April 2024 Midwest Real Estate News

Big plans in store: Hendricks Commercial Properties planning major revitalization of Indianapolis’ Circle Centre Mall

By Dan Rafter, Editor

Small plans? Hendricks Commercial Properties isn’t considering them for the future of Circle Centre Mall in downtown Indianapolis.

Late last year, Hendricks Commercial Properties purchased the Circle Centre Mall from the Circle Centre Development Company, a partnership of 17 business and corporate investors.

Hendricks has since developed a 10-year, $650 million plan to transform the downtown mall into an open-air, pedestrian-friendly mixed-used development. The new Circle Centre will include retail, restaurants, apartments and office space.

Lance Evinger, vice president of acquisitions and dispositions with Beloit, Wisconsin-based Hendricks Commercial Properties, said that closing on the sale of the Circle Centre Mall was a major milestone for his company.

“We had been working on this deal for about two years,” Evinger said. “It was the most complicated real estate deal that I have ever worked on. The property had a very

unusual ownership structure. But we kept working on it to make it happen.”

Why was Hendricks so committed to landing this deal? Evinger said that the potential of the mall is immense.

First, it’s located in the dead center of downtown Indianapolis, close to the city’s convention center and several hotels. It’s where visitors, and residents, too, go to shop in downtown Indianapolis.

Evinger was also intrigued by the historic nature of the site.

“There is so much history in and around this site,” he said. “This site is so integral to the success of downtown Indianapolis. We are all history buffs here. Working on this project is such a honor.”

Circle Centre Mall first opened in 1995, and immediately attracted big crowds. Lately, the mall has struggled, thanks in large part to the COVID-19 pandemic.

INDIANAPOLIS (continued on page 26)

MINNEAPOLIS

The rise of the sportsentertainment district: Minneapolis the latest to benefit from this trend

By Dan Rafter, Editor

The Nationwide Arena District in Columbus, Ohio. The District Detroit. The Deer District in Milwaukee. And, of course, the Wrigleyville neighborhood surrounding Chicago’s Wrigley Field, home of the Cubs. These are all thriving sports-entertainment districts that have brought new life to urban areas throughout the Midwest. Now you can add North Loop Green in Minneapolis to this list.

Big plans in store for Indianapolis’ Circle Centre Mall: Small plans? Those aren’t what Hendricks Commercial Properties is considering for the future of Circle Centre Mall in downtown Indianapolis.

The rise of the sports-entertainment district: The Nationwide Arena District in Columbus, Ohio. The District Detroit. The Deer District in Milwaukee. And, of course, the Wrigleyville neighborhood surrounding Chicago’s Wrigley Field. These are all thriving sports-entertainment districts that have brought new life to urban areas throughout the Midwest. Now you can add North Loop Green in Minneapolis to this list.

Indianapolis’ commercial real estate market holds steady during challenging times: One of the most resilient commercial real estate markets in the country. That’s how CRE professionals working here describe the Indianapolis market.

Indianapolis metro update 2024: A thriving economy and growing communities: In the heart of the Midwest, the Indianapolis metropolitan area stands as a beacon of economic vitality and community growth.

Navigating a normalizing multifamily market in Des Moines: As president and founder of West Des Moines, Iowabased The KataLYST Team, Jared Husmann knows the multifamily market in and around Des Moines. He says that this sector continues to face challenges stemming from higher interest rates, steeper materials costs and the soaring cost of labor.

A bright future for the Midwest’s multifamily market? That’s what Clear Investment Group’s Amy Rubenstein sees: The multifamily sector has long been one of the darlings of investors looking for a place to sink their dollars. And, yes, this commercial sector did face challenges last year in the face of rising interest rates. But what will happen in 2024? Will a more stabilized interest-rate environment lead to an increase in multifamily investment throughout the Midwest?

Midloch’s view: Expect a stronger year for multifamily sales in the Midwest throughout 2024: With offices in Chicago, Milwaukee and the Minneapolis suburb of Eden Prairie, Midloch Investment Partners understands the multifamily market across the Midwest. And what do Midloch investment pros expect to see in this sector throughout the rest of 2024? A better year for investment sales and another strong year for leasing demand.

The real secret to successful mixed-use developments? It’s the third places: Your favorite bench at your neighborhood park. The table in the corner of your local public library. The neighborhood bar at the end of your block. The yoga class at your gym. These are all examples of third places. And they are the key to building successful mixed-use developments and communities.

The only constant in healthcare real estate? Change: Steve Brown began his career in commercial real estate in 1985, when he began working for boutique real estate company American Commercial Properties.

The outlook for the net lease sector in 2024? It all hinges on what the Fed does with its interest rates: Higher interest rates continue to slow the number of investment sales in the net lease sector. And this trend won’t change until the Federal Reserve Board finally begins lowering its benchmark interest rate.

More than 80% of office landlords seeing an increase in lease renewals: A slow recovery in the office sector? It’s better than no recovery at all. That’s the takeaway from VTS’ fifth annual Global Landlord Report released in early April.

COLUMNS/DEPARTMENTS

6 Editor’s Letter

30 Artist + property owner partnerships demonstrate community investment—and ROI

32 The top 100 fastest-growing retailers: Consumers still hunting for convenience and bargains

33 Revitalizing and repurposing real estate in 2024: A strategic guide

34 Encouraging fundamentals could spark an increase in industrial real estate investment activity in 2024

35 With consumer spending up and savings down, workers turn to part-time employment and second jobs for relief

36 The headwinds facing healthcare real estate require a nimble, innovative

The Midwest’s commercial real estate publication, providing useful, unbiased and accurate coverage of the industry and its professionals since 1985.

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Looking for good news? Here’s some from two key Midwest markets

By Dan Rafter, Editor

It can be difficult to find positive news about the commercial real estate sector today. Higher interest rates. Soaring labor costs. And the high price of materials. They are all combining to make life challenging for CRE pros.

That doesn’t mean, though, that there aren’t positive signs in the industry. Since the Federal Reserve Board indicated that it would no longer increase its benchmark interest rate, in fact, many Midwest markets have seen a slow but steady increase in commercial real estate activity.

And here is some positive news from two of our key Midwest markets: Detroit and Milwaukee.

A solid retail performance in Detroit: The good news from the Colliers Metro Detroit first-quarter retail report? There was plenty, as the retail sector in the Detroit market continues to show growth.

Colliers reported that the Detroit-area retail market saw 597,560 square feet of net absorption during the first quarter of 2024. That’s a solid showing, and one indicative of a sector in demand by tenants.

The Southfield submarket was especially strong, recording 355,174 square feet of absorption during the first quarter, according to Colliers.

These solid absorption numbers were fueled by tenant demand. Colliers said that the Detroit market saw 923,124 square feet of leasing activity in the first quarter from 292 closed leases.

The West Wayne submarket saw the most leasing activity during the quarter with 62 executed leases totaling 168,368 square feet.

Notable retail leases signed during the quarter include Brighton Pickleball signing a 27,000-square-foot lease in Brighton, Michigan; Harbor Freight Tools closing a 14,976-squarefoot lease in Oxford, Michigan; and The Salvation Army closing a lease of

13,136 square feet in Novi, Michigan.

As leasing activity rose, vacancy rates fell. Colliers reported that the overall vacancy rate for the retail market stood at 5.1% during the end of the first quarter. That’s a drop of 10 basis points from the fourth quarter of 2023, another sign that the Detroit-area retail sector is still in steady growth mode.

The Troy submarket had the lowest retail vacancy rate at 2.9%, while the Monroe submarket ranked second with a vacancy rate of just 3.2%. The Birmingham/Farmington Hills submarket had the highest retail vacancy rate in the first quarter, clocking in at 8.6%.

The average asking rent for retail space in the Detroit market fell to $14.63 in the first quarter. That’s a drop of 22 cents on a year-over-year basis.

Some light in Milwaukee’s office sector: Good news is rare in the office

sector today. But in the Milwaukee market, at least, this sector got off to a good start in 2024.

That’s the positive news from JLL’s first quarter 2024 Milwaukee office market report released this April.

According to JLL, the Milwaukee office market recorded more than 80,000 square feet of positive net absorption in the first quarter. This comes after a solid 2023 for Milwaukee’s office sector. JLL reported that last year marked the first full year of positive office absorption in the Milwaukee market since 2019.

In the first quarter, most of the positive absorption came in Milwaukee’s Central Business District, with nearly 80% of it occuring in the city’s downtown core. The Downtown West and Third Ward/Walker’s Point submarkets led the way when it came to positive office absorption.

It’s not surprising, given the market’s positive momentum during the past

five quarters, that office vacancy rates are starting to fall in the Milwaukee market. JLL reported that the Class-A vacancy rate is down to 19%, falling from a high of 22.3% at the end of 2022.

This represents the lowest this vacancy rate has been since the end of 2020, when the Class-A office vacancy rate for the Milwaukee area stood at 18.1%.

JLL predicted that office vacancy rates in this market will continue to drop thanks in part to the steady leasing activity in Milwaukee’s CBD. An example of the demand for office space in Milwaukee’s urban core? Enerpac has announced that it will occupy 56,000 square feet in the ASQ Center.

Enerpac is joining other big-name companies such as Milwaukee Tool, Northwestern Mutual, Rite Hite and Fiserv that have either relocated to or expanded their presence in downtown Milwaukee.

Image by Pexels from pixabay.

Still resilient: Indianapolis’ commercial real estate market holds steady during challenging times

By Dan Rafter, Editor

One of the most resilient commercial real estate markets in the country. That’s how CRE professionals working here describe the Indianapolis market.

It’s easy to see why: Indianapolis has developed a reputation as a business-friendly city with reasonable taxes, one that is attractive to both new businesses and investors looking for a safe place to park their dollars.

That stability is important today. Higher interest rates have been a challenge, slowing the pace of commercial real estate development and sales throughout

the country. Investors and developers, then, are looking for affordable, predictable markets, and Indianapolis is a good example.

It’s why all the main commercial sectors are proving resilient in the Indianapolis market. It’s also why even the struggling office sector is seeing some signs of hope.

Steady in the multifamily sector

Indianapolis’ multifamily sector is a good example. It is holding steady even as interest-rate challenges and rising construction costs hit it.

Josh Caruana, first vice president/ district manager for Indianapolis with Marcus & Millichap, said that the Fed’s decision to no longer raise its benchmark interest rate has provided stability in the Indianapolis multifamily market.

Stability, while not as good as falling interest rates, is a necessity to keep commercial sales activity flowing, Caruana said.

“Even though interest rates are at elevated levels compared to two or three years ago, the stability is good for the market,” Caruana said. “That rapid increase in interest rates made it very difficult for buyers and sellers.”

Now that rate stability has returned, Caruana says that he expects investment sales activity in the multifamily sector to slowly increase.

And it’s not just rate stability that will help boost sales activity. Caruana said that the Indianapolis multifamily market has long been a strong one, and that makes apartment developments here attractive assets to investors looking for a safe home for their dollars.

“The Indianapolis market has been one of the most resilient not only in the Midwest but in the country,” Caruana said. “It consistently ranks in the top five or 10 for rent growth. In some quarters,

Image by 12019 from Pixabay.

it’s been number one for multifamily rent growth.”

Even if interest rates remain the same, Caruana said, he expects multifamily sales activity to increase in the second half of 2024 and throughout 2025. If the Federal Reserve Board cuts its benchmark interest rate, he expects investment sales activity to pick up in the Indianapolis market to an even greater level.

Aaron Kuroiwa, senior vice president with the Indianapolis office of Marcus & Millichap, said that the key remains consistency: Investors want to know where rates are going to be before making any deals, whether they remain at their current levels or fall to lower ones.

“Investors are always looking for stability and predictability,” Kuroiwa said. “The challenge came when the Fed increased rates. Many investors will look at today’s rates and say that they are OK with them. They are willing to transact at these rates as long as there is stability. That is the main factor: They want predictability.”

Kuroiwa said that the Indianapolis multifamily market is also benefiting from an

influx of investors who in the past did not have much appetite for investing in the Midwest. The growth of commercial real estate activity in the Sunbelt and smile states kept these investors occupied throughout the pandemic years.

Today, though, these investors are attracted to the consistent rent growth they see in the Indianapolis multifamily market. As Kuroiwa said, Indianapolis’ multifamily rent growth is consistently outperforming the rest of the Midwest,

something that investors, including outof-state ones, are noticing.

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INDIANAPOLIS (continued on page 10)

INDIANAPOLIS

“We have a very experienced developer community in Indianapolis,” Kuroiwa said. “They did not overbuild in the apartment market here. We are very conservative in our pace of development. We are also an affordable market. The renter base here can afford our apartment units. It’s what allows us to continue with our consistent rent growth. We can raise rents and our renters can still afford the units. We are a slow, steady and consistent market. In a time in which there is so much uncertainty, that is very attractive.”

Caruana said that Indianapolis is also a business-friendly market with lower taxes. Not only is the city bringing in a steady stream of new businesses, it is also seeing population growth.

The demand for single-family homes also outpaces the supply. This means that some residents here are renting as they struggle to find a single-family home that fits their needs.

