State, developers concerned about new EPA rule

starnewsonline.com -- WILMINGTON, NC -- Local developers are holding their breath as courts examine a controversial federal Environmental Protection Agency (EPA) rule aimed at cleaning up the nation's drinking water. The Clean Water Rule, which went into effect Aug. 28, aims to clarify Environmental Protection Agency authority over certain bodies of water. In addition to navigable waterways, the rule states that the EPA has jurisdiction over streams, ditches, wetlands and other bodies of water that connect to those waterways or are within certain distances. An appeals court decision stayed the rule Oct. 9 after several states sued to stop its implementation.

The Clean Water Rule, which went into effect Aug. 28 but was stayed by a court decision Oct. 9, clarifies what bodies of water are under EPA jurisdiction. Millions of acres of wetlands and 60 percent of the nation's streams had been in regulatory limbo for the last decade -- the rule reinforces federal authority over these areas that feed drinking water systems for nearly a third of the nation. But the rule could mean more permitting and paperwork is required when building near these bodies of water. At a presentation Wednesday in Wilmington, developers from Southeastern North Carolina learned about how the stalled rule could impact them; representatives from Wilmington and Jacksonville city governments and Rep. David Rouzer's office also attended.

Wednesday's event was hosted by the Wilmington Chamber of Commerce and Business Alliance for a Sound Economy. Among the presenters was David Syster of Southern Environmental Group Inc., a Wilmington-based consulting group. Syster explained that the rule was proposed to reduce red tape by clarifying the EPA's authority. But he said it may have the opposite effect in low-lying areas: streams and wetlands within 4,000 feet of the tide line, within 100 feet of the high water mark of navigable waters and within 1,500 feet of that mark in the 100-year floodplain are now under EPA jurisdiction.

Myrtle Beach to talk Performing Arts Center options at budget retreat

sunnews.com -- Myrtle Beach will consider a new idea next week for construction of a performing arts center after progress on the project slowed as city officials worked toward improving safety during Memorial Day weekend. The new proposal would combine the indoor performing arts center with an amphitheater. Project architect Steve Usry of Usry, Wolfe, Peterson, Doyle said the city has discussed the idea of having an amphitheater for years so he and convention center director Paul Edwards looked into the possibility of tying that desire with the performing arts center. Usry said his recommendation is that the indoor performing arts center would have no more than 700 seats and a 2,600-square-foot stage. The back of that stage would have some type of divider that would open to a 6,000 to 8,000 seat amphitheater.

“It would be the same stage, same rigging, same light systems,” he said. “It marries up what Myrtle Beach is about from a visitor standpoint but doesn’t take away from what the local [arts community] has been working for.” City Manager John Pedersen said the city will present the option to council members during the retreat in Pinopolis, being held Sunday through Tuesday.The city has been pursing the option of constructing a 650-seat performing arts center that would connect with the Myrtle Beach Convention Center. Almost 54 percent of city residents who voted on a November 2013 referendum approved the purchase of $10 million in bonds to build the center. The referendum passed 1,915 to 1,641.

Pedersen said council also will consider a plan next week that includes constructing a free-standing building near the Myrtle Beach Sports Center with an amphitheater component. “We have another concept that is still consistent with the referendum,” he said. “We’re going to talk to council and see if they’d be open to this concept.” Myrtle Beach approved a resolution 4-3 last June that gives supporters of the performing arts center the ability to update architectural plans for the facility that were completed in 2010.Penny Boling, who is on the Myrtle Beach Performing Arts Center board, said she thinks combining the facility with the amphitheater will delay the project another year – with construction possibly beginning toward the end of next year.Usry said the performing arts center still would cost about $10 million, but there would be more money needed to construct the amphitheater. City Council will talk about the funding for it next week.

“The combination would cost more, but not as much as two separate operations,” he said.Councilmen Wayne Gray, Mike Lowder and Philip Render voted against the resolution last year, which expressed the city’s intent to repay itself the $200,000 it is expected to cost to update the plans through the $10 million in bonds that would be used to pay for construction of the center. That $200,000 has not yet been spent, Pedersen said. Gray said Tuesday that law enforcement expenses during May and the rest of the year took priority over moving forward with the arts center, which is why he voted against the resolution last year.Three people died and seven were injured in eight shootings on Ocean Boulevard last year during Memorial Day weekend. Myrtle Beach is spending millions of dollars in equipment and assisting personnel to try to ensure a safe weekend this year.

