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2019 Mall Revelopment Strategies

2019 Mall Redevelopment Strategies

Though not an article about local Philadelphia retail real estate, BisNow London has an article called, If You Don’t Want Your Property To Become Obsolete, Here Are The 10 Things You Need To Know. The article cites a new study from the Urban Land Institute and PwC called Emerging Trends in Real Estate: The Global Outlook for 2019.

The customer used to be the capital markets, but now it is the person using the building.

The acute problem for the real estate industry going forward is how to value older, retail properties that are becoming obsolete in today’s new retail paradigm? The problem retail real estate investors face going forward, is how to begin properly valuing these properties before and after their conversion.

The article from BisNow highlights an interesting part of the retail paradigm where a number of retail real estate investors, may be trapped by their current leases and see the value in current leases and not find value in reinvesting money back into the property. This seemingly narrow-minded outlook could be the best option for many.

If you are a leveraged investor, you might know that the equity value of the scheme that you own is zero,” one investor said in the report. “With that in mind, the only value the property has for you comes from the leases that are currently in place.

So why would you invest money in the property or do anything that reduces the income from those leases?” On top of this, it will take some time before those willing to step in and undertake the process of repositioning retail get the chance, the report said.

Going forward retail property owners will need to elicit better feedback from those using their buildings. As the study points out the future of retail is going to be driven by the end users experience.

It is no longer okay to just give people a box and then not speak to them for the next 10 years. People want you to design, develop and manage the space for them. They want you to provide amenities, experience and help to create a community.

In our opinion experiential retail is going to play a big part in redeveloping older retail properties. The drive towards increased understanding of one’s tenant is only going to grow. The adoption of digital tenant engagement apps by the major REIT’s is an early first-sign in the drive towards increased tenant engagement.

It’s clear that to avoid obsolescence and remain relevant in the modern world, real estate will need to provide that amenity and experience that the ultimate end users require – be they office workers, shoppers or residents.

Technology will be key in measuring feedback from people – both in terms of what they say they like about a building as well as how they actually use it in practice – and in creating a clearer link between new uses and value.

Owners will need to forge closer ties with occupiers, to collaborate and analyse what’s working for the people using buildings, day in and day out. The owners who can assess how people want to feel about a building and fulfil that intangible demand will be the most likely to avoid their assets becoming obsolete.

If you are a real estate investor that is considering the opportunities offered by retail and older mall redevelopment than it is going to be important to continually focus on how you can drive value to your visitors. Adopting innovative mall marketing strategies is one step towards going forward.

Best Places In PA To Invest In Real Estate 2019 – Vitality Index

A very interesting study on where prosperity can be found across the US came out from The Hamilton Project in a blog post, An Interactive Exploration of the Geography of Prosperity. The study highlights what it calls the Vitality Index.

For real estate investors, there definitely seems to be some potential insights for which areas could be the best places to find future real estate investment opportunities.

Pennsylvania real estate investors especially those looking in the 5-county area of Southeastern PA around Philadelphia will find the 3 of the highest-rated counties according to the research, Chester County came in first, followed by Montgomery County, then Bucks County with Delaware County and Philadelphia further behind.

From the Hamilton Project:

Americans in many ways experience a different economy based on where they live, generating substantial gaps in life outcomes.
The typical household income in the wealthiest 20 percent of counties is more than twice that in the poorest 20 percent, and that gap increased substantially from 1980 to 2017.
Poverty rates are three times higher in the poorest 20 percent of counties compared to the top counties.
Life expectancy is 6 years longer in top performing counties than those at the bottom. To put this gap into context, it has taken about 4 decades for U.S. life expectancy to rise 6 years, so the gap across counties is the equivalent of 4 decades of progress.
To present a more complete picture of which places are thriving, The Hamilton Project created the Vitality Index, which measures the economic and social well-being of a place. The index combines the following measures:
  • median household income,
  • poverty rate,
  • unemployment rate,
  • prime-age employment-to-population ratio,
  • housing vacancy rate, and
  • life expectancy.
Using a statistical procedure that can isolate the underlying common factor among these variables, we found that having a high median household income, a low poverty rate, and high life expectancy were the most important indicators of a county’s vitality.
While it’s never a good idea to invest in a particular area based on simply 1 look at data, it can definitely show some areas where to consider further exploring off-market deals.
Then again great real estate investment opportunities can be found in any area.