“Are we going to see some potential vacancy increases in the multifamily market here? Yes,” Caruana said. “But there is still more demand than there is supply.”

Certain submarkets are seeing more

development and demand than others. Like many other Midwest markets, Indianapolis is seeing an influx of renters moving to its suburban areas. Kuroiwa said that suburban areas such as Carmel, Hamilton County, Greenwood and Franklin are seeing increasing leasing activity.

And when renters are seeking new apartment space what amenities top their lists of must-haves? Kuroiwa said that renters looking for affordable rental housing are more interested in clean, well-maintained space in a safe environment. They are not as interested in top-of-the-line amenity packages.

There is demand, though, for high-end product, too, from certain renters. These renters are seeking high-quality finishes and amenities such as well-appointed workout facilities and pool areas.

Positive momentum in office?

Positive momentum. That’s what JLL found when studying the performance of the Indianapolis office sector at the start of this year.

In its first-quarter Indianapolis office report, JLL said that the Indianapolis office market recorded its largest lease renewal since 2022, largest user

sale since 2020 and largest new downtown lease since 2019.

Unfortunately, JLL also reported that those big deals, though welcome, have not yet reversed the negative trends still being seen in the Indianapolis office market, negative absorption and a high vacancy rate.

JLL reported that during the last three quarters, the Indianapolis office vacancy rate increased by a combined 30 basis points and ended the first quarter of this year at 24%. This is the first time that the office vacancy rate has been this high in the Indianapolis market.

JLL did say that it expects this vacancy rate to fall soon. If not for RCI leaving behind 219,000 square feet at its West Carmel Operations Center this quarter, the office vacancy rate in Indianapolis would have already fallen below this mark, JLL said.

The Indianapolis office market saw 123,365 square feet of negative net absorption in the first quarter. Again, the RCI move impacted this figure, with JLL reporting that the Indianapolis office market would have posted backto-back quarters of occupancy growth for the first time since the end of 2021 if not for this move.

The first quarter was notable for its

big office transactions. JLL pointed to J.P. Morgan Chase’s lease renewal of 107,550 square feet and Calumet Lubricants’ 52,683-square-foot new office lease as positive signs in the market.

Two big office sales of more than 100,000 square feet also closed in the first quarter. Intech 12, a former call center, sold to AlHussnain Seminary and a construction-services firm bought 10500 Kincaid for its new corporate headquarters. These rank as the largest user sales in Indianapolis since 2020.

Bruce Miller, senior managing director and office group leader with JLL, said that JLL researchers are seeing signs of improvement in the office sector across the country, including in Indianapolis.

“There has been such a reduction in the velocity of office property sales in the last couple of years, that it’s not surprising that we are seeing more interest in sales now,” Miller said. “There are a lot of sellers who want to sell but haven’t been able to. There is a growing number of buyers looking to purchase who are holding off and waiting for the right time.”

As Miller said, buyer and seller expectations are finally starting to converge.

INDIANAPOLIS (continued from page 8)

Photo by Josh Hild on Unsplash.

Because of this, JLL researchers are expecting a greater volume of office sales in 2024 than what the industry saw last year.

Patrick Shields, senior director of capital markets at JLL, agreed that there is reason for optimism in the Indianapolis office market, even with the challenges it is facing.

“We are optimistic that we are heading in the right direction,” Shields said. “The people we deal with, the family offices and high-net-worth individuals, when looking at the Midwest always point to two markets as being especially strong right now, Indianapolis and Columbus. When the lights do turn back on in a meaningful way, Indianapolis will be one of the markets that helps the office sector’s recovery.”

What makes Indianapolis such an attractive market for investors? Miller says that the city and its suburbs boast a diversified economy. That is helpful during challenging economic times. If one industry is struggling, another might be performing well. That keeps the Indianapolis market from some of the bigger downturns that other

markets reliant on just one or two industries might face.

The state of Indiana also features a pro-business environment, Miller said. That makes the Indianapolis market an attractive one for companies looking for office space and investors looking to invest in it.

Finally? Miller points to the development community. Developers here have been smart about building mixed-use developments that include retail, office, residential and often hospitality space, Miller said. These mixed-use developments are popular today and tend to perform better than other commercial real estate projects.

Shields added that Indianapolis remains a growing market. That, too, makes the city and its surrounding suburbs attractive to both investors and tenants, he said.

As in other cities, there is a flight to quality in the Indianapolis market, with tenants seeking modern office space with amenities such as on-site fitness centers, outdoor walking trails, collaboration spaces and a walkable

location close to restaurants, shops and services.

“The flight to quality is definitely happening in Indianapolis, as it is in every other market,” Miller said. “Tenants are looking for a combination of a building that is a top-tier quality asset combined with a location in mixed-use environments where the amenities are in the building or in close proximity to it. Those are the type of buildings that are seeing leasing velocity and absorption.”

Shields said that tenants are looking for quality “in every sense of the word.”

“It’s not just the physical quality. It’s the location quality, too,” Shields said. “They want to be in the town center. Just look at a market such as downtown Carmel. It’s virtually impossible to find available office space there. You’re seeing it in a market like Fishers, too. It’s all about location quality and physical quality.”

A changing industrial market

are slowing the pace of new industrial deliveries in the market.

According to JLL, after several consecutive years with more than 25 million square feet of new industrial deliveries, developers are “pumping the brakes” on new industrial construction projects in the Indianapolis market.

The first quarter of this year saw the fewest industrial construction completions in three years, with just more than 2.69 million square feet of new industrial space delivered to the market.

The remaining pipeline of new industrial space under construction in the market -- about 4.5 million square feet -- is the lowest amount in six-and-ahalf years, according to JLL.

Despite the slowdown in construction, the Indianapolis-area’s industrial vacancy rate hit 11% at the end of the first quarter, according to JLL. Leasing activity is roughly half of what it was at this time last year, and more than 70% of the industrial leases signed in the first quarter of the year were below

The Modern Law Firm.

Indianapolis metro update 2024: A thriving economy and growing communities

by Keith Stark, principal ConsortiumCRE

In the heart of the Midwest, the Indianapolis metropolitan area stands as a beacon of economic vitality and community growth.

As we delve into the latest developments shaping the region, it becomes evident that Indianapolis and its surrounding counties are not only weathering the storms of economic uncertainty but are thriving in the face of challenges.

Indiana’s population growth over the past decade was largely driven by gains in a handful of metropolitan areas, according to the latest results from the 2020 Census. The 11-county Indianapolis-Carmel-Anderson metro area led the way by adding 223,163 residents between 2010 and 2020, resulting in an 11.8% increase. This numeric growth accounted for 74% of the state’s net population gain. With a population now exceeding 2.1 million people, this central Indiana region’s share of the state’s total population increased from 29.1% in 2010 to 31.1% in 2020.

As of February 2024, Indiana boasts an impressive unemployment rate of 3.5%, a testament to the robustness of its economy. This figure stands in favorable contrast to the national average of 3.9%, affirming Indiana’s position as a stronghold of employment opportunities. With companies like CNO Financial, Cummins, OPENLANE, Eli Lilly, Allison, Roche and Elanco anchoring the corporate landscape, high-paying jobs are plentiful, attracting talent from far and wide.

Indianapolis offers a cost-of-living score of 85.7, making it 14.3% lower than the national average. Despite being slightly higher than the Indiana average, this score reflects a favorable environment for residents, with affordable housing, reasonable expenses, and access to essential services.

The pulse of Indianapolis beats with a vibrant array of cultural and sporting amenities. From cheering on the Pacers, Colts, and Indians to reveling in the camaraderie of Indy Eleven matches, residents enjoy a rich tapestry of en-

“The Indianapolis metropolitan area stands at the nexus of economic vibrancy and community growth. With a diverse array of industries, thriving neighborhoods, and a welcoming atmosphere, Indianapolis continues to beckon newcomers and seasoned residents alike.”

tertainment options. With a livability score of 77/100, Indianapolis ranks in the 92nd percentile for desirability, cementing its status as a sought-after place to call home.

The

North – Hamilton County

Whitestown, Zionsville, and surrounding areas are poised for significant growth, with plans for mixed-use developments and expansions. West-

field’s Grand Park and Carmel emerge as hubs of commerce and culture, offering residents sophisticated shopping, dining, and recreational experiences. Micro Center opens its first and likely only Indiana location in Castleton.

The East – Hancock County

Greenfield experiences a renaissance, with a surge in retail, industrial, and residential developments. Major players like Walmart Distribution and restaurants Chipotle, Panera Bread, Chick-fil-a, Olive Garden, McAlister’s Deli, Panda Express and Atomic Wings have set up shop, underscoring the area’s appeal for businesses and residents alike.

Downtown/CBD – Marion County

Eleven Park and the revitalization of Circle Centre Mall signal exciting transformations for downtown Indianapolis. Commission Row promises a dining and entertainment extravaganza, further enhancing the city’s allure as a cultural hub.

The South – Johnson, Morgan and Shelby Counties

Greenwood Park Mall remains a cornerstone of the southside, while infrastructure improvements redefine Johnson County’s landscape. Industrial growth along the I-65 corridor and residential expansions underscores the region’s dynamism. Sporting Goods retailer opens its third Indianapolis Metro location

The

West – Hendricks County

The I-70 West Corridor emerges as a hotbed of industrial growth, complemented by retail and residential developments along US-36. From Total Wine & More to Costco, the west side buzzes with activity, attracting both businesses and residents.

Grocery is aggressively expanding in the metro area Kroger, Meijer, Fresh Market, Giant Eagle and in some cases new entries to the market Harvest Market and Hy-Vee.

Keith Stark

Restaurants on the Rise

Indiana is experiencing a surge in restaurant chain expansions, bringing beloved brands and exciting dining options to communities across the state. Among the notable chains expanding their presence in Indiana are:

Atomic Wings: Atomic Wings is opening its first location in Indiana, bringing its famous flavors to Indianapolis. With a diverse menu of wings and other delicious options, the restaurant promises a new dining experience for Hoosiers.

Chick-fil-A: With its commitment to quality ingredients and exceptional customer service, Chick-fil-A continues to expand its footprint in Indiana. New locations are popping up in cities like Indianapolis, Fort Wayne, and Bloomington, offering Hoosiers more opportunities to enjoy their famous chicken sandwiches, nuggets, and waffle fries.

Chipotle Mexican Grill: Known for its customizable burritos, bowls, and tacos made with fresh, responsibly sourced ingredients, Chipotle is expanding its presence in Indiana. New locations are opening in cities like Lafayette,

Terre Haute, and Muncie, catering to the state’s appetite for flavorful Mexican-inspired cuisine.

Culver’s: This beloved Midwest chain is expanding its reach in Indiana, bringing its signature ButterBurgers and frozen custard to new communities across the state. With its friendly service and commitment to quality, Culver’s is quickly becoming a favorite dining destination for families and foodies alike.

Panera Bread: Known for its freshly baked bread, soups, salads, and sandwiches, Panera Bread is expanding its presence in Indiana with new bakery-cafes opening in cities like Evansville, South Bend, and Carmel. With its focus on wholesome ingredients and convenient dining options, Panera Bread is meeting the needs of busy Hoosiers on the go.

Starbucks: The ubiquitous coffee chain is fueling Indiana with new locations opening in urban centers and suburban communities alike. From cozy cafes in downtown Indianapolis to drive-thru locations in smaller towns, Starbucks is making it easier than ever for Hoosiers to get their daily dose of caffeine.

Walk On Sports: Walk On Sports is expanding in Indianapolis with new locations, bringing its lively sports atmosphere and hearty menu to the city’s diverse neighborhoods.

Indiana experiences a surge in population, driven by high net in-migration and job opportunities. Counties bordering Marion County witness the most significant growth, with Hamilton County leading the pack. As the state’s economic engine, Indianapolis serves as a magnet for talent, fueling its expansion and prosperity.

In conclusion, the Indianapolis metropolitan area stands at the nexus of economic vibrancy and community growth. With a diverse array of industries, thriving neighborhoods, and a welcoming atmosphere, Indianapolis continues to beckon newcomers and seasoned residents alike.

As we navigate the opportunities and challenges of the years ahead, one thing remains certain: the future of Indianapolis is bright, promising, and filled with boundless

INDIANAPOLIS

potential. The Indianapolis metro area has been a significant driver of Indiana’s population growth, with Hamilton County leading the way in terms of percentage increase over the past decade. Additionally, the metro area’s GDP also experienced substantial growth during a threeyear period. Indiana’s population gains in 2023 nearly matched its average annual increase from 2010 to 2020, indicating continued strong growth.

Keith W. Stark has been a commercial real estate professional for over thirty years. After attending the University of Illinois earning a degree in economics and focus in real estate, Keith moved to Indianapolis. His experience includes working for several major firms, seeking to provide the best service and expertise for his clients, he founded Indianapolis-based ConsortiumCRE. Keith has hundreds of deals under his belt and is an expert in all aspects of deal making, from single tenant, small shop retail and restaurants and big box to large footprint lifestyle centers.