“I think there were matters in front of us then that are still in front of us now that are expensive,” Gray said. “Until there’s some settling of those issues, you just have to evaluate the cost of those [other] projects and the merit they have to the community. ... My position hasn’t changed.” He said he appreciates the “out-of-the-box thinking” of combining the performing arts center with an amphitheater. “The expansion of the whole convention center area – which would be driving economic activity to Myrtle Beach – is a good thing,” he said. “The amphitheater is something I’m more open to. ... It gives the community greater options for economic vitality. From that perspective, I’m more encouraged.” For more than 15 years, arts supporters have tried to establish a performance venue in Myrtle Beach. After being unable to raise about $2.5 million to partially fund building the center with help from the city, board members asked City Council in 2012 to completely pay for construction. “I feel like its Groundhog Day again,” Boling said. “But I still have very strong faith that the city will move forward with it.”

Read more here: http://www.myrtlebeachonline.com/news/local/article17779937.html#storylink=cpy

Why The Apartment Cycle Is Good For Five More Years

globest.com -- WASHINGTON, DC—Fundamentals in the multifamily space should continue their golden trajectory for several more years, based on the latest numbers about US homeownership from the US Census Bureau. Indeed, coupled with other recent reports on multifamily dynamics, it is safe to call the asset class bullet proof, at least for the medium term. US home ownership, of course, has been steadily falling since the Great Recession. On Tuesday, though, it hit a low that gives one pause -- to say nothing of putting it within spitting distance of awe-inspiring benchmark. US homeownership is now at 63.4%, which is the lowest level of home ownership in this country since 1967. There is little to suggest it won’t stop falling: in Q1 it was at 63.7%. In 1965, when the government started tracking home ownership the level was 63% -- a percentage that seems like it is but a few quarters away again.

At the same time rental vacancies are also, not surprisingly, dropping to new lows. The Census Bureau also reported that rental vacancy rates were 6.8% in Q2, a 30-year low. You don’t have to have the resources of the US government at your disposal to predict how this will play out: multifamily rents will rise and supply will continue to enter the pipeline. Reis, for example, reports that it is expecting "a flurry of new buildings to come online in the second and third quarters of 2015, as developers schedule openings to take advantage of the strongest leasing periods of the year." That number, actually, is 100,000 units and updated project numbers suggest that this alone will see 230,000 units having come online all together. This may result in relatively minimal increases in vacancies for the rest of the year, it said, but overall the national vacancy rate -- which Reis puts at 4.2% right now -- will remain very tight, rising to 4.8%, a figure that "does not seem like cause for much worry."  

A Five-Year Run
In mid-month Reis predicted at least another five years remained in the current apartment cycle and the latest Census Bureau's numbers support that. "We do not believe that Millennials will continue to rent for the rest of their lives, but postponing the decision to have children and to buy homes will imply another good five to ten year run for apartment landlords, during which only the oldest of the Millennials will become homeowners," it said in its Q2 report.

5 Secondary Ports to Watch

With less than 10 months to go until the $5.2 billion Panama Canal expansion opens in April 2016, U.S. ports are implementing almost $30 billion in dredging and infrastructure improvements to handle Post-Panamax ships—massive 400-yard-long vessels that can carry about 14,000 product containers. Shipping experts estimate that the two main U.S. ports, Los Angeles/Long Beach and New York/New Jersey, will continue to grow at a steady pace after the expansion. However, secondary markets that are spending some of those billions mentioned above are poised to gain more market share. Up to 10 percent of container traffic from East Asia could shift to East Coast ports by 2020, according to a recently released study by C.H. Robinson and the Boston Consulting Group. West Coast ports will still grow their shipping, but more cargo will head east, especially as companies look to diversify their routes to avoid another labor strike like the one that hit California ports earlier this year.

According to the C.H. Robinson/Boston Consulting Group report, as well as new port studies released this week by CBRE and JLL, there are five East Coast ports to watch once the expansion opens:
 

The Port of Savannah Savannah is investing more than $1.4 billion to improve its port for the Post-Panamax ships, including $266 million in state money to dredge Savannah Harbor. The port’s container traffic has grown almost 30 percent since 2007, and was up 12.5 percent from 2013 to 2014, according to JLL’s Seaports Outlook Report and Index.
However, David Egan, CBRE’s head of industrial research in the Americas, says that while Savannah may gain in the short term, the port is limited to about 45 feet of dredging depth, which could hinder any future ship growth. “It’s a river port, and there’s a limit to the geology of the riverbank,” he says.

