May June Midwest Real Estate News

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A slowdown in Omaha’s commercial real estate market?

That’s not on the horizon

By Dan Rafter, Editor

A

thriving industrial market. An evolving retail sector. Booming demand for multifamily housing. These are all fueling the ever-steady Omaha commercial real estate market.

And the good news? Developers are building new warehouse facilities at a sizzling clip, while retailers are targeting the Omaha market for their expansion plans. At the same time, demand continues to soar for new multifamily projects.

It all adds up to a real estate market that has remained consistent throughout the pandemic and today, as the country slowly makes it way past COVID-19.

Jon Blumenthal, partner with Omaha law firm Baird

72nd & Center, developed by Meridian Development, is a new multifamily project planned for downtown Omaha.

Holm, said that the city has long been fortunate: Even in down markets, commercial real estate activity has remained steady. This hasn’t changed throughout the COVID-19 pandemic.

This isn’t to say that COVID-19 didn’t slow Omaha leases, sales and new construction. It did. But the impact of the pandemic wasn’t as strong here as it was on the real estate markets and economies of some other Midwest cities, Blumenthal said.

That’s largely because while Omaha did take precautions against COVID-19, the city did not experiencelockdowns that lasted as long as they did in other markets.

OMAHA (continued on page 12)

INDUSTRIAL

No end to the boom times? U.S. industrial market still thriving after record-setting months

By Dan Rafter, Editor

The industrial market has thrived both before and during the COVID-19 pandemic. And this sector is showing no signs of slowing as companies continue to seek or build warehouse space across the Midwest and the country.

Midwest Real Estate News spoke with two long-time industrial veterans – Alfredo Gutierrez, president and founder of Houston-based INDUSTRIAL (continued on page 20)

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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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A slowdown in the Omaha CRE market? It’s not on the horizon:

22

A medical clinic across the parking

DEPARTMENTS/COLUMNS

lot from a Target? It’s the new

A thriving industrial market. An evolving

world of healthcare real estate: The

retail sector. Booming demand for

success of the multifamily and industrial

multifamily housing. These are all fueling

sectors has been grabbing plenty of

26 The impact of evolving tenant

the ever-steady Omaha commercial real

headlines. But there’s another commercial

expectations

estate market.

real estate sector that’s thriving today, too: healthcare real estate.

1

No end to the boom times? U.S. industrial market still thriving: The

industrial market has thrived both before

24

Healthy offices now a must-have, not a nice-to-have, for building

owners, employers: How healthy are

this sector is showing no signs of slowing

offices across the United States? And are

as companies continue to seek or build

employees more likely to return to the

warehouse space across the Midwest and

office – at least on a part-time basis – if

the country.

their employers take the steps necessary to boost indoor air quality, improve

A Soaring industrial market and

natural light and surround their work

an evolving retail sector fuel

areas with green spaces?

Indianapolis’ steady CRE market: The COVID-19 pandemic might not be over.

But that isn’t stopping Indianapolis’

25

Relying on top amenities to bring employees back to the office: It

commercial real estate market from

remains a challenging time for the office

thriving.

sector, with many companies still not sure when, or if, they will bring their employees

17

Plenty of bright spots as sales,

back to their cubicles and conference

leases and development all on the

rooms on a full-time basis.

rise in Des Moines: Industrial is thriving.

Retail is adapting. Demand for multifamily is soaring. And office? Even this sector

27 Interest rate volatility brings … opportunities?

and during the COVID-19 pandemic. And

8

6 Editor’s Letter

Midwest Real Estate News brings real ­estate leaders together to explore the challenges and opportunities unique to their markets.

28

Meeting the demand: A new lending option sprouts in

is showing signs of life. It’s true: This is

Minnesota: The multifamily and industrial

a good time to work in commercial real

sectors are thriving. And as they boom,

estate in the Des Moines, Iowa, market.

the demand for commercial financing is on the rise, too.

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FROM THE EDITOR

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COVID isn’t over, but that isn’t stopping commercial real estate

T

By Dan Rafter, Editor

he world has been fighting the COVID-19 pandemic for more than two years now. And though it looks like much of the globe, including the United States, has made it through the worst of the pandemic, COVID still remains a worry.

But as far as the commercial real estate market goes? The impact of COVID has steadily waned.

This is most evident in the industrial sector, which was thriving before COVID and has been even hotter throughout the pandemic. Just look at the numbers: Despite national and global challenges to the economy, the U.S. industrial market has remained strong throughout 2022.

And April was no exception, according to research from CommercialEdge.

In the Minneapolis-St. Paul market, the average industrial rent hit $6.03 a square foot in April. That’s up 3.5% from a year earlier.

same level it found in January of this year. That April figure also marks a year-over-year decrease of 30 basis points.

And the national industrial vacancy rate? That remained low, too, at 5% in April. That is 120 basis points lower than in January of 2021.