The KataLYST Team’s Jared Husmann : Navigating a normalizing multifamily market in Des Moines

By Dan Rafter, Editor

As president and founder of West Des Moines, Iowa-based The KataLYST Team, Jared Husmann knows the multifamily market in and around Des Moines. He says that this sector continues to face challenges stemming from higher interest rates, steeper materials costs and the soaring cost of labor.

It’s all led to a slight slowdown in multifamily sales in the Des Moines market.

But this slowdown? It’s not all bad. It’s transformed the local multifamily market here into a more normalized one, with investment sales activity looking more like it did in 2017 and 2018 than it did during the unsustainable pandemic boom years of 2020 and 2021.

What does the future hold for the Des Moines apartment market? Does a year or more of stable interest rates mean a boost in investment sales? We spoke to Hussman about this and other multifamily topics. Here is some of what he had to say.

Now that the Federal Reserve Board has stopped boosting its benchmark interest rate, are you seeing more interest in multifamily investment sales in the Des Moines market?

Jared Husmann: Yes and no. There is still a lot of interest in commercial assets overall in the Midwest. And multifamily is a good sector for investors. Des Moines has seen a lot of growth in the last several years, too, so that story of growth inspires out-of-state buyers.

But our investment sales numbers have been down from our peak years. As of the first quarter of 2024, we are at about $63 million in sales volume in the multifamily sector. Right around 11 different transactions took place in the quarter. Those transactions were at an average CAP rate of 7.54%, up from the 7.25% CAP rate we saw in the fourth quarter.

Apartment buildings sold for $58,581 a unit and 1,076 units traded hands in the first quarter. One of the differences we have seen is that in the fourth quarter of last year, a lot of products built in the 1970s sold. Those buildings have a smaller square footage. In the first quarter of this year, we saw a lot of newer assets trading. That is partly why we saw an increase in the square footage of investment sales in the first quarter compared to the fourth.

But even though activity was up from the fourth quarter of last year, if you look at the first quarter of this year compared to our overall figures from last year, our price per square foot and price per unit are down 8% and 12%, respectively. Last year’s average CAP rate was at 6.75%. Now we are at a 7.5% CAP rate. As of right now, the prices we are seeing from apartment sales are about 10% lower than where we were last year.

What about rental growth?

Husmann: We have seen slowing rental growth in the Des Moines marketplace. There has been some rent growth, but it has definitely slowed. This is especially true in the downtown market. Downtown is seeing some struggles as Millennials push out into the suburbs, moving into townhomes and larger-sized units in the suburban markets.

Does it seem like the Des Moines apartment market is cooling down, then, from those busy pandemic years?

Husmann: Last year we saw $150 million to $180 million in sales volume for apartments. This first quarter, we’ve seen $63 million in sales volume. That puts us on pace for about $240 million. Last year was the lowest multifamily sales volume in Des Moines since 2017. This year, our sales volume will be more on pace with what we saw in 2018 and

2019. But we won’t get to 2020 or 2021 levels. Back then, we saw $400 million to $500 million in multifamily sales volume. We are still off from those highs.

I think we are getting back to a more normalized market. I would say that $150 million to $240 million in multifamily sales is probably the new norm in the Des Moines market.

Des Moines has been a strong market for multifamily sales and leasing activity in recent years. What led to this?

Husmann: We have had strong population growth for several years. But there are more factors. Back in 2008 and 2009 we had the Great Recession. Everyone could find deals left and right. From 2012 through about 2015, everyone was absorbing those good deals. Then in 2015 to 2017, people started searching for yield in tertiary markets. When that hap -

Photo by Niko Vassios on Unsplash.

pened, Des Moines popped up on the radar of a lot of investors.

Also around 2016, we saw a lot of Millennials graduate from college. They needed to rent apartments. That resulted in a boost to the apartment market, too. Couple the growth of Millennials who started renting with investors searching for yield in tertiary markets, and that led to a boom in apartment investment in all tertiary markets around 2016 and 2017. That happened here in Des Moines, too.

The demand for rentals only increased in 2020. Most people tend to forget that we were all expecting a recession and economic slowdown in 2020. We started to see interest rates creep up. Then COVID happened and rates dropped through the floor. That spurred on the economy. Then there was the money that the government gave out in 2020 and 2021. That boosted the economy and the apartment market, too. Now we are seeing a bit of the slowdown that we probably should have seen four years ago.

Do you expect to see much new multifamily development activity throughout the rest of 2024 and into next year?

Husmann: Yes and no. The developers that are active are either very well-capitalized or they are legacy ownership groups or family-operated groups. We are not seeing a lot of true multifamily developers in the Des Moines market. The cost to build is simply too high right now.

However, because of the growth of the Des Moines market, developers do see the value here long-term.

Are you seeing any signs of relief from the high costs of building?

Husmann: From my perspective, it seems that the cost of materials has evened out. But we still see higher costs in the labor force. Labor is still very expensive. At the same time, we seem to be pulling labor from a smaller pool of people, which only increases the cost of labor further.

“At DarwinPW Realty, we look at building long term relationships and we achieve this by putting our clients’ interests above all others.

For over 45 years, DarwinPW Realty/ CORFAC International has been a leader in industrial and commercial real estate. The company specializes in brokerage, property management, investment and development services primarily in the Midwest. DarwinPW Realty’s highly qualified professionals are problem solvers and utilize a breadth of tools and knowledge to serve our clients best.

Labor is the X factor in development. Materials cost the same, generally, if you are in Philadelphia or Des Moines. There is not a lot of variety in materials costs across the country, for the most part. But labor, though, is a challenge that can vary depending on your market.

What kind of amenities are renters looking for in newer Des Moines-area apartment buildings?

Husmann: I have been hearing that more renters are looking for that one-bedroom-plus-den or two-bedroom-plus-den layout. People want a little more space, especially with so many working from home.

Chicago is an outlier, but in most of the Midwest, the Class-A developments seeing the most success are fairly light on their amenity packages. Beyond the typical pool, workout facility and maybe a dog park, they don’t offer much more. In the Midwest, we are a little more price conscious. The top two drivers of success in an A-class development

DES MOINES

in the Midwest are bigger units and lower rent. The developments that I’ve seen succeed in this market offer more space at a more affordable monthly rent.

As we see more people renting in the suburbs, they don’t care as much about the in-building amenities. They are used to driving everywhere. They don’t need all the bike racks. They are instead looking for more of a backyard area for young children or their pets.

What

do you more in the long-term for the rental market?

Husmann: I think in the Midwest, or anywhere where land is cheaper, we will see a push more toward ownership. People want more space. The interest is growing for townhomes and build-to-rent homes. Because of this, there might be less development of new multifamily buildings in the future. I don’t think we’ll see apartment development at the rate at which we have seen it in the last several years.

630.782.9520 | darwinpw.com

Jerry Sullivan Principal

A bright future for the Midwest’s multifamily market? That’s what Clear Investment Group’s Amy Rubenstein sees

By Dan Rafter, Editor

The multifamily sector has long been one of the darlings of investors looking for a place to sink their dollars. And, yes, this commercial sector did face challenges last year in the face of rising interest rates. But what will happen in 2024? Will a more stabilized interest-rate environment lead to an increase in multifamily investment throughout the Midwest?

We recently spoke with Amy Rubenstein, chief executive officer of Chicago-based Clear Investment Group, about the state of multifamily in 2024. Here is some of what she had to say.

Last year was a challenging year for all commercial classes. Do you think we’ll see more multifamily sales in 2024?

Amy Rubenstein: I’ve already been feeling a bubbling up of interest. I am seeing more people talking about new transactions. But people are still waiting for an actual interest rate drop to make a deal. There are many people waiting on the sidelines with cash. As soon as we see that first drop in interest rates, we’ll see a pick-up of sales activity.

The fundamentals of real estate have remained strong. I don’t think there is any crash coming. There is enough money on the sidelines that when people see that drop in interest rates, transactions will pick up.

How have the higher interest rates impacted Clear Investment Group?

Rubenstein: We focus on Class-C and workforce housing. In our asset class, the problems in the economy have helped us. When you get those high interest rates, it makes renting more affordable than buying. That helps us.

Also, when you start to see rents going up in even in the B-class of properties, that pushes more renters into the

C-class group, where we do most of our business.

How strong is the demand from tenants for multifamily properties in the Midwest?

Rubenstein: Demand is strong, especially in the Midwest. There has been so much growth and development of multifamily product in some of the Sunbelt cities and Southern cities. These areas now have an excess of housing. In the Midwest, you didn’t see all that development.

The housing demand in the Midwest, then, is higher. That is leading to rent increases. It is interesting to look at: People are projecting rent decreases in other markets. But they are projecting increases in Midwest markets and for vacancies to remain low.

Demand is also still high for workforce housing. That is where we get an edge. There is a lack of good affordable housing. It’s not just a lack of afford-

able housing, it’s a lack of quality affordable housing. We provide that type of housing. We step in and create solid, quality workforce housing, which gives us an edge in today’s market.

When you purchase a property that might be struggling, what changes do you make to transform it into quality workforce housing?

Rubenstein: What we see with a lot of the properties that we take over are high vacancy rates and high delinquency rates. Why is that? We must determine why that is happening and what we can do to change it.

Sometimes the management of the property has allowed it to fall apart. A building might have a lot of crime. The common areas might have deteriorated. Crime is one of the bigger concerns that we focus on cleaning up. We come into a property and identify what is causing the crime. Then we are very strict about cleaning it up. It takes some time, but usually in about

two years, we can clean up the crime problems.

From the managerial side, we often see properties in which all the units aren’t even being made available for rent. The staff might not know how to lease the space. The staff might not be showing the units. Or the units need work and aren’t ready to be rented. The landlord might not have had the bandwidth to wrap everything up. No one gave that final push. We will work on cleaning that up and getting those units ready to rent.

We invest in additional staff, too. We try not to displace anyone when we buy a property, staff members or tenants. We want people to stay. But a lot of the properties we buy might have been understaffed for years. The staff might not have had the proper leadership to guide them. If we take over a property that is understaffed, we’ll keep the existing staff and start hiring additional staff members locally. Then we’ll bring in our Chicago-based staff

Image by programmingibc from Pixabay.

to train everybody and help them get through the next six to 12 months.

I know that you buy throughout the Midwest and country. What makes a property a good fit for Clear Investment Group?

Rubenstein: We try to find properties that need us. That is where we find the best economics. When a property in our area of expertise needs us, that’s when a deal tends to work out.

We will look at the economics of the deal itself. How is the property performing today and how would it perform if everything was functioning well? Then we underwrite the difference. How much money will it take us to get from where we are today to where we want to be?

Once we decide that a deal is a good fit, we underwrite the submarket itself. We look for stability in the submarket. We don’t need a lot of population growth. But we do want to see a stable population. We are making sure that there is a high enough volume of renters in the market, that there is enough em-

Amy Rubenstein

ployment in the market. We want the employment to come from multiple sources, not just one industry or one company. We don’t want a market that is overly dependent on the success of one industry or company.

We also look at crime in a market. We are OK if there is crime at a property we are considering purchasing. We can clean that up. But we don’t want a lot of crime in the surrounding community itself. If

“We try to find properties that need us. That is where we find the best economics. When a property in our area of expertise needs us, that’s when a deal tends to work out.”

the crime is coming from a building that we buy, we can handle it. We can change it. If it’s the neighboring properties that have a lot of crime, there is not much that we can do. We can clean up our property, but not theirs.

We also look at the income in an area. We want to buy the right property for that market so that we have enough renters who can become residents of a building.

High-growth markets in the “smile” and key supply markets in the rust belt where our relationships allow for first, last, and only looks at compelling sites

Are you looking to further build your multifamily portfolio in 2024?

Rubenstein: We are looking all over the country. We do like the Midwest quite a bit. We are trying to expand. Our goal is to purchase quite a few more complexes this year. We think that this is a great time to buy. We are happy with the market.

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Midloch’s view: Expect a stronger year for multifamily sales in the Midwest throughout 2024

By Dan Rafter, Editor

With offices in Chicago, Milwaukee and the Minneapolis suburb of Eden Prairie, Midloch Investment Partners understands the multifamily market across the Midwest. And what do Midloch investment pros expect to see in this sector throughout the rest of 2024? A better year for investment sales and another strong year for leasing demand.

We spoke with Tim Donovan, managing director of Midloch Investment Partners, about the resilience of this sector and why he expects to see more multifamily sales in his favored Midwest markets this year.

Here is what he had to say.

A jump in sales activity

Donovan says that once the Federal Reserve Board late last year indicated that it was done increasing its benchmark interest rate, it immediately boosted the odds that the multifamily sector would see increased sales activity in 2024.

Donovan said that an environment of stable interest rates should inspire more investors to purchase multifamily assets this year. But as far as interest-rate cuts go? Donovan said that he’s not entirely certain that the Fed will deliver as many cuts as some in the commercial real estate industry expect.

“The sentiment is that 2024 will be a better year with increased transaction activity compared to 2023,” Donovan said. “Of course, we are starting with a bit of a low point with 2023. A lot of people are expecting multiple interest-rate cuts this year, maybe as early as late spring. We are more cautious and not overly optimistic that we’ll see cuts. But we do think the fact that rates won’t be going up will result in more multifamily sales.”