Are Urban Farms And Opportunity Zones A Potential Perfect Match?

With the buzz around investing in Opportunity Zones continuing to get louder and louder, one company is looking at a potentially genius pairing of new technology and using old industrial real estate which is currently available in numerous Philadelphia Opportunity Zones.

Zale Tabakman is the founder of Local Grown Salads which fabricates indoor farms using a modular construction method.

This concept has particular intrigue for areas like Philadelphia and Baltimore which has a large stock of older industrial warehouses which don’t meet the needs of many warehouse tenants.

A recent article in BisNow, Can Indoor Farming Fulfill The Dream Of Opportunity Zones?, highlights Tabakman’s efforts and his launching of an Opportunity Zone fund around his concept,

Because each LGS unit only requires a 15K SF pad with 14-foot clearance heights, Tabakman believes it is actually better suited to older warehouses than newer buildings with higher ceilings, saying “all that extra space would be wasted.”

The model is, in a way, ideally suited as an opportunity zone investment. To that end, Tabakman is working to launch a qualified opportunity fund called I95 OZF, focusing on the Northeast corridor, from Richmond, Virginia up to Boston, where space is at a premium and the most dense population in the country has sky-high food needs.

The article goes on to show how Philadelphia could be an ideal location for urban farms and similar concepts.

Those areas also often contain functionally obsolete industrial buildings for which an urban farm could easily meet the significant improvement threshold required under the opportunity zone regulations, according to CBRE Philadelphia Senior Research Analyst Lisa DeNight.

“[Philadelphia] is one of the oldest industrial stocks in the country, so its buildings are definitely on a smaller scale than other industrial hubs, even on the East Coast,” DeNight said. “Baltimore is probably very similar.”

For real estate investors up and down the East Coast Opportunity Zones could provide an interesting way to utilize many different real estate developments including urban farms.

2019 Mall Marketing Strategies

The new era of retail real estate means most commercial property owners need to adopt innovative strategies in order to compete in 2019 and ahead. So we asked a local real estate marketing agency for some ideas on how real estate investors looking for a value-add retail investment can succeed in 2019.

Below are a collection of ideas they put together. Some which we think are really innovative real estate marketing strategies. The successful real estate investor could have tremendous success in the new retail economy by adopting this comprehensive strategy.

Perhaps, the best strategy retail property owners can adopt is to become more local. While that may sound strange since commercial properties are often as local as it can get but overall they often are only local by their location.

Becoming more locally focused means retail and mall property owners need to adopt more local marketing strategies.

From older suburban malls to newer town centers, the commercial property owners who focus on most-effectively driving foot traffic and property recognition are going to find themselves the winners of retail in the new e-commerce age.

Malls Need To Become a Better Neighbor

We see the winners of the new retail paradigm as the property owner who can best become ingrained into the fabric of local life. As a local retail owner or developer, you must constantly be focused on how can I be the best neighbor possible?

How Does A Retail Property Market Itself Better?

The key is to drive people for events and instances outside the normal shopping experience. Start trying to drive more bodies to your property using events and marketing efforts they incorporate social media and if possible driving people to “check-in”.

  1. Become the host for local events.
    Instead of only being open during your business hours, realize you have numerous opportunities to add plenty of foot traffic, outside of business hours. From hosting winter 5K’s to local meetups or parents groups, it’s all about getting people in the door consistently.
  2. Start using the underutilized parking spaces.
    So many older malls have expansive parking lots that are rarely if ever including the Holiday Season, being used to capacity. Start filling those lots. Host a Farmers Market or Popup beer garden, maybe find a local non-profit to co-sponsor an outdoor fitness or wellness event. Start thinking about how can I bring bodies back to my property.
  3. Act more like a business association.
    Part of your goal as a mall or retail owner should be to help your tenants succeed. Vacancy is a killer, you want your tenants doing well especially for those on net leases. Help them succeed by marketing them as an extension of yourself. Promote – Promote – Promote run co-sponsored Facebook and social media marketing campaigns leverage your tenants to help yourself.