This might not be too surprising. Several companies have finalized their back-to-office plans. That has led to the slight dip in vacancy rates. The office market still faces plenty of uncertainty, but the dip in vacancy rate, no matter how slight, is still good to see.

In the Midwest, both Indianapolis and Columbus featured tight industrial markets. CommercialEdge said that the industrial vacancy rate in Indianapolis was 2.1% at the end of April, while it stood at 2.3% in Columbus.

According to CommercialEdge’s May National Industrial Report, rents for the national industrial market reached $6.47 a square foot in April, a jump of 4.4% from a year ago. The 12-month rolling average for new industrial leases was an even more impressive $7.48 a square foot.

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New construction remains in demand, too. CommercialEdge reported that the industrial construction pipeline stood at 640.1 million square feet across the country as of the end of April. That accounts for 3.7% of the existing U.S. industrial stock. An additional 650 million square feet of industrial space were in the planning stages in April, equal to 4% of the country’s existing industrial stock.

Industrial sales totaled nearly $19 billion for 2022 as of the end of April.

At the same time, interest from investors has pushed industrial prices to record highs throughout the United States, with the national average sale price for this commercial sector hitting $135 a square foot in April, 20% higher than 2021’s average.

Industrial sales came in at high numbers in several Midwest markets.

Chicago led the way in the region, notching more than $1.35 billion in industrial sales in 2022 as of the end of April. In Nashville, that figure was $495 million, while in Columbus it was $314 million and in Minneapolis-St. Paul $313 million.

Not all commercial sectors are created equal, though, and one that has struggled mightily throughout the pandemic has been the office market.

But even this sector is showing some signs of life, according to the May office report by CommercialEdge.

The first bit of good -- or slightly good -- news? The U.S. office vacancy rate fell to 15.7% in April, back to the

CommercialEdge points to a trend that could boost the office market, locating office spaces into mixeduse developments. While the 2010s brought an increase of live-work-play mixed-use developments, the COVID19 pandemic brought fears that this trend would fizzle as employees worked from home and foot traffic evaporated.

Today, though, this trend looks to be regaining strength. Many companies have now adopted hybrid work models, and they need the amenities that come with mixed-use developments to entice workers back to the office.

Mixed-use projects offer in-place amenities like shopping and dining, which can help commercial tenants convince hesitant workers to come back to the office, at least two or three times a week. For owners and developers, a mixed-use model offers long-term resiliency through diversified space usage across a variety of asset types.

Office sales volume reached $26.7 billion for the year in April. Of this, $13.25 billion originated in 10 markets that each surpassed $1 billion in office sales during the first four months of the year.

The national price-per-square-foot for office space reached $277 in April.

And despite the office market’s troubles, developers still have 148.2 million square feet of office space under construction across the country.

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Midwest Real Estate News

A booming industrial market, an evolving retail sector: Indianapolis CRE market continues to show its resiliency

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May/June

The Fishers District in the Indianapolis suburb of Fishers, Indiana, is an example of a busy mixed-use district, one featuring 2022multifamily www.rejournals.com developments, retail, entertainment and dining.

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By Dan Rafter, Editor

T

he COVID-19 pandemic might not be over. But that isn’t stopping Indianapolis’ commercial real estate market from thriving.

And two sectors in particular – industrial and retail – provide an example of just how resilient this market has been since the pandemic first started making headlines in early 2020.

Indianapolis’ industrial market is thriving. This isn’t a surprise: Industrial real estate has been booming across the country, and Indianapolis has long had a strong industrial sector.

But the retail sector? Its performance in the Indianapolis market is more unexpected. Yes, retailers have faced challenges since the pandemic began. But many retailers have evolved, focusing on in-store pickup and curbside delivery and boosting their online presence. Retailers here are doing what it takes to survive in these still-challenging times.

No slowdown for industrial Andrea Hopper, senior vice president and industrial specialist with the Indianapolis office of Colliers, said that her market, like most others across the country, is in the middle of a in-

dustrial market boom.

According to Colliers’ research, the Indianapolis market saw more than 16 million square feet of industrial absorption last year. That was a record-setting year for this market, one that Hopper said usually sees 9 million or 10 million square feet of industrial absorption.

As of the end of April of this year, Colliers reported that the Indianapolis-area industrial market recorded more than 4 million square feet of absorption, with most of this absorption being in the big-box modern bulk building arena.

“There is so much activity in that really big range, tenants looking for 600,000 square feet to more than 1 million square feet of industrial space,” Hopper said. “More tenants are coming to our market and looking for space. We believe we are going to see another solid year for us here.”

The other numbers in the industrial sector are strong, too. The overall industrial vacancy rate in the Indianapolis market fell to 4.3% earlier this year, according to Colliers.

And Hopper said she doesn’t expect vacancies to rise anytime soon. Colliers tracks pending industrial deals,

and Hopper said that as of late April there were 6.5 million square feet of pending industrial deals in the pipeline in the Indianapolis market in just the bulk sector of this asset class.