There’s another important factor in

play, too, the high number of multifamily loans maturing in 2024. Donovan said that roughly 20% of outstanding commercial real estate mortgages are set to mature this year, a number that’s so high partly because lenders granted so many extensions in 2023.

As Donovan says, nearly $930 billion of commercial real estate mortgages are set to mature this year, many of them originated in a very different interest-rate environment.

“In prior years, you could see neutral or cash-out refinances,” Donovan said. “In this environment, borrowers often need to bring additional capital to the transaction to close a refinance. Others are being forced to sell properties sooner than they anticipated for prices lower than they were originally hoping to sell at.”

A shrinking gulf between buyers and sellers?

One reason for such a shortage of multifamily sales last year? Buyers and sellers often didn’t agree on the appropriate prices for apartment properties.

Has the gap between buyers and sellers closed yet? Partly, Donovan says.

“For people who are not stuck between a rock and a hard place or people who are voluntary sellers, I would tell you that the gap has shrunk in the first few weeks of this year,” Donovan said. “We are starting see that buyer demand has picked up again to the point where some are willing to pay higher prices for multifamily properties. But at the same time, sellers’ expectations have begun to step up a little bit more, too, so we’ll

have to see if that gap between buyers and sellers starts to widen again.”

Solid leasing activity

Demand for apartment units from renters remained high in 2023. This was partly because higher mortgage interest rates made it more difficult for potential homebuyers to afford a mortgage loan.

These potential buyers, then, chose to rent an apartment instead of purchasing a single-family home.

But what about in 2024? Will leasing activity remain high in the multifamily sector?

Donovan said it will, especially in certain markets. Donovan said that he has seen a slowdown in leasing activity in certain overbuilt Sunbelt markets. But demand for apartment space from renters remains consistently strong in the Midwest, he said.

“Certain Sunbelt markets are struggling with excess amounts of supply,” Donovan said. “Some Midwest markets, though, have seen a more fixed stream of new units. A lot of markets in the Midwest have a healthier balance of supply and demand. That helps keep occupancy and rents more stable.”

Why are so many people renting today?

Donovan said that two groups of people are boosting the demand for apartment units today, renters by necessity and those who because of the work-fromhome movement now have more flexibility on where they must live.

Donovan said that high interest rates have made mortgages less affordable for many people who would prefer to own but instead have chosen to rent until these rates fall.

High housing prices are also pushing

Harber Estates in Sheboygan, Wisconsin, features 186 apartment units and 15 acres of undeveloped land. Midloch owns this property. (Photo courtesy of Midloch Investment Partners.)

Tim Donovan

more potential buyers into the renter-by-necessity category. There’s a shortage of single-family homes on the market, too, which is helping to keep housing prices too high for many potential buyers.

“A lot of people can’t afford not only the down payment but also the ongoing mortgage payments and taxes, insurance and maintenance of owning a home,” Donovan said.

The second group of people providing a boost to the apartment market are those who can work from home, even those who can work remotely on a parttime basis. These people now can work in locations that might otherwise have been too far for a daily commute.

“There is a whole new group of individuals who have more flexibility in terms of the location from which they work,” Donovan said. “People are prioritizing flexibility. They don’t mind moving from one city to another. It’s easier to do that if you rent instead of own. People who are renters by choice are renting later into their lives. A lot of that has to do with them having jobs with more flexibility.”

And what about where renters are living? Are more choosing to rent in the urban centers of their cities or are they instead choosing the larger spaces and quiet of the suburbs?

Donovan said that the answer is both market- and individual-dependent. Simply put, some renters prefer the

larger spaces and amenities that you might find in suburban apartment projects. Others want to live in cities in which they can walk to public transportation, restaurants and theaters.

“It’s an interesting give and take,” Donovan said. “Younger people put more value on access to bars, restaurants and entertainment. They might put more value on their time and want to be in

close proximity with their job if they still work in the office. At the same time, there are forces in the other direction. Some renters prioritize the extra space that you can get in the suburbs because they are spending more time at home than they have in prior years. There are drivers for both urban and suburban living.”

Suburban or urban?

Harber Estates in Sheboygan, Wisconsin, features 186 apartment units and 15 acres of undeveloped land. Midloch owns this property. (Photo courtesy of Midloch Investment Partners.)

The real secret to successful mixed-use developments? It’s the third places

By Dan Rafter, Editor

Your favorite bench at your neighborhood park. The table in the corner of your local public library. The neighborhood bar at the end of your block. The yoga class at your gym. These are all examples of third places. And they are the key to building successful mixed-use developments and communities.

What are third places? They are the places we go to when we are not at home – known as the first place – or work – the second place. When you attend your local community theater, you are visiting a third place. When you sit on a park bench reading a book, you’re in a third place. When you chat with

your neighbors at the local dog park, you are, again, in a third place.

And today, those third places are even more important. A growing number of people are working remotely, even if only on a part-time basis. They are spending less time in their second place, then, and socializing with fewer people. This makes the time spent in third places more important for people’s mental wellbeing.

Third places have also become more important in commercial developments. Mixed-use developments are thriving today, largely because of the pocket parks, brewpubs, dog runs, bowling alleys and gyms that they offer.

And this need for third places is only going to grow as developers see just how successful mixed-use developments that offer spaces for socialization are becoming.

We spoke with Alex Baum, vice president of strategy with ERA-co, a New York City-based global consultancy firm that works with clients planning and developing mixed-use projects, about what makes for successful third places and why developers need to think beyond coffee shops and bare patches of grass when developing these key spaces.

ERA-co is working with clients on projects in eight countries. The firm em-

ployes everyone from master planners and urban designers to professionals specializing in spatial analysis, place strategies and graphic design.

Here is some of what he had to say:

The general definition of third places is clear. But how do you personally define third places?

Alex Baum: Howard Schultz and Starbucks helped popularize the term with the idea that people should walk into a Starbucks and stay there for hours with a coffee. The bars in New York and the pubs in England are examples of third places. Third places have always existed. It’s where people have long ex-

Image by 12019 from Pixabay.

changed ideas and where movements have been born.

But it’s important to go beyond the café, beyond the pub. We always joke about coffee shop or latte placemaking. When people are looking for something to add to a mixed-use development, they always say, ‘Let’s put a coffee shop here.’” Third places, though, are places that are familiar to your feet. They are places where you are recognized and you feel that you belong. It could be a dog park, bench, stoop, café or corner bar. It’s more about what the space provides you in terms of a sense of belonging and connection.

It could be your running club or the movie nights that happen on a Saturday night in a park in your town. It’s a place where you walk to and nod your head as you meet people. It’s the ‘where everyone knows your name’ idea.

How important are these third places today?

Baum: You no longer need to interact with humans to live your life. That provides convenience, but it is also a great detriment to society. The advantage of third places is that they connect us to the surrounding community. They expose us to more diversity. At home and at work, you don’t have diversity, or the

diversity you have is fixed and not fluid. It is important to see others and see how they function. It’s important to become a part of the broader narrative of society.

What do developers need to consider when developing third places for their mixed-use developments?

Baum: For a development that is more focused on office properties, we know that a mixed-use environment

MIXED-USE (continued on page 23)

ERA-co consulted on the Treasure Island project in San Francisco, which will feature plenty of third places. (Photo courtesy of ERA-co.)

demands higher rents. In a post-COVID world, when you are trying to attract tenants, you can’t just offer a nice space. You must prove to tenants that the spaces you create are relevant to a new cohort of employees who have the choice of whether to come into the office. You have to create an environment where relationships can be created not just in the cubicle or in the office but outside the office, too.

There are two things that are clichés when developers are creating third places: One is a coffee house and the other is a farmer’s market. We understand the idea of those coffee shops. But you need a diversity of offerings that is appealing throughout the day and at different price points. You might need a place where someone can go in and spend $3. They don’t have to sit down for a full meal. They can go in and not have to spend that much to feel welcome in the space.

With a lot of third places, going there becomes a sort of ritual for people,

and that’s a positive thing for a development. Look at gyms. People make that one of their rituals, their routines. They keep coming back to these spaces. They might join classes that allow them to socialize with other people. That socialization often keeps them coming back. That should be attractive to the owners of the developments in which these places are.

What about in apartment developments? Are amenities such as on-site fitness centers and dog runs considered third places?

Baum: Some third places are private. They only impact a small number of people. They create a sense of community, but only in a vertical establishment of similar-minded people with similar economic means versus the entirety of the community that we inhabit. Those private spaces don’t have the same power or impact that public third places tend to have.

Public spaces just have more potential. There’s a park near where I live in New York in which people work out in any way you can imagine. There are people

on rollerblades. There are people doing ballet moves, weightlifting and sprinting.

There are ways to create a public third space and do it well so that it is used on a consistent basis. You don’t want just a blank slate of grass that is only used by a few people at very specific times. It’s about programming a space so that there are things going on. It’s about providing areas for people to exercise or sit or just congregate. The most successful of these public third places have a diversity of uses throughout the day. Developers, then, shouldn’t just add green space. They should add pocket parks that have seating and spaces to gather.

People would never say this, but it’s a move to a more European-minded urbanity. Rather than vast parks, it’s about pocket parks, a substitute for the European plaza. Developers are considering smaller, intimate spaces. Governments and planners are doing a good job of mandating these public spaces, of saying you can build higher and denser if you provide more public space.

Did the lockdowns and business closures during the height of COVID instill an even greater demand in people for these third places?

Baum: Whenever there is a shock to the system, it allows you to zoom out and look at something from the outside rather than from the inside.

There is an exercise that we sometimes do: How will people feel if you take something away from them? What COVID did was take a lot away from people. And in doing so, it connected them to different faces and places that they weren’t engaging with before. National parks never saw more visits. That has since held steady and resilient. People looked at traveling to spaces within a one- or two-hour drive versus a one- or twohour flight. People spent more time outdoors, whether on their stoops, the sidewalk or the park.

People learned that third places were not necessarily commercial spaces, but that they can be outdoor spaces.

MIXED-USE (continued from page 21)

The Hoboken Connect project will bring third places in a mixed-use development in New Jersey. (Photo courtesy of ERA-co.)

Forte Real Estate Partners’ Steve Brown: The only constant in healthcare real estate? Change

By Dan Rafter, Editor

Steve Brown began his career in commercial real estate in 1985, when he began working for boutique real estate company American Commercial Properties. While there, Brown began representing medical practices, a side of his business that continued to grow.

Today, Brown is principal of Bloomington, Minnesota-based Forte Real Estate Partners, and is one of the leaders in the Twin Cities’ healthcare real estate market.

Midwest Real Estate News tapped into this wealth of experience during a recent interview with Brown. This industry veteran shared his thoughts on the state of the healthcare real estate market in the Minneapolis-St. Paul region and the constant changes hitting this sector.

Here is some of what Brown had to say.

How challenging has it been for your medical clients during the past several years?

Steve Brown: They faced supply chain issues that caused construction costs to go up. These supply chain issues also delayed the timeline for completing construction projects. Land costs have risen dramatically. Then throw in the interest rate increases that occurred. That all made the cost of new construction prohibitive for many medical providers. There are plenty of providers who wanted to expand during these last four years but couldn’t afford to do it.

On top of that, I’ve had clients who’ve said that even if they had a facility that they could move into, they didn’t know if they had the right number of professionals to staff it. That’s another layer to the challenges that medical providers are facing today: The burnout of nurses and physicians has led to a lack of staffing.

The staffing issue is a serious one. Go to an urgent care. They’ll tell you that they’re backed up. Go to the emergency room. They’re backed up, too. Where do you go to get care?

Even with these challenges, do you think we’ll see more leasing, development or sales activity in the Twin Cities healthcare real estate market this year?

Brown: I have clients who want to expand. But they must find real estate that they can afford to buy. Real estate becomes a fixed cost. Staffing? They can modify that. If they buy real estate when the price is high, they are stuck with that cost for a long period.

Medical providers dealt with the fast increase of interest rates. That is what put the brakes on the development world. It was a sudden stop: Providers couldn’t afford to build new construction. They couldn’t afford to buy new real estate. Everyone was used to having cheap money and easy access to capital. That has now changed.

The real estate world has to adjust. Is this the new normal? We are not going back to the days of free money. These rates look bad in comparison to what we saw in 2020 and 2021. But historically, they are not bad. One of the things that healthcare providers have to figure out is if this is the new norm. And if it is, how can they conduct business in it?

There is another challenge, too. On Wall Street, healthcare has become its own food group. Wall Street wants a higher rate of return. That has an im-

pact on the rents you need to charge and the profits that you need to make. It’s a bit like a perfect storm.

I think we will see providers get creative, though. They will find creative ways to save money.

What about conversions? Will we see more medical providers moving into and converting office that wasn’t originally built for healthcare use?

Brown: Last year when Minnesota Real Estate Journal had its healthcare summit, we discussed this on a panel.

HEALTHCARE (continued on page 23)

A rendering of the Twin Cities Orthopedics ASC that is planned and underway in the Prudential campus redevelopment in Plymouth, Minnesota. (Photo courtesy of Forte Real Estate Partners.)