The Port of Charleston Charleston’s container traffic improved by almost 41 percent from 2011 to 2014, according to JLL, boosted by double-stacking rail lines that go through Greer, S.C., where a new intermodal port has been operating for about two years. While the port also serves Atlanta along with Savannah, Charleston has benefited from Volvo’s decision to build a $500 million factory nearby.


The Port of Virginia
The Port of Virginia has benefited from its Norfolk Southern rail link that goes direct to the Midwest, a region shippers want to hit hard in the next decade. Industrial space is scarce in this market, as warehouses in Hampton Roads are almost full, with about 9 percent vacancy, according to CBRE. But the port is adding warehouse space in neighboring cities. The Port of Virginia is also the only port on the East Coast that has federal authorization to dredge to 55 feet. More build-to-suit construction is expected.

 

 

Port of Miami

The Florida Ports (Miami/Jacksonville/Ft. Lauderdale/Everglades) CBRE’s Egan says the Florida ports should benefit due to relaxed storage times for perishable items. Traditionally, perishables had to be stored on ships for a certain amount of time, so the ships in transit would head to ports such as Philadelphia because the vessels would have to remain out at sea to meet the time requirements. “The time period allowed them to ensure [no] negative insects or bacteria were present,” he says. “Now that timeframe has been compressed, and the ships will likely pull into Florida ports to offload when they can.”
Jacksonville is deepening the St. John’s River to 47 feet, and Miami is spending $2 billion on its capital investments to be ready for the expansion.

The Port of Baltimore Experts agree that Baltimore won’t see too much increased traffic—unless city leaders can come up with funding to allow for double-stacking capabilities. “Baltimore gets too bottle-necked, they can’t unload and get freight out,” Egan says. Leaders in the region are also having trouble getting resident approval to expand century-old tunnels that can’t handle the double-stack trains. However, there are signs of growth, as shipping giant Maersk has started to call on Baltimore after a two-decade snub, according to JLL.

Need Big-Box Space? Good Luck, Industrial Experts Say

nreionline.com -- Net industrial absorption has outweighed new space completions for five straight years following the recession, particularly in the big-box segment, resulting in a significant drought of available space in many major markets at mid-year 2015.  Craig Meyer says the expected 171 million sq. ft. of industrial space scheduled to be completed this year will not meet the 219 million sq. ft. of anticipated absorption. The supply imbalance will likely continue into 2016, he says.  “Construction deliveries have been minimal this cycle, and are under the historic norm,” Meyer says. “New deliveries as a percentage of the nation’s existing stock averaged 0.7 percent per year over the last seven years. This compares to the 20-year average, since 1996, of 1.4 percent per year.”

The big-box market has been especially hard hit by the supply imbalance, as the driving force behind the leasing and construction has been e-commerce, typically looking to occupy large new warehouses. For example, Chicago, one of the nation’s top industrial markets, has no vacant contiguous space available over 750,000 sq. ft., according to a second quarter market report from a real estate services firm. Amazon took occupancy of the most recent opening, a 1.1-million-sq.-ft. build-to-suit warehouse in the Kenosha, Wis. sub-market, during the second quarter.  Dwight Hotchkiss says extremely strong second quarter occupier demand drove down available big-box supply in the Chicago market, lowering the vacancy 66 basis points to 9.31 percent.

“Development just isn’t keeping up, there’s five million sq. ft. leased and only four million sq. ft. delivered in the quarter,” he says.  Jason Tolliver says the demand curve for big-box space is unprecedented. “The big-box market is as tight as a drum. We’re seeing at least a two-to-one ratio of tenant requirements to available space options on average nationally. There’s just more demand than there is available space.”  Part of the challenge for developers, he says, is how quickly properties become obsolete today, particularly when it comes to technology tenants. E-commerce tenants want much higher ceilings, such as 42-foot clear, more room for employee parking, space for racks, electricity for robotics, etc., that many older buildings just don’t have.

“It used to be that industrial needs changed over a long period of time, such as with manufacturing,” Tolliver says. “Now, as a developer, you have to think not only about what the tenant needs today, but what they’ll need tomorrow.”  Meyer says the dwindling big-box supply has pushed users into secondary markets within a reasonable drive time and/or strong connectivity to a primary market, such as in Chicago, Philadelphia and the Inland Empire. Indianapolis, a city about a fifth the size of Chicago, now has a construction pipeline of 3.3 million sq. ft., only a third smaller than Chicago’s pipeline. Philadelphia’s Lehigh Valley is now the largest market in the region, containing 30 percent of Greater Philadelphia’s 14.6 million-sq.-ft. construction pipeline.

