Is the supply-demand balance
shifting for hotel investment?
It looks like RevPAR is looking to increase
5-6% this year. New supply is on the horizon. We get weekly calls from developers
looking for construction financing. Some
of these folks are people who have owned
hotel sites since the last cycle but couldn’t
get financing for the past five years, so
those are coming back around. We’re seeing infill locations in urban markets,
developers either converting buildings or
doing ground-up construction. There are
a lot of signs that people are going to start
building. There’s a long lead-time
between construction starts and debuts,
but in the next two to three years, supply
will start hitting the market in earnest.
Last year was a banner year and 2014 is
looking to be even stronger in volume.
It’s a great time to be a buyer because
there are still deals, and a seller because
valuations are increasing and financing is
available. If you can lock in a non-recourse loan at a sub-5% interest rate, at
some point during the term of the loan,
that loan is going to look outrageously
good and you’re going to look like a
genius when rates go back up. New supply
is slow right now so this is a great year,
and there’s a lot of capital in the market.
Where do you see the growth
in retail for San Bernardino?
The retail sector in the county is starting
to pick up quite significantly. New developments are coming to fruition, including Majestic Realty’s Mountain Grove at
Citrus Plaza project in the Redlands, a
47-acre sister project to the Citrus Plaza
Shopping Center. Mountain Grove is set
to open in summer 2015. We have a couple of the large shopping center projects
and we are also seeing a lot of the small
centers that have been repositioned.
As for retailers, we’ve seen everyone
from Whole Foods, which is looking at a
location in Redlands, to the German-based discount grocery Aldi, which is in
the Midwest and East Coast now, looking
at California over the next five years. It
plans to open nearly 650 stores so we are
confident some of those are going to land
in our area. Smart & Final is still expected
to expand more stores in the county and
the Wal-Mart Superstores are still in play.
We’re also seeing a big surge with ethnic
supermarkets. When Albertsons or Ralphs
are choosing to close some stores, ethnic
grocers are coming in and taking that
space. We still see activity among the convenience stores and are seeing a lot of
activity from quick-service restaurants.
How does one ensure retail
properties are truly accessible?
Retail is essentially a public space and as
such, accessibility issues are highly scrutinized and stores are at risk of lawsuits if
found not to be in compliance. To avoid
legal implications, I’m seeing that retail
investors are increasingly committing to
accessibility reviews that go above and
beyond the standard regulations of the
Americans with Disabilities Act.
Accessibility requirements for retail
properties are two-fold, concerning both
external issues (such as building access
and car parking) and the configuration of
interior space to ensure that everyone has
equal access to dressing rooms, sales counters etc. Importantly, compliance can be
affected by a change of tenant: different
business uses have different ADA requirements, and modified shop fit-outs or
entrances may bring about new concerns.
ADA requires that “readily achievable”
improvements (within the client’s physical or financial restraints) are made to
ensure equal accessibility. My advice to
retail investors is to minimize exposure
by putting together a written “barrier
removal plan” which identifies and outlines how to deal with any non-compliant
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MICHAEL D. ARMSTRONG
HREC-Hospitality Real Estate
Partner Engineering &
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