“With so many of the buildings going up, there are deals in place for new tenants before these buildings are even built,” Hopper said. “Activity is through the roof. There is very little space available. When you do have a space that comes on the market, it is scooped up very quickly.”

Why is this sector so hot? Hopper said that many of the trends that favor the industrial sector started prior to the COVID-19 pandemic. But once the pandemic hit, even more customers turned to ordering products online.

That led to the demand for new distribution centers across the country, including in the Indianapolis market.

This includes a recent increase in the number of distribution centers that Amazon has opened in the local market, too.

At the same time, companies need more distribution centers for food.

Customers have grown more comfortable with ordering food online during the pandemic. This has led to an influx of companies that need more cold storage space, Hopper said.

Indianapolis’ location in the center of the country helps, too. Companies are striving to get their products to their customers in as few days as possible.

Indianapolis provides quick access to much of the rest of the country.

Hopper pointed, too, to Indianapolis’ strong interstate system. The city benefits from a network of highways that interconnects through the Indianapolis area and spreads out to other major markets across the country.

All this positive news doesn’t mean that the Indianapolis market doesn’t face challenges. Like in all markets, developers continue to struggle with a shortage of supplies and building materials. They are also struggling to find enough labor to build their facilities.

“We have seen a few hiccups with some buildings because of supply chain issues,” Hopper said. “Labor was also a big story before COVID. It still is. These new distribution centers might have to become more automated if they can’t find the bodies to staff them.”

But even with these challenges, Hopper said she sees the boom times INDIANAPOLIS (continued from page 10)

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for industrial continuing throughout 2022 and into next year.

“Activity has remained very solid,” Hopper said. “The activity from users looking for 50,000-squarefoot to 150,000-square-foot spaces is not slowing. The demand from those looking for big-box spaces of 600,000 square feet to more than 1 million square feet is not slowing, either. Those two tranches of users will remain active. As long as we have the product, we are going to see demand.”

What is changing is that the savviest and most successful of retailers are embracing the omnichannel approach, building a strong online network and operating brick-and-mortar locations. Retailers also adapted during the pandemic, giving their consumers a greater number of ways to purchase their products.

The retail evolution

Multifamily is firmly in recovery mode in downtown Indianapolis, Boyd said,

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days of the COVID-19 pandemic, Boyd said. And while it’s true that consumers embraced online retail during the pandemic, the majority of all retail purchases are still made in brick-andmortar stores, Boyd said. That isn’t changing.

INDIANAPOLIS (continued from page 8)

Ashlee Boyd, managing partner for commercial with Indianapolis-based Thompson Thrift, said that the Indianapolis commercial real estate market is strong today. He said that mixed-use spaces, multifamily and much of the retail sector are all performing well.

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while retail is performing better in suburban areas.

And retail in the urban centers of Indianapolis? That, unfortunately, still faces challenges, Boyd said.

“Downtown continues to lag,” Boyd said. “Retail there has not recovered in the same way it has in the suburbs.”

Overall, though? Retail has seen a strong resurgence since the earliest

“We’ve seen retailers offer in-store pick-up and curbside pick-up,” Boyd said. “Many have beefed up their online presence. Restaurants focused more on delivery. What COVID did in the short-term with the shutdowns forced retailers to improve the way they operate. Just look at food retailers and the many different ways in which they can deliver products to consumers: in-app purchases, in-store pick-up, Door Dash, delivery and dine-in.”

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Those retailers that have struggled during COVID were also faring poorly before the pandemic hit. COVID hastened the demise of many of these retailers.

But those that have adapted? They are enjoying a boost in business as consumers return to shopping and socializing.

“The retailers who have adapted to the online space and have strong brickand-mortar locations are the ones that will continue to thrive going forward,” Boyd said. “COVID thinned the retail herd. Those that are left are the most vibrant and strongest retailers. In most cases, they have only gotten stronger and better since the pandemic.”

Those retailers looking for new space – and many retailers are growing – are looking at locations in mixed-use developments, Boyd said. The mixed-use arena was strong before the pandemic and is even more popular today.

As Boyd said, consumers want to be wowed today. Those who live in highgrowth suburbs still want an urban experience. They just don’t want to

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INDIANAPOLIS

Midwest Real Estate News

live in downtown Indianapolis to get it.

Mixed-use developments that combine retail, office and multifamily housing are one way to bring the feel of urban living to suburban areas, Boyd said.

“A mixed-use environment is like breaking off a chunk of that urban experience and dropping it into the suburbs,” Boyd said. “You feel you are in a village, an urban community.

When you add height and density to a development, it gives the feel of that urban experience.”

Boyd said that Thompson Thrift mixeduse developments are more successful the more the developer adds density such as residential, hotel and office uses.

“The challenges there lie in making it function well for retailers,” Boyd said.