Construction activity in the Inland Empire totals 24.4 million sq. ft., with the sub-market slowly expanding away from the Los Angeles port, east toward the Coachella Valey and north up Interstate 15.  “As the big-box logistics sector in primary and secondary markets continues to tighten, we continue to see some spillover into demand and pricing for quality class-B product—as long as speculative completions remain measured we expect this dynamic to increase, and—based on current tenant requirements—this will likely be the case for most markets through the remainder of the year,” Meyer says.

U.S. Hotel Industry is Approaching a Construction Boom

nai.hotelmanagement.net -- The hotel industry in the United States is back into a construction mode. According to Lodging Econometrics, the U.S. development pipeline included 4,038 hotels with 507,221 rooms at the end of the second quarter. That’s an increase of more than 20 percent in both properties and rooms over the second quarter of 2014.  Nearly 70 percent of rooms in the development pipeline are either under construction (146,743 rooms) or will start construction within the next 12 months (198,506).  “There’s no question there’s more construction going on,” said Chris Nassetta, president and CEO of Hilton Worldwide Holdings, during a second-quarter earnings call with analysts. “Not just in hotels, but across the board there’s more infrastructure spending going on.

You’re also seeing construction in other areas of real estate and home building is picking up.” During the second quarter, Hilton approved 24,000 new rooms for development, and the company’s development pipeline included 1,510 hotels with more than 250,000 rooms. A little bit less than half the rooms in the Hilton pipeline are in the U.S.  Other major brand companies have been building their development pipelines. At the end of the second quarter, Marriott International had more than 250,000 under development, while InterContinental Hotels Group’s pipeline included nearly 1,300 hotels. Marriott boasts that it is the first company with more than 1 million hotel rooms open or under development.   

Increasing numbers
In 2015, according to Lodging Econometrics, 754 hotels with 78,808 rooms will open, representing a 1.6 percent increase in existing supply. The number of new hotel openings will continue to build during the next three years, and during 2017, 992 properties with 113,968 rooms are expected to open.  Hotels in the upscale and upper-midscale segments dominate the current development pipeline. More than 2,500 hotels with nearly 285,000 rooms are under development in these two segments. That’s 63 percent of hotels and 56 percent of rooms under development.  The pipeline for luxury hotels is less robust and includes just 42 hotels with 11,785 rooms.

Where to build
Steve Rushmore Jr., president and CEO of HVS, said the increase in new hotel construction should create equilibrium between supply and demand in the U.S. by the end of 2016 or early 2017. He also outlined the U.S. markets with what he calls “the highest entrepreneurial incentive for new construction.” Topping the list are Manhattan, followed by Austin, Texas; Brooklyn, New York; Denver; and New Orleans. Major markets lowest on the list of places to build, according to Rushmore, are Atlanta; Dallas; Ft. Worth, Texas; and Houston.

Costs on the rise
A rebounding U.S. and world economy, combined with a rise in residential construction activity in 2013, put pressure on costs of commercial construction, including hotels. However, according to the HVS U.S. Hotel Development Cost Survey, residential construction declined in 2014, which helped to ease construction cost increases.  In some top-tier markets, such as New York, San Francisco and Miami, hotel construction costs have risen considerably in the past three years. According to HVS, full-service and luxury hotel developers in Miami report cost increases of 25 percent to 30 percent in that time.

Cost increases are more manageable in most other areas of the country. In 2014, costs were up nationwide by about 3 percent. Cost increases for building materials varied from above 5 percent for lumber and cement to around 2 percent for steel.  Not surprisingly, the recent low point for hotel construction costs was during the last recession in 2010. Today, the average per-room cost of hotel development—including land; building; furniture, fixtures and equipment; soft costs and preopening costs—range from $86,900 for economy and budget properties to $335,000 for full-service hotels and more than $700,000 for luxury hotels.