Panelists talked about seven or eight deals in which medical providers moved into general office buildings. Is that a trend? I think it is. There is a shortage of medical office space. That causes users to say that they can build new or try to find an alternative that will meet their fundamental needs and cost less.

It’s not easy to make this work, though. You have to check a certain number of boxes to make sure that the property is a good fit. We’ve had some deals where we have put medical clients into general office buildings. In these cases, the owner was someone who understood healthcare and what was required. The client had to make sure that the buildings had adequate plumbing capacity and HVAC, that they could support the weight of certain medical equipment. It required an investment. But that investment compared to new construction was still more attractive.

Is this a trend? I think the question is more how deep will the trend run? As you watch some of these office assets struggle, you are going to see medical uses moving into them.

“What is the purpose of the hospital then? Providers have redefined those services that are being provided in a hospital setting.”

Do you expect health systems to continue to focus on ambulatory surgery centers, freestanding clinics and other outpatient facilities?

Brown: There has been a push for more ambulatory care. It’s about getting medical services closer to the patient. Imaging work would always be done at the hospital. Surgery was always done at the hospital. Over time as technology has changed and the reimbursements that medical providers receive have gone down, providers have turned more toward the ambulatory category.

What is the purpose of the hospital then? Providers have redefined those services that are being provided in a hospital setting. Why does a certain type of service have to be provided at the hospital? Can it be provided in an outpatient facility? As much as possible, healthcare systems are trying to push care to the lowest-cost scenario.

Earlier in my career, if you had a hip replacement, you were told that you needed to stay off your hip for six weeks. That was the rule of thumb. Today, you are putting weight on it and walking 45 minutes after surgery.

These changes have had significant effects on how fast you get out of the hospital when you actually have a procedure at a central hospital.

It will be interesting going forward. As healthcare has gone more ambulatory, it’s almost taken on a retail type of flair. It’s now about accessibility and signage. Healthcare users want more of the attributes of what makes for a good retail location. Will healthcare providers be more willing to accept a location that doesn’t have the best visibility but comes at a lower cost or will they increasingly say that they need high visibility and an accessible location, even if that costs more? I’d never say that there is a right or wrong answer to that. But there is going to be a dialogue that hasn’t occurred in the past.

What about tenant demand? Are healthcare users actively seeking new space in the Twin Cities market?

Brown: If you are on the private practice side, you either need to grow for scale or you are going to be consumed by a system that wants to grow. Are more systems going to grow and hire new physicians to compete with larger private practices?

HEALTHCARE (continued from page 23)

Run Skin Rejuvenation Clinic photo with this caption: The Skin Rejuvenation clinic in France Place, Edina, is an example of a medical/healthcare use taking office space. (Photo courtesy of Forte Real Estate Partners.)

The outlook for the net lease sector in 2024? It all hinges on what the Fed does with its interest rate

By Dan Rafter, Editor

Higher interest rates continue to slow the number of investment sales in the net lease sector. And this trend won’t change until the Federal Reserve Board finally begins lowering its benchmark interest rate.

That’s one of the big takeaways from The Boulder Group’s 1st Quarter Net Lease Research Report that the brokerage released in early April.

According to The Boulder Group’s report, cap rates in the single-tenant net lease sector increased for the eighth consecutive quarter within all three major net lease sectors in the first quarter of 2024.

And where do these cap rates stand as of the end of the first quarter?

Single-tenant cap rates increased to 6.42%, a jump of seven basis points, for retail; 7.60%, or five basis points, for office; and 7.02%, two basis points, for industrial.

“Cap rates in the first quarter of 2024 represented the highest levels since 2014 for single-tenant retail properties” said Randy Blankstein, president of Wilmette, Illinois-based The Boulder Group. “However, cap rates for single-tenant retail and industrial assets remain lower than their 20-year historical average by approximately 40 basis points.”

Like all commercial brokers, those specializing in net lease brokerage are waiting anxiously for the Federal Reserve Board to lower its benchmark interest rate. This hasn’t happened yet. And until it does? Don’t expect sales activity in the net lease space to rise significantly.

“Elevated interest rates continue to impact transaction volume, which is lower than prior years” said Jimmy Goodman, partner with The Boulder Group. “A lack of 1031 exchange buyer

Group.

“Cap rates in the first quarter of 2024 represented the highest levels since 2014 for single-tenant retail properties.”

activity is resulting in an increased supply of net lease properties on the market.”

The slowdown in net lease sales has resulted in an increase in available properties. The Boulder Group reported that property supply in the single-tenant sector increased by more than 9% in the first quarter of 2024 when compared to the last quarter of 2023. With limited transactions occurring, properties continue to be added to and remain on the market, according to The Boulder Group’s report.

Despite the headwinds in the market, certain sellers including merchant builders or owners with upcoming loan maturities, look to meet market pricing.

“Net lease retail properties with the largest supply -- dollar stores and drug stores --continue to experience the greatest cap rate expansion,” said John Feeney, senior vice president with The Boulder Group. “Both of these sectors experienced double-digit cap-rate expansion in the first quarter of 2024.”

After multiple Federal Reserve meetings without any interest rate relief, investors will be monitoring upcoming rhetoric from the members of the Federal Reserve, the Boulder Group said.

As the company’s report says, any cuts to interest rates would be welcomed by net lease owners looking to refinance or sell properties before the end of the year.

There is hope, too, that sales activity will increase in the next six months. The Boulder Group said that with the stability now in the capital markets, the expectation from market participants is for increased transaction volume in the second half of 2024.

However, an increase in transaction volume without a cut in interest rates? It would be a small increase, not anywhere near a surge, with The Boulder Group predicting that net lease transactions are not expected to end 2024 anywhere near the amount of activity the sector saw in prior peak markets. Including recent ones in 2020 and 2021.

Photo courtesy of The Boulder

Today, several storefronts are empty.

One of the big changes that Hendricks is making is to replace the mall’s main concourse with an openair street lined with shops, restaurants and apartments.

“We didn’t want to just re-tenant the mall,” Evinger said. “This isn’t about putting lipstick on a pig. If you want a world-class development there, that is what we want to do.”

Evinger said that Hendricks plans to transform the mall into a completely open-air space, with the development’s pedestrian-only promenade a highlight. The promenade will be wide and inviting, Evinger said. The focus will be on bringing restaurants and retailers that are new to the Indianapolis market.

The hope, too, is to bring experiential retail to the mall, Evinger said. This could mean bars that offer darts, bowling alleys, indoor mini-golf or other retail options that include the opportunity for socializing.

“We want to attract retailers that provide an experience,” Evinger said. “We are trying to bring in retailers that you don’t already see in down -

“We didn’t want to just re-tenant the mall.

This isn’t about putting lipstick on a pig. If you want a world-class development there, that is what we want to do.”

town Indianapolis today.”

Evinger said that these sorts of mixed-use developments have proven successful, attracting a steady stream of both tenants and customers.

“These types of developments go back to what cities originally were all about,” he said. “They blend into the fabric of the city. They don’t stick out and look like a 1994-era mall. They look like they’ve been there for 100 years. They fit into the fabric of the neighborhood very organically.”

Mixed-use developments also provide a safety net to developers and

owners. A mixed-use development might include residential, retail, office and hotel space. If one of those sectors is struggling, another might be thriving.

“It balances out,” Evinger said. “But at the same time, all the uses feed off each other.”

Evinger points to Hendricks’ existing Bottleworks District mixed-use development, also in Indianapolis. This mixed-use development is thriving today, thanks to its mix of different uses.

“The retail component in Bottleworks would be fine by itself. But you

add the daytime population using the office space and the people eating at the restaurants and the clients staying at the hotel? It becomes a little ecosystem,” Evinger said.

Hendricks Commercial Properties expects the design phase of the Circle Centre transformation to take 12 to 18 months. It will then take another 12 to 18 months after this for the project’s first phase to reopen. Evinger said that Hendricks is targeting 2028 for the opening of the first phase, the south walk of what will be a two-block-long outdoor mall.

INDIANAPOLIS (continued from page 1)

(Photos courtesy of Hendricks Commercial Properties.)

VTS survey: More than 80% of office landlords seeing an increase in lease renewals

By Dan Rafter, Editor

Aslow recovery in the office sector? It’s better than no recovery at all. That’s the takeaway from VTS’ fifth annual Global Landlord Report released in early April.

And here’s the best news from the report: VTS says that more than 80% of office landlords surveyed said that they have seen an increase in lease renewals.

According to the latest VTS Office Demand Index, the national demand for office space marked its sixth consecutive month of annual growth in March. And VTS’ 2024 Global Workplace Report showed that 62% of companies are following a hybrid work strategy in which their employes work part time in the office and part time remotely.

This indicate a slow but steady recovery for the office market, according to VTS officials.

“We are witnessing a conviction for a strong return-to-office in 2024 in contrast to years prior, and while positive for the market, it is becoming increasingly crucial for landlords to remain competitive to meet the evolving demands of tenants for enriched, interconnected workspaces,” said Nick Romito, chief executive officer of VTS, in a statement.

Romito said that by putting the needs of their tenants first, office landlords are seeing more stickiness in leases, with fewer tenants leaving for better opportunities.

The VTS report highlights the top priorities and concerns of office landlords across the globe. According to VTS, office landlords this year are more concerned with boosting lease renewals by improving their tenants’ experiences than they are with leasing vacant space.

A total of 57% of respondents in VTS’ report said that they are focusing on retaining current tenants. How are they doing this? A total of 56% of landlords surveyed said that they are boosting their property management services and taking steps to enhance the experience of their tenants.

According to the report, landlords are twice as focused on property improvements this year as they are on portfolio diversification. The evidence for this comes in how office landlords are spending their dollars.

VTS found that landlords are increasingly investing in tenant experience technologies (cited by 33% of respondents), outdoor communal areas (31%), property operations (30%), food and beverage concepts (27%) and fitness centers (27%).

These efforts seem to be paying off. VTS reported that 82% of landlord respondents said that they are already

seeing the length of office lease renewals either increasing or holding steady.

Another key finding from VTS’ report? Most landlords -- 84% -- said that they expect to invest more in technology in 2024 when compared to 2023. Only 4% told VTS that they expect their investment in technology to decline.

Property management software ranks as the top tech investment for landlords, with 44% of survey respondents citing it as their most important piece of technology. Next came leasing and asset management platforms, cited as a top investment choice by 33% of respondents, and digital marketing software, listed as a top choice of 26% of respondents.

In 2022, VTS found that only 4% of landlords were utilizing digital marketing software. That number spiked to 26% in 2024.

Social media ranks as the most powerful channel that office landlords use to find new commercial real estate tenants, with 33% of respondents saying that they have success with this method. On the other end of the spectrum? Landlords said that digital ads are the least effective method of finding new tenants.

VTS reported, too, that 34% of landlords spend more than $50,000 annually to create, maintain and update their digital web properties across their portfolio.

As in most industries, AI is expected to play an increased role in helping landlords manage their office properties. VTS reported that 45% of surveyed landlords said that they expect AI to help them make portfolio decisions, assist them in saving money on the operations of their properties and boost their marketing efforts.

Photo by Rodeo Project Management Software on Unsplash.

MINNEAPOLIS

North Loop Green, which officially opens this summer, is bringing a 1-acre activated green space, dubbed The Green, to an area of downtown Minneapolis located between the Cedar Lake Trail and Target Field, home of the Minnesota Twins. The goal is for this area to serve as a town square for Minneapolis’ North Loop section of downtown, and to give fans attending Twins games, and nearby residents, a wider range of activities to enjoy in the neighborhood.

North Loop Green is also bringing 350,000 square feet of office space, 350 residential units, 100 hospitality units and 15,000 square feet of premier food and beverage offerings.

Global real estate firm Hines has collaborated with partners Marquee Development and the AFL-CIO Build Investment Trust on the construction and opening of North Loop Green. JLL is serving as the leasing agent for the office component of the development. The architect of record for the project is ESG Architecture and Design, while Kraus-Anderson served as North Loop Green’s general contractor.

Eric Nordness knows how effective

sports-entertainment districts can be in pumping life into urban areas. He’s managing principal for Marquee Development, which has worked extensively on additions to Chicago’s Wrigleyville neighborhood.

He said that North Loop Green will bring new activity to Minneapolis’ North Loop neighborhood, even when the Twins aren’t playing.

“North Loop Green is an amazing location,” Nordness said. “It’s a vibrant

neighborhood. It has that live/work/ play environment that everyone wants. There isn’t a lot of open space there. But there was this left-behind space because of the urban constraints of rail and highway. It left us with a pretty cool way to create a green space and invite the neighborhood to use it as its park.”

Nordness sees the green space portion of North Loop Green as a place for urban residents to decompress during an otherwise busy day. They

can sit on a bench, read a book or sprawl out on the grass.

On other days, the park space will be programmed with music nights, farmers markets, craft fairs or other events.

“Whatever the neighborhood wants, that’s what that space can provide them,” Nordness said. “It will evolve and respond to what the neighbors and fans want to see and use. We will be pivoting and growing. But the idea was to start with this great space that

MINNEAPOLIS (continued from page 1)

North Loop Green is scheduled to celebrate its opening this summer in downtown Minneapolis. (Images courtesy of Marquee Development.)