“They need amenities such as convenient and adequate parking. But when you can create the dense feel of an urban environment, when you do that correctly, the development usually performs very well.”

As with many markets in the Midwest, Indianapolis’ downtown area is seeing a slower recovery than are its suburban locations. Boyd said that some people who lived in the downtown and its surrounding neighborhoods moved during the earlier days of the pandemic. They discovered that being locked down in the suburbs, where there is more space, was more comfortable than going through lockdowns in downtown.

But downtown Indianapolis – again, like in other major cities – also was the site of protests following the murder of George Floyd by a police officer in Minneapolis. Some of those protests turned violent, resulting in fires, broken windows and violence.

That created a perception among many that downtown Indianapolis was no longer as safe as it once was.

Today, with fewer office workers downtown, the center of Indianapolis is quieter and feels less safe.

That is keeping residents from the suburbs and tourists from visiting its restaurants and shops.

Indy Industrial Advisory Team

“We need to get the workers back downtown again,” Boyd said. “Major employers have either not brought their workers back or are considering a hybrid work arrangement. That is a real phenomenon that has, along with the safety issues, slowed the recovery in the downtown areas. If there are not people working downtown, it’s hard for restaurants and retailers to survive in those urban areas.”

Despite downtown’s slower recovery, Boyd said, the Indianapolis CRE market as a whole has proven resilient throughout the pandemic. Boyd said that no one could have predicted in those earliest days of the pandemic how quickly Indianapolis’ commercial real estate activity would recover.

“One of the most significant things COVID did for retail was remind people of how much they appreciated going to restaurants or shopping in stores,” Boyd said. “When people couldn’t do that, they realized how much a part of their everyday lives those experiences are. People enjoy getting out. They want to go to restaurants and be entertained.”

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Conagra’s downtown campus is being redeveloped into a mixed-use development featuring nearly 400 apartments, a hotel and retail space. The project, developed by real estate firm Hines and Conagra, is known as the Mercantile.

OMAHA (continued from page 1)

Because of this, Omaha’s businesses mostly continued to operate even during the earliest days of the pandemic.

“We were able to keep working and building through more of the pandemic,” Blumenthal said. “Omaha is still booming. We have a lot going on here right now.”

This includes an ongoing redevelopment in downtown Omaha and the city’s riverfront area. There is also the redevelopment of Conagra’s downtown campus into a mixed-use development featuring nearly 400 apartments, a hotel and retail space.

The project, developed by real estate firm Hines and Conagra, is known as the Mercantile and overlooks Omaha’s Heartland of America Park.

Blumenthal said that downtown Omaha has largely rebounded from any pandemic-related slowdowns, pointing to the city’s Old Market district and the area around Charles Schwab Field -- a baseball stadium home to the College World Series -- as being particularly busy today.

Blumenthal said that the low crime statistics in downtown have helped keep this part of the city strong.

“I know some downtowns have faced crime issues during the pandemic. But Omaha has a lowcrime downtown. People feel safe here. People feel safe bringing their families to downtown on the weekends.”

“I know some downtowns have faced crime issues during the pandemic,” Blumenthal said. “But Omaha has a low-crime downtown. People feel safe here. People feel safe bringing their families to downtown on the weekends.”

Another positive? Commercial real estate activity remains high in Omaha’s suburban areas, too. Blumenthal points to the suburb of Gretna, Nebraska, as a good example. This suburban area on the outskirts of Omaha is benefitting today from a surge in industrial activity. Developers are targeting the suburb for new warehouse and manufacturing spaces.

One step forward, but two steps back.

That’s how J.P. Raynor, an office specialist with Omaha’s Investors Realty, describes the Omaha office market.

It’s true that Omaha’s office sector is seeing more new leases than it did during the height of the COVID-19 pandemic, Raynor said. But tenants are also downsizing. Employees are continuing to work from home. This combination has brought plenty of uncertainty to the Omaha office market.

Investors Realty regularly talks to chief executive officers and chief operating officers of companies throughout the Omaha market. These company

leaders say that about 50% of workers want to work from home on a permanent basis, Raynor said. Another 25% want to work on a hybrid schedule, spending two or three days a week in the office. The remaining 25% want to be in the office on a full-time basis, as they were before March of 2020.

That makes it difficult for companies, especially today, to consider expanding their office space. But Raynor said that the reluctance of workers to go into the office might not be as permanent as some think.

“Business owners have told us that they think it is more efficient to have employees in the office. They say it leads to more collaboration when employees are not working from home,” Raynor said. “Right now, we are in an employees’ market. That is dictating the work-from-home strategies we are seeing. Sometime in the next five years, the market might switch back to an employers’ market. When that happens, I think you will see a shift back to people working in the office.”

It’s important to note, too, that not all employers have embraced remote working. Raynor said that smaller companies, those generally occupying under 5,000 square feet of office OMAHA (continued on page 14)

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The Mercantile development will feature a new luxury multifamily development.

