brokers would become the Society’s charter members. The urgency of the war effort required ability, integrity, and sincerity from the brokers—three qualities that the organization holds in high regard to this day. After the end of WWII, SIR members were instrumental in disposing many of the industrial plants that had been assembled to support the war effort.
In 1986, the Society of Industrial Realtors (SIR) became the Society of Industrial and Office Realtors (SIOR) while expanding the association membership to professionals who lease and sell office properties.
SIOR expanded outside of North America in the 2000s through leadership’s committed focus on establishing a global network of transaction professionals. Membership continued to grow outside of the U.S. and Canada. The first chapter outside America, the European Regional Council, was established by SIORs in Europe. Today, there are more than 70 members outside the U.S. and Canada. Over the years, Newmark Grubb Zimmer has provided instrumental leadership to SIOR locally, regionally and nationally. Since its inception, there have been only three father/son duos to hold the position of President within SIOR. In 1979, Hugh J. Zimmer was national president of SIR and in 2010-2011, David J. Zimmer was international president of SIOR. Currently, Allan S. Kaufman and Mark C. Long are on the Performance Oversight and Monitoring Committee for SIOR.
In 2016, SIOR will celebrate its 75th anniversary. Over the next year, past and present members are urged to come out and participate, renew old acquaintances, and make new friends while recognizing the organization’s 75th anniversary. Celebrations will be held at the Spring World Conference in San Diego, followed by an international conference in London, U.K. in the summer. The year will culminate with the Fall World Conference in New York City.
SIOR Celebrates 75 Years Across the Globe
Sara Jo Wergin
Sara Jo Wergin has joined our firm as Business Operations Manager for NGZ’s Kansas City office. She holds a master’s degree in entrepreneurial real estate and brings experience in asset management, residential, and commercial leasing and development. Prior to joining NGZ, she was with a $4.5b REIT as an analyst and underwriter.
George Hinde
George Hinde joins our brokerage group as a member of our office leasing team. He is a graduate from the University of Missouri with a degree in finance and an emphasis in real estate. Our office brokerage team is among the largest and most active in Missouri and Kansas.
Chandy Orthel
Chandy Orthel will serve as Branch Office Coordinator in our Lee’s Summit office where she oversees operations and support of the eastern Jackson County business. Prior to joining our team, she served four years in the United States Army.
ROBIN FISH
Robin Fish joined as a Property Manager and has most recently spent seven years with Downtown Overland Park Partnership doing economic development and marketing as well as providing tenant and property owner support. Ms. Fish received a Masters Degree in English Literature from Pittsburg State University.
Olivia Yarbrough
Olivia Yarbrough has joined as the Business Operations Manager for the St. Louis office. She has been working on marketing and real estate for the past 5 years and is a graduate from the University of Missouri.
Ben Albers
Ben Albers has started in the NGZimmer St. Louis office. He represents landlords and tenants in office property transactions. Ben is a graduate of St. Louis University.
EVOLUTION OF SIOR LOGO
MEET OUR TEAM
Today, Newmark Grubb Zimmer is an organization of 90 people with wide expertise, practical education, and experience ranging from bachelor’s degrees, master’s degrees, and doctorates. Our degrees cover real estate, architecture, engineering, law, construction, economic development, finance, economics, and marketing. NGZ strives to achieve excellence for not only our clients and vendors, but also internally with a strong group of dynamic people. We continue to attract and develop a winning team. It is our pleasure to introduce some new faces.
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