Two Self Storage Properties in Marion Sold

White’s Mini Storage, a 84,985 net rentable square foot self-storage facility, and Francis Marion Plaza Storage, a 42,000 net rentable square foot self-storage facility, both located in Marion, South Carolina, were sold in early October and commanded a combined sales price of $1,960,000. The facilities feature 608 standard and climate units, including retail/commercial units, a clubhouse and a warehouse with loading dock on a combined 18 acres.  The buyer, a private investor, formed an LLC for the purpose of acquiring both of the facilities.  White’s Mini Storage was opened around 1975 with the last expansion in 2009. The facility consists of 22 buildings. Francis Marion Plaza Storage was opened around 1991, and consists of 11 buildings. Amenities include fencing, lights, security cameras and rental offices. There is room for on-site expansion at both facilities.

Hotel Sales Market: ‘Active and Liquid’

globest.com  --  CALABASAS, CA—The lodging sector’s recent performance is giving rise to optimism that the exceptional momentum will extend well beyond historical cycles says in a new report. One macroeconomic trend that could create turbulence in the months ahead, though, is internationally sparked stock market volatility, the firm states.  “The recent turmoil in global equity markets illustrates the difficulty involved in anticipating unforeseen events capable of disrupting positive trends,” according to MMI’s report, with input from a team led by Peter Nichols, director, national hospitality group. In particular, the Federal Reserve’s timing on an interest rate increase, as well as the extent of its actions, could be affected by the markets’ uncertainty, triggering “a reconsideration among hotel owners of near-term objectives. An inevitable rise in the Fed Funds rate will likely affect the prime rate, a frequently used benchmark in hotel debt.”

At the moment, the hotel investment market remains liquid, with “considerable equity and competitive debt providers” both helping to sustain a high volume of transactions that are holding cap rates near cycle lows. MMI sees a tilt toward the upper midscale, with more properties trading in this bracket than in any other chain segment during the first half of the year. “More than half of these deals occurred in the 100 largest metros, but one-fourth took place in much smaller interstate, college and military markets to illustrate the ongoing search for yield,” according to MMI.  In general, MMI sees currently low interest rates and strong capital flows sustaining an “active and liquid” investment market. Sales of hard-branded hotels and independents were up for the first half of this year.

Looking at performance metrics, MMI sees records continuing to tumble in 2015. ‘The strengthening US economy will continue to put more business and leisure travelers on the road this year,” according to MMI’s report. National occupancy is forecast to jump 120 basis points to 65.6%, the highest annual level on record. “A bump in ADR will account for most of the gain in RevPAR,” the report states.

Helping to underpin these predictions is the momentum that several markets have begun generating. “In Chicago, higher travel volume supported a 12% jump in RevPAR through July, more than three times the rate of growth over the same span in 2014,” according to MMI. Meanwhile, occupancy in Atlanta has gone up 300 bps year to date to 72.9%, “while Sacramento rode a 7.5% rise in room nights to higher occupancy and a double-digit bump in RevPAR.”  Also registering double-digit bumps over the past 12 months has been hotel construction. Lodging Econometrics, based in Portsmouth, NH, says its United States Construction Pipeline Trend Report has now posted eight straight quarters of year-over-year growth, with double-digit increases for each of the past four quarters.  LE says the hotel construction pipeline is now at 4,038 projects representing 507,221 keys, up more than 20% Y-O-Y by room count. However, LE says the pipeline is 29% below the 2008 high of 5,883 projects and 785,547 keys. Analysts at the firm say that the number of new project announcements entering the pipeline is accelerating and think that the hotel real estate cycle has about two more years to go before peaking.

Clemson Student Housing Development Sold

Pineherst, LLC recently sold the just developed Pineherst Student Apartments in Clemson, SC.  The 24-unit, 96-bed, walk-to-campus development was 100% leased prior to completion of construction and sold for $8,175,000. All units are four-bedroom, 4-bath and the development was completed in 2015.

Development plans underway at site of former Myrtle Beach Hospital

wmbfnews.com -- The now-void space that once held the Myrtle Beach Hospital may finally be developed soon. It's hard to imagine because it is so overgrown, but plans are in motion to build 78 residential units on the space right on 79th Avenue North and Ocean Boulevard.  Some of the buildings would be quad-plexes; some, duplex townhomes. It's prime real estate in Myrtle Beach: right on Ocean Boulevard and a mere block from the ocean.  The design team went before the Myrtle Beach Community Appearance Board recently to talk the plans over. The response, the CAB said, was positive, and the board commended the designers for planning to preserve the trees on the existing site and not tear them down.  The CAB said there have been several other projects designed for this lot, but none have made it to the construction phase.  This was just a conceptual review to get feedback from the community appearance board.  The plans don't have approval just yet. The architects will go back and make any needed changes- they still have to get final approval before any construction can begin.