Alliance Residential rose three spots to
become the top developer this year with
6,935 apartments started in 2018—that’s
over 1,000 more units started than the next
developer on the list.
Summit Contracting Group stayed on
top as the nation’s highest-producing
apartment builder, starting 8,828 apartments in 2018, up more than 2,000 units
from last year.
PNC Real Estate became the country’s
largest apartment tax credit syndicator with
136,447 apartments syndicated.—Erika
BRICKS AND STICKS
The Rising Cost of Office
The cost of office fit outs has been outpacing tenant improvement
allowances, according to a recent study by JLL. It reports that the
average cost of an office fit out increased by 12% last year, fueled
by a combination of strong demand for new space and increased
prices for labor and materials. Tenant improvement allowances
also jumped in 2018 by 13%—but not by enough to fully offset
cost growth, JLL said, resulting in an increase of net out-of-pocket
costs to tenants. Of the total construction cost increase in 2018,
60% was offset by increases in tenant improvement allowances,
and the remaining 40% was passed on to tenants.
TI allowances will keep pushing higher in 2019, JLL predicts,
while concessions will continue to increase in most markets as new
supply will remain high.
These numbers are hitting up against another recent trend in
office fit outs: many tenants want to update their space every year or
two. JLL writes that “trends common in other industries like consumer electronics and fashion, where consumers consider products
expendable and want new versions rapidly, are starting to seep into
construction and fit outs.” Of course, with fit out costs continuing to
rise, this trend becomes more of a challenge for occupiers because
expensive capital outlays are being spread across fewer years of use.
A Breakdown of the Numbers
To give the industry a sense of the hard numbers, JLL compiled the
following costs for three different types of floor plans and their
Progressive Open-office floor plan with 100% bench-style seating and no enclosed offices. Design also includes numerous variet-ies of both collaboration and conference spaces.
The base cost (the space is designed on a low cost and simple
budget, with finishes focused on function. Space contains basic
technology and aesthetic design) is $147 per square foot.
The medium cost (there is an increased project complexity,
such as upgraded lighting, cabling and design features. Average
quality materials and details) is $170 per square foot.
The high cost (the project design is complex with top-quality
finishes and space improvements as well as increased effort spent
on aesthetics and detail design) is $193 per square foot.
Moderate Agile floor plan with 10% enclosed offices and 90%
open floor plan with 6-by-6-foot workspaces and minimal benching
for visitors. Design also includes a mix of
conference rooms and two to four dedi-
cated collaboration spaces.
Base is $156 per square foot
Medium is $182 per square foot
High is $207 per square foot.
Traditional Private office heavy floor
plan with 30% enclosed offices and 70%
open floor plan with large 8-by-8-foot workspaces and no bench space. Design also
includes several conference rooms and one
dedicated collaboration space.
Base is $167 per square foot
Medium is $196 per square foot
High is $224 per square foot
REITs Find Liquidity in
Many life science firms, technology companies and other businesses are facing liquidity and capital resource constraints. The
reason? Ongoing market turmoil has resulted in increased volatility that has subsequently shut down traditional methods of raising
capital. In comes “at the market” or ATMs providing a somewhat
efficient means of raising measured amounts of equity capital over
time by allowing a company to tap into the existing secondary market for its shares as needed. Increasingly REITs are also turning to
this channel for liquidity.
In an ATM offering program, an exchange-listed company systematically sells newly issued shares into the trading market
through a preferred broker-dealer at current market prices instead
of through a traditional underwritten offering of a fixed number of
shares at a fixed price all at once. Their use and allure have significantly risen over the last few years because of the Securities Act
Reform regulations adopted by the SEC in December 2005, which
streamlined the procedural hurdles for conducting an ATM offering program, according to Daniel P. Adams, partner and co-chair
of Capital Markets at Goodwin.
“At the beginning of 2019, Goodwin observed that at least 115
public REITs had ATM programs in place, covering the sale of
nearly $40 billion,” he says.
There are many benefits to ATMs, according to Adams. The
company has the flexibility to control the amount of sales, the
timing of sales, and a minimum acceptable price is one. Another
is that the company can raise equity as and when needed and
can precisely match the sources and uses of funds. Also, the
incremental nature of sales means that the company stands to
benefit from a rising stock price and that the overall cost of issuance is generally significantly less than that of a traditional
underwritten offering. Other benefits include the fact that sales
are usually anonymous/discreet over an electronic communications network, the program can be put in place within a few
weeks with little to no road-show or other sales efforts required
and no lock-up is required from officers, directors or significant
“I see ATMs staying around for a long time,” says Adams. “Issuers
have really embraced ATMs and the benefits they offer for the foreseeable future.”—Tanya Sterling
Pacific Partners Investment
team has joined Colliers
International. The team,
which includes first VP
Edward Pan, VPs David Lin
and Jeff Lin, associate VP
Jason Lin and senior associate Richard Wang, focuses
on trans-Pacific investment
in Los Angeles with a specialization in multifamily and
retail asset classes.