 

Industrial Real Estate In PA Could See Boost From Opportunity Zones

Joseph Brendel of Clark Hill PLC has an interesting article, which has some excellent news for real estate investors interested in Pennsylvania Opportunity Zones, on jdsupra.com, Pennsylvania DEP Confirms that Qualified Opportunity Zones in Pennsylvania May Also Offer Environmental Incentives for Redevelopment.

Mr. Brendel writes,

While the real estate development community has focused primarily on the tax incentives available for investment in QOZs, there also may be significant opportunities for limiting environmental risks associated with redevelopment of QOZs.

The designated opportunity zones often are located in financially distressed areas that typically have legacy environmental issues from shuttered manufacturing facilities, refineries, etc.

Therefore, investment in those QOZ areas also requires thorough environmental due diligence and addressing site contamination through state voluntary cleanup programs to protect the investors from exposure to potentially significant environmental liabilities.

The above offers some excellent insights into the potential Opportunity Zones offer for those looking to invest in industrial or commercial buildings in Pennsylvania. Mr. Brendel then goes on to show how a favorable decision by the DECP may make Opportunity Zones even more attractive for industrial real estate investors.

The DEP recently confirmed that properties located within these designated QOZs also qualify as “enterprise zones” for purposes of the applicability of the Special Industrial Area approach under Section 305 of Act 2.

Lastly, he finishes with some excellent insights into why industrial investors in Pennsylvania should benefit from investing in Opportunity Zones.

The benefits associated with remediating Special Industrial Area property in Pennsylvania demonstrate that there can be significant advantages beyond the tax incentives available under the Tax Cuts and Jobs Act for redeveloping environmentally-impacted QOZs that were formerly used for industrial purposes.

Ft. Lauderdale Opportunity Zones

As readers of the site know, we are big on the potential being offered by Opportunity Zones here in Philadelphia and across Pennsylvania, New Jersey, & Delaware. We’ve also been examining how investors and eventual employees around Amazon’s planned Virginia HQ could potentially benefit from investing in the Opportunity Zone nearby.

This led our team to take a recent trip from Philadelphia to Southern Florida, in particular, Broward County and Ft. Lauderdale to see what’s happening with what might end up being one of the most sought-after areas for Opportunity Zone investing.

Back in November BisNow highlighted the excitement being shown around Ft. Lauderdale Opportunity Zones,

Opportunity zones are a hot real estate topic around the country, and in Fort Lauderdale, especially so. The city is seen as an ideal place for opportunity zone money to land, because it has several neighborhoods that are already on the upswing.

During the event several investors pointed to Flagler Village, the 13th Street/Progresso area and the Sistrunk Corridor as ripe for opportunity fund investment.

In addition to a strong market, the Opportunity Zones in Florida have access to amazing weather which draws visitors and business owners from across the globe.

Due to the strong market fundamentals and ideal climate, we see many International business owners and real estate investors looking to the South Florida Opportunity Zones over the coming year.

Why Business Owners Should Consider Opportunity Zones

Often we’ll talk to real estate investors and developers and they are often wondering why we see such great potential for non-traditional real estate investors to see value in Opportunity Zones. Perhaps the biggest reason is due to the current structure of the plan. InvestmentNews.com has a similar look at why it could be beneficial to other investors and particularly business owners, Opportunity-zone investments — are they right for your clients?.

While a 1031 exchange only permits tax deferral on the sale of investment real estate, opportunity-zone benefits apply to the sale of a range of assets, including real estate, a business or highly appreciated stock, and thus are potentially beneficial to a wider range of investors.

Opportunity zone real estate developments may offer a higher internal rate of return than investments in existing stabilized assets, but the nature of a development project means that investors aren’t going to receive any cash flow for the first few years of the investment.

They then continue to show how the longer reinvestment time may end up giving investors and business owners who own real estate more flexibility over the 1031 exchange.

Additionally, because opportunity zones allow 180 days to reinvest, compared to just 45 days in a 1031 exchange, they can be a great option for investors who missed the chance for a 1031 exchange.

The Ft. Lauderdale Opportunity Zones could become an even bigger play, depending on the 50% ruling, for businesses who cater to the affluent and ultra-high net worth as many look to escape the colder climates during the winter months.

One question investors and business owners still have around Opportunity Zones, is the 50% Rule.