OMAHA (continued from page 12)

space, typically have more employees working more often in the office.

Larger companies, though, are still determining when they will bring most of their workers back to the office, Raynor said, with many of their employees still working remotely.

“It has been more difficult for larger companies,” Raynor said. “They have more people working for them, so it’s challenging to allow for social distancing. Because of this, small- and medium-sized companies were bringing people back to the office on a more regular basis.”

While Omaha’s office market has faced its challenges, Raynor said that it’s also been fortunate. This sector doesn’t rely on just one industry.

Instead, the Omaha office market features a diverse array of businesses.

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One type of office user that is common in Omaha are medical staffing companies. Raynor said that these users thrived during the COVID-19 pandemic, providing a boost to the local office market.

“Medical staffing companies were prospering and leasing a lot of space,” Raynor said. “That helped prevent the office market from becoming disastrous during the pandemic.”

There has been some good news in the downtown Omaha office market during the pandemic. Earlier this year, insurance giant Mutual of Omaha announced that it will develop a new headquarters tower in downtown Omaha.

“Anytime one of your Fortune 500 companies wants to make a significant investment in staying or relocating, that is great for downtown,” Blumenthal said. “This will be huge for downtown Omaha. It will benefit all of downtown. There will be ancillary buildings around the Mutual of Omaha headquarters.”

At the same time, the city of Omaha has committed to launching a modern streetcar line that will travel through downtown Omaha. In a press release, Mutual of Omaha officials said that the addition of this public transit option is one reason why the company has committed to downtown.

Raynor agreed that the streetcar will be a positive for downtown Omaha’s

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office market. Many corporations are looking for locations that offer public transit options for their workers.

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OMAHA

Midwest Real Estate News

“Public transit is a box that

“Public transit is a box that corporations want to check,” Raynor said.

“Omaha has never had that box checked. Hopefully, with the addition of rapid buses and the streetcar, that will start to be a positive for us instead of a negative. It will bode well for Omaha in the long run.”

corporations want to check. Omaha

As in most other office markets, building owners in Omaha are focusing increasingly on higher-end amenities to attract tenants. And companies are looking for buildings that feature these amenities as one tool to help attract workers back to the office.

buses and the streetcar, that will

In a jobs market that favors workers, companies are also highlighting these amenities – everything from onsite gyms and healthy eating options to rooftop gardens and collaborative areas – to attract and retain the best talent.

Raynor said that newer Class-A office buildings today feature underground parking, onsite gyms, collaboration

has never had that box checked.

Hopefully, with the addition of rapid start to be a positive for us instead of a negative. It will bode well for Omaha in the long run.” spaces, bars and game rooms. He’s even seen companies employing masseurs and chiropractors at their offices.

Also as in many other markets, ten-

ants today are looking more frequently at office space in suburban locations than they are in downtown Omaha.

But Raynor said that this, too, isn’t a permanent trend. He pointed to Mutual of Omaha’s decision to build

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in downtown, along with the ongoing riverfront revitalization project taking place now along the city’s riverside, as two reasons why downtown Omaha is set for a resurgence in office activity.

“I think the trends will start to shift in downtown Omaha’s favor again,” Raynor said. “Every four years or so it shifts. I think that will happen again.”

Some commercial sectors are stronger than others, of course. Leading the way is industrial, which has thrived during the COVID-19 pandemic.

“There is a tremendous demand for industrial real estate here,” Blumenthal said. “Developers are trying to keep up with the demand. So many tenants are searching for industrial space today. And it doesn’t look like this will change anytime soon.”

Demand for multifamily space is on the rise, too, Blumenthal said. And this demand is high just about everywhere in the market, from downtown Omaha to Council Bluffs, Iowa.

OMAHA (continued on page 16)

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Much of this demand is driven by Omaha’s equally strong housing market. As housing prices continue to rise, more would-be homeowners are choosing to rent, at least for now.

“Our housing market has experienced a hefty increase in valuations,” Blumenthal said. “That’s good and bad. It’s good for homeowners, but harder for first-time homeowners to buy a house.

There is a tremendous need for good multifamily options.”

One example of a new multifamily project in the works is 72nd & Center

by Meridian Development. This development, in the predevelopment stage now, will be marketed toward young professionals and active empty nesters and feature 250 new multifamily units.

Blumenthal said that developers so far are keeping pace with the demand for new multifamily units. He emphasized, though, that they are only keeping pace: They are far from injecting an oversupply of rental units into the market.

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“As sales rise for ecommerce, people are still going into stores and shopping in physical locations. There is a perception that one thing has to fall as the other rises. That is not ringing true in retail right now.”

The retail sector, of course, was hit hard by the pandemic, and Blumenthal said that Omaha’s retailers are still adapting to changing consumer habits. He said that many retailers are focusing on an omnichannel approach, focusing both on building up their online presence and making sure their brick-and-mortar locations are helping to drive sales, whether those

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sales are in-person or online.