(Images courtesy of Marquee Development.)

invites everyone to come over 365 days a year.”

Bob Pfefferle, managing director at Hines, agreed that the park serves as the centerpiece of the North Loop Green development.

“North Loop Green will be an exciting and dynamic destination for businesses and residents,” Pfefferle said in a statement. “North Loop Green will add significant dining, recreational and family-friendly entertainment options in the rapidly growing North Loop submarket.”

The demand for sports-entertainment districts

Nordness said that sports-entertainment districts that offer a combination of entertainment, retail and dining options have become more important in an era in which consumers have so many choices as to how they spend their dollars.

As Nordness says, consumers can watch games on their many screens at home. They can go to local bars and restaurants to watch sporting events

or concerts on big-screen TVs.

Sports-entertainment districts, then, are a way for sports teams to offer something extra to entice fans to visit their stadiums. They are a way for urban neighborhoods to pry consumers away from their smartphones and other devices.

“These sports teams are incredibly valuable,” Nordness said. “But consumers have an array of offerings outside their front doors. The idea of creating a better fan experience is

always top of mind with owners. The ability to offer a great experience and new and unique ways to experience fandom is something that owners are often searching for. And that often leads to creating something outside the venue.”

And while it’s true that fans can watch their favorite teams from anywhere thanks to smartphones, it’s equally true that these same fans are always looking for new experiences to share in person with their friends.

“People want to come together in an environment that is interesting and compelling,” Nordness said.

Nordness refers to the area around Target Field as a dream spot for a project like North Loop Green. The North Loop is already a successful mixed-use district with shops, restaurants and two sporting venues within a short walk from each other.

Then there’s the architecture in the area, which Nordness said boasts its own unique style.

“We were so excited to come in and work with Hines on this project,” Nordness said. “It’s not too often that you can get a chance like this to make such a difference in a neighborhood.”

(Images courtesy of Marquee Development.)

(Images courtesy of Marquee Development.)

Market Position: Artist + property owner partnerships demonstrate community investment—and ROI

By Margy Sweeney

Hot take: Art and artists have never been more relevant to successful real estate development. Now more than ever, authentic experiences are essential in attracting tenants, and that makes partnering with artists a newly powerful tool in commercial and multifamily marketing.

To create a symbiosis of landlord, community and artist, creative owners and their marketing leaders are now shaping spaces where artists can not only display their work but also actively create or perform.

From hosting intentionally thought-provoking works of art in indoor and outdoor spaces, to providing performance-ready stages and large canvases for future murals, engagement with art and artists can form a lasting bond between a property and its community.

Case in point: Incorporating art into CRE has been top-of-mind at several recent Urban Land Institute meetings. So, what can property owners, developers and property managers do to tap into this fresh value proposition?

Start here, by understanding the current landscape and opportunity.

The Artists Way…to activate spaces across CRE asset classes

Curated, highly personalized art has the power to enliven space across multiple asset classes, particularly where people live, work, shop or play.

“The next generation of malls cannot be an island, physically or culturally,” observed Sean Slater, AIA, Senior Principal of RDC and Vice Chair of the Urban Land Institute’s Entertainment Development Council at the Spring 2024 meeting.

“Not only should the new develop-

ment reconnect physically with the neighborhood, but its offerings must connect on a deeper level. We envision re-invigorated mixed-use developments that include spaces for musical performances and canvases for artists, manifesting artwork and performances that in turn serve as a magnet for members of the surrounding community.”

Following are just some examples of how art is bringing new life across the CRE landscape.

1) Activating public spaces. Harnessing the connective power of artwork can begin in the earliest stages of development. ASPIRE, a recently unveiled, 25-foot-tall public monument in

Chicago’s Englewood neighborhood, was backed by developer Sterling Bay, Skender and others, exemplifying the power of corporate-community partnerships in supporting local arts and culture. Public art can also express community pride in a less permanent way. As part of the San Diego-Tijuana region’s celebration of its distinction as the 2024 World Design Capital, the city’s Park Boulevard is being transformed into The Bay to Park Paseo, an outdoor gallery.

2) Delivering affordable housing for creative professionals. Consider the Pullman Artspace Lofts on Chicago’s south side, an affordable housing development envisioned by local non-profit the Pullman Arts Founda-

tion and developed for local artists. The project restored two historic structures and replaced vacant lots with newly constructed apartments and gallery space for local artists; it was the subject of a recent ULI Chicago Housing Council tour.

3) Infusing vibrant energy at work. For corporate tenants, displaying inspiring visual art that tells a local story, hosting artists-in-residence or offering actual studio space can help energize their workforce. A property’s marketing to those users must show how a tenant space can come to life within a building.

At the ULI Spring 2024 Meeting, a tour of the 80-story 3 World Trade Center in Manhattan revealed that one of the building’s future anchor tenants, a tech company, was originally headed for a more traditional brick/loft type of space—until they toured the 79th floor. That floor happens to be raw space, but with walls covered almost completely by murals and street art, from its elevator lobby to the sundrenched area that hosts multiple working artists in an ad hoc studio. Walking through this art-activated environment helped the tenant envision how they could build out a creative space, and they signed a multi-floor lease soon after.

The 79th floor of 3 World Trade Center is dedicated to art and artists. Pictured here is the building’s elevator lobby.

Margy Sweeney

MARKET POSITION

From decoration to activation

Art has moved from mere decoration to become an activation tool. One example: real estate investment firm BGO supports artists by collaborating with them to curate active programming in its spaces, from hosting exhibitions and films to hosting special events. Upon renovation, the dramatic lobby at 685 Third Avenue in Midtown was transformed into an inclusive space via working artists and exhibitions.

Meanwhile Orrick’s Los Angeles office doubled down on integrating art into its law firm space by partnering with Art for Impact (AFI).

“AFI is our way of helping our clients express who they are in terms of culture, diversity, equity, inclusion and belonging in the physical space,” explained Chely Wright, Chief Diversity Officer, Unispace, Orrick’s design build partner. “We are intentionally using artwork to capture Orrick’s commitment to diversity and inclusion as a primary component of design — not as an afterthought.”

How do you start?

In most cases, connecting with the right non-profit is a strategic place to start.

“Our goal with AFI is to create a sustainable ecosystem of engagement between non-profits, artists and corporations,” observed Wright.

Non-profits can connect local artists with the corporations and building owners that would like to surround their tenants and neighborhood with locally meaningful art—and provide a structure for that relationship. Chicago’s Wabash Arts Corridor, a “living urban campus,” is one example of a non-profit that bridges the artist-corporation gap.

The bottom line: Art is playing a larger role driving real estate ROI

Authenticity and genuine community partnerships with art and artists show tenants that landlords are active members of the community. With local and culturally relevant works of art, you can create a destination that tenants, shoppers, residents and neighbors can be proud to support with their hearts and minds—and also foot traffic, and, not incidentally, long-term rental revenue.

Margy Sweeney is the Founder and CEO of Akrete, the nation’s #2 independent public relations firm for real estate finance and development and is passionate about expanding economic opportunity for women and minority-owned businesses. Based in Chicago, she leads a national team and has been in commercial real estate marketing and public relations since 1995. She is also the Chairman of the Board of Directors of SomerCor, a leading SBA Certified Development Company lender based in Chicago.

A working artist studio hosted on a floor of 3 World Trade Center that is not yet leased.

The top 100 fastest-growing retailers: Consumers still hunting for convenience and bargains

By Lanie Beck, Senior Director, Content & Marketing Research at Northmarq

By understanding the needs and preferences of the typical U.S. consumer, the most successful retail brands have evolved to deliver on these expectations. Today, significant expansion is underway across several diverse retail sectors including automotive, discount and dollar stores, fitness and sporting goods, and, of course, the dynamic restaurant industry.

While expansion in these categories isn’t necessarily a new trend, there have been some recent announcements that promise to contribute even more substantial growth than originally anticipated. Conversely, a handful of retailers have also announced consolidation strategies that could present some challenges in the coming months and years.

Announcements from these retailers aren’t just headlines though. Developers, potential investors, and current owners rely on these plans to help form their own strategies, drive investment decisions, and identify both obstacles and opportunities across the market.

U.S. consumers love a bargain

The allure of a great deal resonates deeply with most U.S. consumers, and many retailers cater to this preference by offering coupons, discounts through loyalty programs, or even structuring their entire concept around discounted merchandise.

In recent years, escalating inflation has caused consumers to cut back on discretionary spending, and shoppers are now pinching pennies on even the most essential goods and services. Not surprisingly, retailers that cater to the cost-conscious consumer are some of the brands growing the fastest.

• Dollar General recently reached 20,000 total locations and is planning an additional 800 new stores in fiscal year 2024.

• ALDI successfully acquired Southeastern Grocers and will add 800 total locations to its footprint through new development and rebranding by yearend 2028.

• In April, Target will launch a new feebased membership loyalty program, presumably to compete with Walmart+ and Amazon Prime, and in recent months it announced its intent to continue exploring large format new store development, which contradicts the downsizing trend we’ve seen across other brands.

• Five Below plans to exceed last year’s growth by opening up to 235 new locations during fiscal year 2024, putting the discount brand on target to reach its goal of 3,500 total stores by 2030.

U.S. consumers value convenience

Convenience remains a cornerstone of the consumer experience, but convenience extends beyond just products. It encompasses ease of access, swift service, and helpful technology among other characteristics.

From one-stop shopping destinations to grab-and-go offerings, retailers that promise a speedy and efficient experience are gaining market share as brand loyalty rises. The availability of self-checkout kiosks, mobile apps that

allow ordering on the go, and multiple drive-thru lanes to ensure quick service all combine to deliver a convenient experience that consumers crave, which is helping to drive not only growth across the sector but additional innovation, too.

• Sheetz & Wawa: More than 1,000 locations are planned long-term by these two rapidly growing gas station and convenience store brands.

• Take 5 Oil Change, the “stay in your car” oil change pioneer, embodies convenience and speed, and recent growth has taken the brand beyond 1,000 locations, with long-term plans calling for 150 new locations to open each year.

• In the growing “medtail” space, Aspen Dental has emerged as a provider of choice, offering appointments and locations that are more convenient for some patients than a traditional dentist can offer.

• Chipotle Mexican Grill & Chick-fil-A: Both brands have embraced unique drive thru concepts, relying on mobile ordering and multiple pick-up lanes. It’s estimated that more than 80% of all new Chipotle stores will feature Chipotlanes, while nearly all Chick-fil-A stores will include a double or triple lane drive-thru to accommodate high volumes.

U.S. consumers are investing in their well-being

Following the pandemic, consumers have increasingly been focused on personal wellness, and this has become a driver of growth for retail brands offering health-centric goods and experiences. From fitness centers promoting active lifestyles to grocery stores and restaurants offering organic and healthy food options, consumers are actively seeking out brands that align with their goals and preferences.

According to McKinsey & Company, the U.S. wellness market has reached $480 billion and is growing at a rate of 5 to 10% each year. Retailers who deliver health-conscious goods and services are capitalizing on this growth and many are looking to expand in the coming year and beyond.

• Built on a reputation of being a “judgement-free zone,” Planet Fitness has seen tremendous growth in recent years, and expects to add another 600 locations globally in the next three years to reach a total of 5,000 club locations.

• With up to 140 new stores planned in the next few years, Academy Sports + Outdoors sees an opportunity for significant expansion as it works to capture market share from primary competitors in this growing space.

• While not the fastest growing grocery concept, specialty brand Sprouts Farmers Market has a target demographic that values healthy and fresh offerings, and they expect to reach a broader consumer base by opening 35 new stores in 2024.

For more information about these retailers and other top brands, read Northmarq’s Q1 2024 Top 100: Tenant Expansion Trends report.

Lanie Beck is senior director of content and marketing research at Northmarq.

Discount retailer Five Below has aggressive expansion plans for 2024. (Photo courtesy of Five Below.)

ADAPTIVE REUSE

Revitalizing and repurposing real estate in 2024: A strategic guide

By Austin Smith

The real estate landscape has undergone a significant transformation in recent years. Property owners and operators are exploring innovative ways to repurpose their assets. From changing mall storefronts into entertainment centers to converting empty office suites into cannabis dispensaries, the opportunities are diverse.

Interest in transforming aging hotels, for example, into residential spaces continues to soar, with an anticipated surge of 63% in overall upcoming conversion projects. Several Midwest cities including St. Louis, Kansas City and Minneapolis made the top 10 for most buildings converted to apartments in 2022.

Four risk considerations in repurposing real estate

With these adaptive reuse opportunities come increased risks that property owners must carefully navigate with flexibility and adaptability. Here are some key considerations for managing risks effectively:

1. Know the local codes and zoning laws. Changing the use of a property often requires navigating through complex local codes and zoning laws. Rezoning a building can be a time-consuming and costly process, involving legal fees and renovations to ensure compliance. Older facilities may present additional code challenges, making it crucial for property owners to assess the feasibility of repurposing within existing regulatory frameworks first before committing.