Joshua Pollard@JPollardinsight – Founder of Omicelo – A Mission-Driven Real Estate Investing Firm, provides a great explanation on the rule and what came out of the recent IRS hearing on Opportunity Zones in his article, 3 Big Takeaways From The Standing-Room-Only Hearing On Opportunity Zones,

The 50% test for investing in a business has emerged as, arguably, the most important factor in the legislation right now.

Why? If the IRS determines that 50% of the sales or gross income of a business that is taking on capital gains must be derived from within the Opportunity Zone in which it is located in order to qualify for an Opportunity Fund, that severely limits which and how many projects make for good investments.

Imagine a T-shirt design and printing company that operates in the rustbelt town of Braddock, Pennsylvania, known as the birthplace of Andrew Carnegie’s first steel plant.

Today, most of Braddock is designated as a Qualified Opportunity Zone. In order for the T-shirt business to meet the 50% test standard that would designate it as a Qualified Opportunity Zone Business, half of its T-shirt sales would have to come from inside Braddock.

Never mind the significant retail sales the T-shirt designer conducts online with buyers across state lines.

The 50% test plainly hamstrings businesses residing within OZ’s which seek qualification as OZ Businesses. Confining them to deriving 50% of sales from within the boundaries of their OZ creates little incentive for investors to want to put capital into them.

Learn More About Ft. Lauderdale Opportunity Zones

For those extremely interested in learning more about Opportunity Zones in Ft. Lauderdale, Bichanan Ingersoll & Rooney put together a panel to discuss investing in Ft. Lauderdale Opportunity Zones. (View Video)

The Hollywood Florida Economic Development website has excellent maps showing the Opportunity Zones available there.

Liberia – Oakwood Plaza – South Florida Design & Commerce Center

Young Circle – Hollywood Boulevard – South Federal Highway

Will New Train Station Make East Whiteland Township A Place To Invest?

For many residential real estate investors, a change in public transportation can have a major impact on an area. One has to look no further than the impact, the PATCO high-speed line has had on a number of South Jersey towns since it’s opening in 1969.

Recently, we’ve heard a number of investors who are interested in the impact the proposed extension of the Norristown high-speed line into King of Prussia could potentially have.

Investors in the Montgomery County and Chester County areas could also see a potential impact of mass transit on real estate in the form of a new train station being added to East Whiteland Township.

Next Wednesday from, February 27, 2019, from 6:00 PM to 7:00 PM, a Public Open House is being held by the East Whiteland Planning Commission at the East Whiteland Township Municipal Building.

The Delaware Valley Regional Planning Commission (DVRPC), in partnership with SEPTA, Chester County, and other partners, is developing the East Whiteland Train Station Feasibility Study. This study will evaluate potential sites for a new SEPTA Regional Rail station in East Whiteland Township, as a followup to the Route 30 Corridor Master Plan and previous planning efforts. Learn more and share your input! Stop by the Open House between 6:00 PM and 7:00 PM and stay for a brief presentation at the beginning of East Whiteland Township’s Planning Commission meeting at 7:00 PM.

Interested investors should keep an eye out on what comes out of the Public Open House, and going forward as it could make for some potential excellent real estate investment opportunities.

 

Will Experiential Retail Save The Holiday Season For Malls

While many malls have been struggling throughout the country, some malls in the Philadelphia suburbs are doing quite well. Iconic mall properties like the King of Prussia and Cherry Hill Malls, have both seen a strong resurgence, mostly due to a better mix of high-end retail and dining options.

One area where the difference in mall health is visible is the traffic during the holiday season. Mall owners need to continually look for ways to improve their foot traffic, and many times this is especially evident during the holiday season.

Additionally, some older suburban malls like the Granite Run Mall are seeing almost a complete change into more of a town center concept. Another mall in the suburbs that is seeing a number of changes, towards increased experiential retail, is Plymouth Meeting Mall.

Though the change to experiential retail has been happening at the Plymouth Meeting Mall, a recent trip to the mall showed there is still a long way to go, to drive people in large numbers back into the interior of mall properties.

PREIT the owner of the Plymouth Meeting Mall is planning to add a number of new retail and dining options in 2019 including a Dick’s Sporting Goods, Edge Fitness, and Miller’s Ale House, which are opening at the former Macy’s location, according to signs on the construction fencing.