Jared Sullivan, associate broker with Omaha’s The Lerner Company, agreed that retailers throughout Omaha -- and the country -- expanded their services during the pandemic as a way to keep the customers coming.

He points to Chipotle, which recently introduced its Chipotlane concept.

Customers can order their burritos and bowls online, drive to their nearest restaurant and pick up their orders from a lane dedicated only to these online orders.

“That is going to become a gold standard in fast-casual service,” Sullivan said. “Chipotle won’t be opening many new sites without that Chipotlane.

Other retailers like Starbucks feature mobile-order pick-up stalls. It’s an easy way to get customers their orders quickly.”

During the pandemic quick-service restaurants have thrived, both in Omaha and across the country, Sullivan said. Sullivan said that automotive-supply stores have been firmly in expansion mode, too.

The labor crunch The biggest challenge today? Sullivan said that these expanding businesses are struggling to find workers.

“Getting people who are good and qualified and show up to work is the big challenge,” Sullivan said. “That is the only thing that is causing a downward pressure on sales for a lot of businesses. You can’t find peopel to

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come in and work. That employment challenge is really difficult.”

And there are few signs that this challenge is easing. Sullivan said that Nebraska as a whole has had one of the country’s lowest unemployment rates this year.

“There is no light at the end of the tunnel,” Sullivan said. “If Chipotle is having a hard time finding staff, you know all the quick-service restaurants are having a hard time. It’s just difficult today to get people who show up.”

As the pandemic continues to ease, Sullivan said several retailers are either entering Omaha for the first time or are opening new locations.

This includes Tidal Wave Auto Spa, a high-end car wash that is busy expanding throughout the Omaha market. Smash Park pickleball, a West Des Moines, Iowa-based pickleball-based entertainment center, is also expanding aggressively throughout the Midwest, Sullivan said. And Topgolf, a golf entertainment center that is already a fixture in Omaha, continues to grow its presence throughout the country, too.

“There has been a rapid expansion of ecommerce, and that has given some the perspective that consumers would be shifting away from brick-andmortar stores,” Sullivan said. “But as sales rise for ecommerce, people are still going into stores and shopping in physical locations. There is a perception that one thing has to fall as the other rises. That is not ringing true in retail right now.”

And what makes Omaha such a good location for retailers looking to expand or open new locations? It’s a growing city with a steady influx of new consumers.

“Compared to the rest of the country, we have a low cost-of-living but our median household incomes are strong,” Sullivan said. “We have a good Midwestern mentality. We like to experience new things, and we have the disposable income to do that.

If you are in San Francisco and your monthly rent is $3,600 for a studio apartment, you are not sitting down and getting together in restaurants.

You are not paying for these new experiences. But here? People like to have those experiences. It’s a good recipe for retailers.”

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Plenty of bright spots: Sales, leases and development all on the rise in Des Moines

I

By Dan Rafter, Editor

ndustrial is thriving. Retail is adapting. Demand for multifamily is soaring. And office? Even this sector is showing signs of life. It’s true: This is a good time to work in commercial real estate in the Des Moines, Iowa, market.

But what’s behind the strong CRE activity in Des Moines? We spoke with Adam Kaduce, senior vice president and managing director with West Des Moines, Iowa-based R&R Realty Group, about the big business taking place today in Iowa’s busiest market.

How strong is the commercial real estate market today in Des Moines?

Adam Kaduce: The bright spot in our market is definitely industrial. We are seeing more spec industrial in this market than I’ve ever seen in my career. And we are going to see a fair bit of that spec space pre-leased before it delivers. Industrial space gets gobbled up quickly in Des Moines. A number of developments are multi-building projects or industrial parks. They have kicked off their first buildings, so we will see more development from these projects in the future, too.

What makes the industrial market so strong here?

Kaduce: Our location and access to the interstate system has always helped.

We have good access to labor talent.

We also benefit from a low cost-ofliving. And because our population has a high degree of education, the residents here tend to have disposable income. For the Amazons of the world, Des Moines is a good market to be in.

This is a relatively affordable place in which to develop, too. Our rental rates for industrial have long been in the $3- to $4-a-square-foot range. That has pushed up a bit with construction costs rising and demand increasing.

But our industrial rents are still lower than what you’d see in the larger markets. That has continued to make this a good market.

For a long time, local developers dom-

er companies are still working out how they are going to handle the return to work. You can see the difference between the suburbs and CBD when you look at vacancy rates.

That has been the trend we’ve seen throughout COVID. The companies that have autonomy at the local level have generally brought workers back earlier. We have a lot of smaller local and regional companies. We are seeing them bring their workers back to the office.