2. Be aware of building ordinance upgrades. Renovations and upgrades may trigger the need for compliance with any recent local ordinance changes. Building owners must be prepared to incorporate necessary upgrades, such as sprinkler systems or wheelchair access, to meet updated building ordinances. Understanding the requirements and properly budgeting to adhere to these new ordinances is essential. While there is additional cost

“As the purpose of a space evolves, its infrastructure and systems must align with the space’s new and unique needs. ”

for upgrading fire protection such as sprinkler systems, this enhancement can favorably impact underwriting and improve property rates for building owners.

3. Understand the established vacancy clause. The vacancy clause in property policies poses a challenge when tenants vacate a space, altering coverage terms and conditions. Obtaining new coverage for a repurposed property with an existing vacancy can be problematic. Property owners must address this clause to ensure continuous coverage. They should work collaboratively with their insurers to identify appropriate solutions, informing them of the timing in which the building will vacate tenants and initiate renovations and construction activity. They also need to make sure that their policy language can accommodate the scope of construction activity planned. In some cases, a separate builders’ risk and liability policy may be relevant to secure proper coverage, while in other

cases, insurers may be able to accommodate the work within their current policy language.

4. Tread carefully with triple net leases. Large property owners engaging in triple net leases face unique challenges during repurposing, if the tenant is controlling the insurance in place for the asset. Reduced rent in exchange for tenant responsibility for taxes, insurance and utilities means that coverage disappears when a tenant vacates. Property owners must then swiftly secure insurance to address potential risks like vandalism or fire, navigating the complexities of this setup.

Evaluating existing building systems during repurposing

As the purpose of a space evolves, its infrastructure and systems must align with the space’s new and unique needs. Neglecting to evaluate these systems can lead to operational issues and potential liabilities. Consider:

• Fire and life safety systems: Repurposing demands a thorough evaluation of fire and life safety systems beyond sprinklers and alarms. This includes assessing stairwells, emergency evacuation plans and understanding fire hazards specific to the new use. Compliance with safety standards is crucial for ensuring the well-being of occupants, and the operations that resume after repurposing.

• Electrical systems: Different industries will have different power needs.

Manufacturing and healthcare facilities, for example, require extensive power with backup solutions. Property owners must ensure that electrical systems can support the operational requirements of the repurposed space.

• Plumbing systems: Repurposed spaces necessitate a thorough examination of plumbing systems, considering materials, pipe life expectancy and occupancy needs. Regular inspections are often required, and compliance with plumbing infrastructure standards is essential for avoiding potential water damage issues.

• Mechanical systems: Strong mechanical systems are essential for addressing air flow and indoor air quality concerns. Ventilation requirements must align with the new business, and adherence to industry-specific mechanical systems codes and standards is imperative.

Navigating a new market

Repurposing real estate presents both opportunities and challenges, requiring careful evaluation of regulatory, structural and insurance considerations. Whether repurposing properties or maintaining existing ones, engaging with an experienced insurance broker is a crucial first step in reducing your risk.

Austin Smith is a senior vice president in commercial risk at international insurance brokerage Hub International out of Grand Rapids, Michigan.

Austin Smith

Industrial strength: Encouraging fundamentals could spark an increase in industrial real estate investment activity in 2024

By Jim Koman, ElmTree Funds

The industrial real estate sector has consistently been one of the top-performing real estate sectors over the past few years, however, the confluence of economic challenges, persistent marketplace fluctuations, and uncertainties experienced in 2023 led to a slowdown in industrial investment. Is this investment deceleration indicative of a broader trend, or can we anticipate a resurgence in industrial sales activity in 2024?

To answer that question requires a deeper understanding of the wide array of factors that impact industrial real estate markets, understanding investors’ concerns, and recognizing how these insights ultimately can shape perspectives and influence market activity.

Resilient demand drivers

Positive news for the industrial real estate sector continues as the underlying fundamentals that have upheld resilience in this sector persist and show little signs of abating. Notably, the continuous expansion of e-commerce growth remains one of the primary demand drivers shaping the industrial real estate landscape. Projections suggest annual e-commerce sales to increase 8-9% over the next five years, which we believe signals robust potential for future growth.

On the supply side, there is also reason for optimism. With growing numbers of companies looking to diversify and de-risk their supply chain, reshoring, nearshoring, and friend-shoring are all on the rise. Deglobalization, with more production, transportation, and logistics infrastructure moving back either state-side or in nearby locations like Mexico and Central and South America, presents opportunity for the U.S. industrial real estate market.

Markets across the country are primed to capitalize on these trends, particularly in border states such as New Mexico, Arizona, and Texas. Furthermore, as

part of the ongoing supply chain diversification and risk mitigation efforts, numerous corporations are inclined towards decentralizing their U.S. entry points, which should yield increased investment opportunities for investors.

A third factor fueling optimism among investors is the upward trend in U.S. manufacturing, notably in semiconductor and electric vehicle (EV) production. Over the past two years alone, this sector has seen significant growth, expanding by $320 billion.

What goes down, must come up?

Though providing exact economic predictions is difficult, both analysts and economists agree that the long-feared recessionary cycle may not materialize.

Supported by strong economic data and optimism about the likelihood of interest rates coming down slightly in 2024—alongside the possibility of further decreases in 2025—the structural economic strain experienced throughout 2023 appears to be easing.

Cyclical trends related to industrial inventory also present pockets of opportunity for developers and investors. Given the substantial influx of newly constructed industrial assets in recent years, the slowdown in construction starts observed last year was imminent. However, the current landscape has shifted. The industrial real estate sector steadily absorbed inventory over the past several years and appears poised for a significant increase in new developments in the second half of 2024. Developers and investors who are well-positioned and well-capitalized stand to be the primary beneficiaries.

Optimism and opportunities

It isn’t solely the border states referenced above that are poised to gain from these positive industrial trends. Approximately 60% of manufacturing mandates are expected to occur in the sunbelt markets, including but not limited to South Carolina, North Carolina, Florida, Texas, Alabama, Georgia, and Arizona, and represent 40% of total U.S. tenant industrial real estate requirements.

As e-commerce continues to expand and the economic outlook becomes more optimistic, coupled with favorable indicators spanning from supply chain diversification to U.S. manufacturing infrastructure and volume, it is not surprising to witness a notable shift in investor sentiment towards the industrial real estate sector. Institutional investors are increasingly more active, with private real estate target allocations holding at an average of around 10.8% — a positive sign indicating that real estate investment appetite remains healthy. The primary focus will continue to be on investment opportunities in markets that exhibit resilient fundamentals, including growing labor forces, strong demographics, and strategic access to major U.S. distribution arteries.

Keys to success

While the industrial marketplace—and, consequently, industrial transaction volumes—seem to be moving in a positive direction for 2024, the basic formula for sustained success has not changed: mission-critical industrial real estate investments in primary and secondary markets that are net-leased to investment-grade tenants on a longterm basis remain the gold standard.

The lasting appeal of mission-critical industrial assets stems from their essential function not only for Fortune 100 companies but also for the broader economy. These assets fulfill crucial production, logistics, and fulfillment needs and are bolstered by promising trends and demand drivers, which present future growth opportunities. For developers and investors who operate in this space, these underlying fundamentals combined with evolving market dynamics, suggest ongoing strong performance and investment appetite for industrial real estate in 2024 and beyond.

Jim Koman is founder and chief executive officer of St. Louis-based ElmTree Funds.

Jim Koman

Image by THAM YUAN YUAN from Pixabay.

ECONOMICS

With consumer spending up and savings down, workers turn to part-time employment and second jobs for relief

By John Beuerlein, Chief Economist at the Pohlad Companies

Many economic reports in March came in stronger than expected, justifying the Fed’s current stance of being patient in making the decision to lower interest rates. Despite the downward trend in inflation readings since June 2022, the “last mile” in getting inflation down to the Fed’s 2% target is proving to be more challenging.

The ongoing resilience of the economy causes the Fed to be less concerned about the lagged impact of the tightening of the past two years, and more focused on the potential impact of lowering rates too soon.

Inflation and consumer spending

The February Core Consumer Price Index (CPI) increased 0.4% for the second month in a row. Although the year-over-year core CPI edged down to 3.8% from 3.9%, the three-month annualized rate has accelerated to 4.2%. The headline CPI also increased 0.4% for the month, causing its year-overyear growth rate to increase from 3.1% to 3.2%.

The Fed’s preferred measure for inflation, the core Personal Consumption Expenditure Index (PCE), recorded a 0.3% increase in February and remained at 2.8% year-over-year. It should be noted that inflation indices often show stronger readings at the beginning of the year due to many price adjustments that occur at the outset of a new year.

As for the consumer, despite a weaker than expected retail sales report, overall consumer spending was stronger than anticipated in February, driven by spending on services. The increase in spending occurred even though inflation-adjusted disposable personal income declined in February after a flat reading in January. With spending up and income down, personal savings declined to the lowest level since December 2022.

Economic indicators and GDP

The leading economic indicators (LEI) ticked higher in February following 23 consecutive months of decline. Further improvement in the LEI is needed to confirm that the economy is poised to re-accelerate, but at least this suggests that most of the factors that have been cited as holding back economic growth are stabilizing. The biggest positive contributor to the LEI was the improvement in the length of the average workweek, while the biggest negative contributor was interest rates.

Improvement was also seen in the manufacturing sector via the ISM survey for March. That index moved above the neutral level of 50 for the first time since September 2022. The Production, New Orders, and Employment components provided much of the strength for the overall survey. Expectations for stronger demand and low customer inventory levels suggest support for future production.

The final reading on real GDP in fourth quarter 2023 was revised up to 3.4% from 3.2%. Stronger consumer spending and business investment were drivers of the upward revision. Nominal corporate profits in fourth quarter 2023 were up 4.1% during the quarter and up 5.1% year-over-year.

The labor market

The March employment report provided further evidence of the strength of the labor market. Non-farm payrolls in the establishment survey rose 303,000 – the largest gain since May 2023 – and the household survey showed an increase of 498,000 jobs. The unemployment rate dropped back to 3.8% from 3.9%, the growth rate of average hourly earnings declined from 4.3% to 4.1% which was the weakest growth since June 2021, and the average weekly hours worked ticked higher.

In a separate report, the National Federation of Independent Business (NFIB) said that the net percent of firms planning to raise worker compensation decreased from 26% to 19%, not only fully reversing the jump in compensation plans that occurred in late 2023 but also hitting its lowest level since March 2021.

It is interesting to note that over the last 12 months, 1,347,000 full-time jobs have been lost while 1,888,000 part-time jobs have been added. Consequently, on a net basis, the yearly gain in jobs has come from part-time employment. Multiple job holders have increased by 492,000.

Interest rate expectations

As expected, at their mid-March meeting the Federal Open Market Committee (FOMC) kept the target range for the Fed Funds rate at 5.25% to 5.50%. Their official statement following the meeting said that they don’t “expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2.0%.”

Of particular interest was the economic projections that the FOMC updates on a quarterly basis. The median projection for real GDP growth (from fourth quarter 2023 to fourth quarter 2024) was revised up to 2.1% from 1.4%. The median projection for core PCE inflation in fourth quarter 2024 was revised up to 2.6% from 2.4%.

On the topic of interest rate cuts, the median forecast of the 19 members was for three interest rate cuts this year. Interestingly, 10 members forecast three or more cuts, while nine members forecast two or fewer cuts. In other words, although the median projection came out as three cuts, it was a close call that could have been changed by the forecast of a single committee member.

Undoubtedly, the Fed is leaning towards cutting rates this year at some point. However, the stickiness of inflation in some categories along with the strength of the labor market is causing them to be patient. The recent rebound in some economic metrics has reduced the urgency of a near-term interest rate cut. Further evidence that inflation is moving sustainably toward their target of 2.0%, along with the continued rebalancing of supply and demand in the labor market, will be necessary for the FOMC members to have the confidence to make the initial cut in rates. Markets have moved expectations for the timing of the first interest rate cut to July.

John Beuerlein is Chief Economist at the Pohlad Companies.

Photo by Eric Prouzet on Unsplash

The headwinds facing healthcare real estate require a nimble, innovative response

By Matt Bremner, president of Bremner Healthcare Real Estate

At the intersection of healthcare and real estate, the landscape appears both promising and challenging for stakeholders in the industry. While the demand for healthcare services continues to rise, hospital systems face the financial strain of escalating labor and material costs, which have surged by 35% to 40% over an unprecedentedly short amount of time, along with additional increased operational expenses.

Traditionally, hospitals have relied on internal funding mechanisms. However, many hospital systems are now exploring alternative avenues, such as partnerships and collaborations with nonprofit entities and universities.

Our team at Bremner Real Estate has witnessed a successful example of this partnership in Norman, Oklahoma, where we are developing a state-of-the-art cancer center for Oklahoma University Health and Norman Regional Health System. We’ve seen many benefits to these partnerships including patient access to clinical trials and collaborations that facilitate a seamless flow of information between researchers, educators and healthcare providers.

Ambulatory care centers, outpatient facilities and specialty centers of excellence (cancer, orthopedics, women’s health) are also gaining traction. During the COVID-19 pandemic, we saw hospital overcrowding which resulted too often in patients being turned away. The modern healthcare hubs now being created offer a blend of inpatient and outpatient care that enhances patient accessibility. For real estate developers, this trend underscores the need to be flexible and adaptive when designing for healthcare systems with strategies that may deviate from traditional models.