These options will join a number a tenant mix that has lately included many experiental focused retailers including Dave & Buster’s, Orvis, CycleBar, LEGOLAND Discovery Center, 5 Wits, and Busy Bees Pottery & Arts Studio.

It will be interesting to see how if this change in retailer mix eventually leads to more traffic within the mall. While walking through the mall, it struck me that an important part of the experiential mix that is still missing is getting those who normally wouldn’t stop in, to stop by.

One idea mall owners could benefit from would be to open their properties up as the venue for local races. With the boom in fun runs and 5Ks, it would seem this could be an excellent opportunity for mall owners to get a demographic while shops heavily online, back into their property.

Partnering with local non-profits to host the runs, is an excellent way for mall owners to continually stay front-of-mind during the winter months, especially after the holiday season.

Value-Add Student Housing Investment Opportunity – Bloomsburg, PA

Great multi-family value-add investment opportunity near Bloomsburg University. Investment opportunity consists of 7 properties which are all located in close proximity to Bloomsburg and are currently being rented as student housing. 50% of the properties are already rented for 2019.

Learn more about this great opportunity to purchase a turn-key investment portfolio.

Investment Insights

  • Average annual maintenance fees average out to about $6,000 per year.
  • Tenants pay $303 per year, to cover trash, water, and sewer
  • Included in sales price are a business plan and property manager.
  • Currently, the owner contracts out all maintenance work. (Owner has used the same contractor for as long as they’ve owned the property. The contractor is open to continuing on. and he would be willing to continue on as well.
  • Potential value-add to increase summer rents and increase parking fees.
  • More than 50% of properties are rented through 2019 – 20, which is ahead of last years pace to fill them.

Student Housing Investment Portfolio

Property Address Property Type Listed Price Square Feet Bedrooms Bathrooms
305-307 IRON Street
Bloomsburg, PA 17815
MultiFamily $298,000.00 2,156 6 2.5
398 EAST Street
Bloomsburg, PA 17815 Active
MultiFamily $299,000.00 2,950 6 2
115 E FOURTH Street
Bloomsburg, PA 17815
MultiFamily $299,900.00 1,968 7 3
540 – 542 EAST Street
Bloomsburg, PA 17815
MultiFamily $409,000.00 2,144 10 3.5
140 – 152 IRON Street
Bloomsburg, PA 17815
MultiFamily $459,000.00 2,850 10 4
341 FAIR Street
Bloomsburg, PA 17815
MultiFamily $669,000.00 3,504 13 5
522 – 524 EAST Street
Bloomsburg, PA 17815
MultiFamily $718,300.00 2,464 16 6

Bryn Mawr Off-Market Commercial Real Estate Opportunity

Looking for an off-market commercial property on the Main Line? How about a mixed-use property in Bryn Mawr that’s just been reduced by $200,000?

This property isn’t listed and is ripe for cash investors. The savvy investor will see tremendous potential as the property is currently 100% vacant but had numerous upgrades in the last 24 months.

The property is on Conestoga Rd in Bryn Mawr, Radnor Township, and is situated within Garrett Hill less than 1,000 feet from the Rosemont Business Campus. The Rosemont Business Campus is Class “A” office space centrally located with easy access to Bryn Mawr Hospital, Villanova University and Route 476. The Rosemont Business Campus is comprised of three newly renovated buildings and within a short drive of 6 colleges and a highly affluent populace.

Rosemont Business Campus – Bryn Mawr

A quick look at the previous published rental rates from Loopnet show at it could have a pretty strong Cap Rate with some creative leasing.

The property is a 3,164 SF building made up of 3 units. The units are a 1,064 SF apartment (2 bedrooms), a 500 SF front retail space, and a 1,600 SF side-entrance retail space and warehouse.

2 Bedroom Apartment – Apartment consists of a first-floor entry foyer, a second-floor kitchen, bathroom and living area plus a third floor with two bedrooms.

500 SF Storefront – This space is separate from the rear retail space and does not have a powder room. The space was previously used by a small business that was looking primarily for drive-by advertising through signage and as a place to meet clients.

1,436 SF Retail/Warehouse – This rear space is a retail/warehouse space. It currently has some deferred maintenance and the existing powder room in the suite would need to be updated to an ADA powder room. This space is separate from the front retail space

Prime Commercial Location in Bryn Mawr

 

Central Commercial Location

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