The Westfield Campus office project in West Des Moines by R&R Realty is an example of an office space filled with amenities.

inated the industrial market in Des Moines. In the last two years or so, we’ve seen more institutional players enter our market. Ryan Companies has been developing here. Opus has entered our market. We’ve seen some groups out of Minneapolis and Kansas City that are becoming active in our market.

Why are those institutional players coming into Des Moines now?

Kaduce: Industrial is a low-risk investment. It is more affordable to develop in the industrial space than it is to develop in office. And there is strong demand for industrial real estate here.

Developers coming into this market are chasing returns as cap rates have become compressed in other markets.

Des Moines is still a place where you can make a sound, lower-risk investment.

Speaking of office, that is one commercial sector that has been struggling across the country. What are you seeing in Des Moines’ office sector?

Kaduce: We like to pride ourselves on not having the high-highs and lowlows that other markets have. It’s been the same story during COVID. We never saw our businesses get totally shut down. Office buildings even during COVID were still occupied. Healthcare businesses that needed to remain open stayed open. We never had lockdowns and stay-at-home orders that were as strict as they were in other

markets. That helped keep businesses open.

Have you seen a flight-to-quality, with several companies moving from Class-C and Class-B space to Class-A space today?

But we are still seeing higher-than-normal vacancy rates in our office market.

Local and regional companies do seem to be bringing their workers back in the office. It is the large national global companies that are still trying to assess what back-to-the-office looks like for them. Companies like Wells Fargo, Nationwide and Principal are starting to bring their employees back to the office.

Kaduce: We have seen that in the office space. Our rental rates have stayed firm. Not a lot of landlords are dropping their rental rates. But more companies are downsizing the amount of space they need. If they once needed 10,000 square feet, they might now need 5,000. They can then move to a nicer building with better amenities and still spend less. Companies are taking this as an opportunity to upgrade.

That is the positive. For a while, everyone released dates for people to come back, but then they’d push them back.

Now we are seeing the dates hold.

Companies are going back. The large, global companies, though, are going back with a form of hybrid work. Some tell their employees which days to come in. Some are letting their workers choose. You can tell when you are out and about: Tuesdays, Wednesdays and Thursdays you see more activity.

Mondays and Fridays seem to be the most popular days for people to work from home.

People are using the quality of their office space to attract new hires and to attract their existing workers back to the office. Some customers are doing meal deliveries and investing more in outdoor spaces. They are trying to replicate some of the things people like about working from home. It is a perfect storm in terms of promoting a flight to quality. That’s why the suburbs are doing so well: That’s where the newer office product tends to be.

Some of our newer office buildings in town have performed the best during COVID.

Are you seeing any differences in the performance of office real estate downtown versus in the suburbs?

Companies are doing what they can.

They are trying to make coming back to the office a new and different experience. Some tenants are bringing in food trucks. Others have outfitted their outdoor areas with Wi-Fi. Some customers are doing fresh-fruit deliver-

Kaduce: Our two largest office markets are the CBD and western suburbs. The suburbs are performing quite a bit better than our downtowns are. That’s partially because a lot of our larger companies are in the CBD. Those larg-

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ies. They are doing whatever they can to get employees interested in coming back to the office.

Having workers back to the office will help the retail sector, too, right?

Overall, though, the retail scene here is positive. We were not as over-retailed to the extent that some other markets were before COVID. We have seen some new retail construction, mostly in neighborhood centers with five or six tenants. Coffee retailers have been hot.

Dry cleaners, nail salons and healthcare retailers have done well. Those are our big drivers on the retail side.

Multifamily has done well across the

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ger delivery times for building materials. Are you seeing any signs that this situation is improving?

DES MOINES (continued from page 17)

Kaduce: A number of our downtown restaurants stayed open throughout COVID. Some, though, closed or reduced their hours. Fortunately, a number of these have reopened. That has been a positive. When we talk to retailers and restaurateurs, though, they tell us that their biggest challenge is finding enough staff.

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R&R Realty is undertaking a large-scale renovation project at the Regency West office building in Des Moines.

country. How is this sector performing in Des Moines?

centers and yoga studios. Some have office or co-working spaces, too.

Kaduce: We have seen strong multifamily development in the suburbs and downtown for the last 10 years. The biggest thing that is driving demand for multifamily is the rising cost of housing. Between interest rates and price appreciation, some people have decided to stay put and rent longer.

Our new product is also attractive. We are seeing new projects that are highly amenitized. They are what you’d expect from a national multifamily development, with pools, pet spas, fitness

You are seeing some of the same flight-to-quality from renters that you see among office users. When their jobs went work-from-home, they made the move to the suburbs. They were no longer commuting to work and they wanted more space. Our downtown apartment market has stayed strong.

But we have seen renters moving around a bit, with many going to the suburbs.

Developers are still dealing with lon-

Kaduce: I can’t tell if it’s getting better or we are just getting used to it. The lead time with steel and concrete seems to have improved a bit. Where we face challenges is with the products we need for our interior constructions for tenant improvements. Getting cabinets and appliances is very challenging. Getting anything with glass is a challenge, too. At least the difficulties have become more consistent. For a while, the products that were hard to get changed on a week-by-week basis.