A relationship-oriented approach to healthcare real estate may be more important than ever as we examine these evolving industry trends. In

fact, smaller boutique teams have a significant advantage in today’s marketplace; we can be nimble and adapt to changes quickly whereas individuals in larger corporate settings may find themselves constrained by bureaucratic red tape.

Our team actively embraces this important distinction in services, offering a customized approach that aligns with each client’s unique needs. While we have traditionally operated

“A relationship-oriented approach to healthcare real estate may be more important than ever.”

as an owner/developer, overseeing projects from design development through construction completion, we recognize this comprehensive approach may not suit every client’s needs or growth strategy. So, when necessary, we also assume the role of consultant, providing targeted oversight rather than an all-encompassing approach.

The headwinds facing the healthcare real estate industry mirror those in

various sectors – dynamic interest rates, escalating costs and rapid technological advancements. We eagerly anticipate navigating these shifts by embracing a flexible, relationship-oriented and innovative approach tailored to the needs of each one of our clients.

Matt Bremner is president of Bremner Healthcare Real Estate in Indianapolis.

Matt Bremner

Image by StockSnap from Pixabay.

ASSET/PROPERTY MANAGEMENT FIRMS

AREA REAL ESTATE ADVISORS

4800 Main Street, Suite 400 Kansas City, MO 64112

P: 816.895.4800

Website: openarea.com

Key Contact: Tim Schaffer, Founder & President, tschaffer@openarea.com

Services Provided: Office, Retail & Industrial Landlord and Tenant Representation; Multifamily Brokerage; Property Management; Project Management; Investment; Research Analytics and Consulting.

Company Profile: AREA Real Estate Advisors is a full-suite commercial real estate firm in Kansas City. AREA is the hometown team that plays in the big leagues. Our size and scope allow us to be nimble and apply a team-driven approach while providing best-in-class service. At AREA, we deal in real estate, but our business is relationships. We are committed to meaningful partnerships with our clients to ensure that their goals are achieved. Our goal is to exceed our clients’ expectations.

Notable Transactions: Ocean Prime / Prime Social, Visiting Nurse Association, American Trailer & Storage, Ryan Lawn & Tree, Five Below, Strang Chef Collective, Professional Engineering Consultants, Vytelle, Inspired Homes, CentiMark, Clairvaux, Santa Fe Village Apartments, Arvest Bank, Arborwalk, Higher Ground Education.

MID-AMERICA

One Parkview Plaza, 9th Floor

Oakbrook Terrace, Illinois 60181

Key Contacts:

Dan Hanson-Illinois, dhanson@midamericagrp.com

Brad Lefkowitz-Michigan, blefkowitz@midamericagrp.com

Brandon O’ Connell-Minnesota, boconnell@midamericagrp.com

Jim Vaillancourt-Wisconsin, jvaillancourt@midamericagrp.com

Services Provided: Mid-America provides strategic consulting services that maximize net operating income, net cash flow, and accelerate property appreciation. We provide property and construction management, leasing, due diligence, and market analysis. Additionally, we offer MA Building Services, a self-performing porter and maintenance company offering our clients cost savings and improved accountability for related services.

Company Profile: Mid-America Real Estate is #1 in retail real estate services in the Midwest, with full service offices in Illinois, Michigan, Minnesota, and Wisconsin. Our exclusive focus on retail property, combined with cutting-edge technology and unsurpassed service, distinguishes Mid-America within the industry and provides clients with a competitive edge. The total consideration value of leasing and investment sales transactions facilitated in 2023 was $1.2 billion. Mid-America leases and manages more than 60 million square feet of retail space, and represents over 270 retailers and other tenants. For more information, visit www.midamericagrp.com

OUTLOOK MANAGEMENT GROUP, LLC AMO

S74 W16853 Janesville Road

Muskego, WI 53150

P: 414.369.3511 | F: 414.435.0251

Website: outlookmgmt.com

Key Contact: Ray Balfanz, President/Partner, ray@outlookmgmt.com

Services Provided: Full service property and asset management services, financial analysis and reporting; budget preparation and expense reconciliations; lease administration; construction management; preventative maintenance and consulting services. Company Profile: Outlook Management Group, LLC AMO provides comprehensive property and asset management services for all asset classes in multiple states and markets.

Notable Properties Managed: Washington Corners, Naperville, IL; Ironwood Office Park, Glendale, WI; Wood River Condominiums, West Bend, WI; Seven 10 West Luxury Apartments, Chicago, IL; MDJD Aesthetic MOB, Rockford, IL, Ascension Health MOB Milwaukee, WI; Henry Ford Health Systems Pharmacy Services Building in Rochester Hills, MI; Henry Ford Medical Center in West Bloomfield, MI; Baptist Medical Center South, Montgomery, AL; and Lee Memorial Health Systems Building in Fort Myers, FL.

BROKERAGE FIRMS

GOODMAN REAL ESTATE SERVICES GROUP LLC

25333 Cedar Road, Suite 305 Cleveland, OH 44124

P: 216.381.8200 | F: 216.381.8211

Website: goodmanrealestate.com

Key Contacts: Randy Goodman, President, Randy@goodmanrealestate.com; Richard Edelman, Senior Vice President/Principal, Richard@goodmanrealestate.com

Services Provided: At Goodman, we combine experience, technology, a large support team and hard work to provide exceptional service to its clients in national investment sales and financing, tenant and buyer site selection, property marketing, leasing, sales and disposition. Company Profile: Goodman is a leading commercial brokerage firm based in Ohio specializing in national investment sales, tenant and buyer site selection with over 100 companies represented and marketing over 12 million square feet of retail properties for lease and development.

CONSTRUCTION COMPANIES/GENERAL CONTRACTORS

MERIDIAN DESIGN BUILD

9550 W. Higgins Road, Suite 400 Rosemont, IL 60018

P: 847.374.9200 • F: 847.374.9222

Website: meridiandb.com

Key Contact: Paul Chuma, President; Howard Green, Executive Vice President

Services Provided: Meridian Design Build provides construction and design/build construction services on a national basis with a primary focus on industrial, office, medical office, retail and food and beverage work.

Company Description: With a team of in-house professional project managers, Meridian has extensive experience coordinating the design and construction of new buildings, tenant improvements, and additions/renovations from 15,000 square feet to 1,000,000+ square feet. Meridian Design Build has been a Member of the U.S. Green Building Council since 2007. Notable/Recent Projects: Venture Park 47, Huntley, IL - 729,800 sf speculative industrial facility for Venture One Real Estate. Lion Electric, Joliet, IL - 928,500 sf electric bus / medium duty truck assembly plant for Clarius Partners. Greenwood Truck Terminal, Greenwood, IN125 door truck terminal on 43 acres for Scannell Properties.

PRINCIPLE CONSTRUCTION CORP.

9450 West Bryn Mawr Ave., Suite 120 Rosemont, IL 60018

P: 847.615.1515 | F: 847.615.1598

Website: pccdb.com

Key Contacts: Mark L Augustyn, COO, maugustyn@pccdb.com, James A.. Brucato, President, jbrucato@pccdb.com

Services Provided: Principle specializes in commercial and industrial property and is committed to providing clients with the highest level of design/build construction services with an absolute dedication to each project.

Company Profile: Design/Build General Contractor established in 1999 specializing in the design and construction of Build-to-Suit, Speculative, Retail, Food Processing, Expansions/ Additions, Tenant Improvements, & Specialty Facilities. Principle also has extensive experience in interior improvements, site evaluation, due diligence, and value engineering.

Recently Completed Projects include:

• 282,588 SF dry-cleaning facility for Tailored Brands, at 2000 Deerpath Rd. in Aurora, IL.

• 31,200 SF facility for Alvil Trucking, at 2570 Millenium Dr. in Elk Grove Village, IL

• 6,200 SF Warehouse for Superfast Trucking, at 1001 Raddant Rd. in Batavia, IL

VICTOR CONSTRUCTION

2000 Center Dr., Suite East C219

Hoffman Estates, IL 60192

P: 847.392.6900

Website: victorconstruction.com

Key Contact: Zak Schuttler, President, ZakS@victorconstruction.com

Services Provided: Victor Construction Co., Inc. manages projects from ground-up site developments to interior buildouts, specializing in retail, industrial, and commercial markets. Company Profile: Established in 1954, Victor Construction Co., Inc. is a third-generation general contractor that specializes in commercial, industrial, and retail construction. Victor Construction is known as one of the most efficient and dependable general contractors in the Chicago metropolitan area and has earned the reputation due to meticulous project management, cost-effectiveness, budget awareness, and prime first-rate workmanship. Commitment to the clients’ goals is what keeps satisfied customers returning to Victor Construction for all their construction needs-- We Build for Your Success!

ECONOMIC DEVELOPMENT CORPORATIONS

ECONOMIC DEVELOPMENT

CORPORATION OF MICHIGAN CITY

Two Cadence Park Plaza

Michigan City, IN 46360

P: 219.873.1211

Website: www.edcmc.com

Key Contacts: Clarence Hulse, Executive Director, chulse@edcmc.com

Karaline Cartagena Edwards, Economic Development Manager, kcedwards@edcmc.com

Services/Demographic Info: Up-to-date inventory of commercial buildings, site selection and orientation tours

Incentives: Tax-Increment Financing, Façade Improvement Grants, Property Tax Abatements, Enterprise Zones, Job Training Programs

Recent CRE Activity: Double Track Northwest Indiana: $1.6 Billion development reducing train travel to Chicago to 60 minutes; The Franklin at 11th St. Station: $100 Million Development with Residential & Retail Space; “You are Beautiful”/SoLa: $311 Million MixedUse Multi-Family Development with 235 boutique hotel rooms & 174 Luxury Condos; Burn ‘Em Brewing: $3 Million Expansion project with 30 new jobs.

VILLAGE OF HUNTLEY

10987 Main Street

Huntley, IL 60142

P: 847-515-5268

Website: huntleyfirst.com, huntley.il.us

Key Contact: Melissa Stocker, Development Manager, mstocker@huntley.il.us

Services/Demographic Info: Huntley, a northwest suburban Illinois community of greater than 29,000 residents, is conveniently located at the crossroads of Interstate 90 and IL Route 47. Proximity to the interstate and to international and cargo airports in Chicago and Rockford make Huntley an ideal location for businesses looking to escape the congestion of more populated areas while reaping the benefits of a Chicago market location. Village of Huntley staff provides comprehensive services including site selection assistance and demographic resources, visit huntleyfirst.com to start the search for your new home for business. Residential construction continues with three subdivisions actively building. Huntley is home for your business, and home to the right employees for your business.

Population In Primary Trade Area: 97,283

Incentives: TIF District, Fast Track permitting and development approval process

CRE Activity: Huntley is home to leaders in business. Join Weber, Northwestern Medicine, Amazon and many others that chose Huntley as their home for business. Hampton Inn recently opened in Huntley. Amazon has begun operations in two Huntley facilities. E-Logistics firm headquarters are underway. Speculative development is underway and available near the tollway. Multiple retail strip centers are in the planning and construction phases. With land available for custom-tailored facilities, businesses seeking sites recognize Huntley as a prime location for operations.

REAL ESTATE LAW FIRMS

REINHART BOERNER VAN DEUREN S.C.

1000 N Water Street, Suite 1700 Milwaukee, WI 53202

P: 414.298.1000

Website: reinhartlaw.com

Key Contact: Joseph Shumow, Shareholder, jshumow@reinhartlaw.com

Services Provided: Reinhart is a full-service, business-oriented law firm that delivers innovative, value-added solutions for today’s most important real estate needs, including land use and zoning; tax incremental financing; tax credits; leasing; construction; and condemnation and eminent domain issues.

Company Profile: With the largest real estate practice in Wisconsin and offices throughout the Midwest and across the country, Reinhart’s attorneys offer clients customized real estate insight rooted in broad knowledge and deep experience to help you capitalize on opportunities no matter where you do business.

WORSEK & VIHON, LLP

180 North LaSalle Street, Suite 3010 Chicago, IL 60601

P: 312.917.2307 P: 312.917.2312 | F: 312.596.6412

Website: wvproptax.com

Key Contacts: Francis W. O’Malley, Managing Partner fomalley@wvproptax.com; Jessica L. MacLean, Partner jmaclean@wvproptax.com

Services Provided: Worsek & Vihon, LLP represents tax payers in Illinois by limiting their property tax liabilities through ad valorem appeals. We have over 40 years of experience and can handle basic to the most complex assessment issues while offering the dependable, personalized attention our clients deserve. We have experience representing owners of all property types. In addition to filing thousands of appeals with the Cook County Assessor, we have been involved in numerous proceedings before various Boards of Review, the Illinois Property Tax Appeal Board, and the Circuit Court of Illinois, and have appeared before the Illinois Appellate and Supreme Courts.

Company Profile: Worsek & Vihon LLP, is a team of experienced attorneys singularly focused on real estate tax law. The firm is dedicated to minimizing property tax liabilities through strategic tax portfolio management, well-researched, creative appeal preparation and aggressive advocacy.