One week it might be paint. The next it would be insulation. Now it is glass and cabinets.

We advise clients on what it takes today to get projects done. We order those materials and supplies right away. We’ve gotten better at advising clients on what it will take to finish projects today. At the very beginning of the supply chain disruptions, clients didn’t believe us in terms of what was happening. Now they realize that this is a real issue. They understand that certain things take longer to get.

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industrial real estate investment firm SparrowHawk, and Grant Harrison, senior director of development in the Kansas City, Missouri, office of real estate development company VanTrust – to find out what’s behind this continued surge in industrial activity and whether any slowdown is on the horizon.

We all know that the industrial sector is booming today. What are some of the factors driving this explosion in demand?

Alfredo Gutierrez: There is a lot going on. I am not in the camp that says it is all ecommerce driven. Ecommerce is a function of it, but it is not the driving force. Ecommerce was at plus or minus 16% of all retail sales in 2019.

It popped up as high as 22% or 24%.

Now it has settled back down at about 20%. It is a bit of a higher percent of sales than before the pandemic. We have seen an acceleration of consumers who might not have otherwise been interested in ecommerce embracing this way of shopping.

Look at someone like my mom. She never would have shopped online.

The pandemic forced her to come into it. The growth of the younger generation that is pushing the growth of ecommerce will continue. But now many of the people in the more resistant generations are shopping online, too. Companies need more warehouse and distribution space to get the products to their consumers faster. But clearly ecommerce is not

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“Even before COVID, ecommerce was changing how we all shopped.

The need for industrial space is real. Ecommerce requires about three times as much space under one roof as does traditional retail. COVID has been the great accelerator for ecommerce.” the only thing going on to fuel this demand we are seeing for industrial space.

Grant Harrison: Even before COVID, ecommerce was changing how we all shopped. The need for industrial space is real. Ecommerce requires about three times as much space under one roof as does traditional retail. COVID has been the great accelerator for ecommerce. Our buying habits changed overnight. We can now get an amazing variety of products to our homes and apartments in a couple of hours, if not a couple of days. That has really changed the logistics models and where buildings need to be. The buildings need to be

closer to population centers. Ecommerce is certainly not a fad.

In general, though, we are seeing great activity in the industrial sector, whether it’s light manufacturing coming back to the United States, reshoring or companies needing to increase their safety stocks. It’s not just ecommerce behind the strong performance of industrial. All types of occupiers, big and small, need more space today. It’s a fun industry to be in right now.

What else is pushing the demand for industrial real estate?

Gutierrez: Manufacturers have dis-

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covered that while labor is cheaper in other countries, it is not as efficient.

The United States is the most efficient labor market for employers. That is 100% attributed to the resources and technology we have that makes workers much more efficient. With labor being at such a tight, tight number, it has been forcing companies to invest in technology, artificial intelligence, those kinds of items. It was the only way for companies to continue to grow when it’s been so difficult to find labor. As they are doing this, companies are beginning to relocate their manufacturing back to the United States or near-shoring in Mexico.

They want to get that manufacturing closer to home. They might not be saving on labor, but they will save on transportation and shipping. That was occurring before 2020, but it only accelerated during the pandemic, and is now having an impact on the amount of industrial space we need in this country.

The pandemic exacerbated the issue.

The manufacturing and inventory components were strained. Now everyone is playing catch-up to get back to the stock levels of 2019. But they also want to add 5% to 10% on top of that. There isn’t enough industrial space now to accommodate that. In 18 months, we are going to be out of space. There is barely a year’s worth of vacant industrial space on the market. And that is assuming that every space works for every tenant. If you are saying we have just 18 months of supply, it is worse than that. We need more industrial space, and that, too, is causing an increase in the demand in this sector.

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Harrison: We have seen a lot of light-industrial users, whether tenants or buyers across our markets, getting deals down. We’ve seen some huge announcements, like Intel selecting New Albany, Ohio, near Columbus, for its newest manufacturing facility. We are seeing demand for industrial space from the electric vehicle manufacturers. Demand for cold storage space is up. Everything is active at some level.

It’s hard to keep up.

Reshoring is important, too. We need more supply and stock here in the United States. I think we learned our lesson during the early days of the pandemic. I don’t think the need for reshoring will go away. We clearly need to store more product here. More inventory means more space, spread across the country.

This reshoring trend benefits the Midwest markets. We sit in Kansas City. We can get to almost 85% of the U.S. population in two days or less. And those numbers get better in other Midwest markets. We also have great cargo and rail facilities. We have a great interstate system. The connectivity is so strong in the Midwest. We also have strong labor in these markets and a low cost of living. That whole story does well for the Midwest.

How much of a challenge are rising labor and materials costs today?

Gutierrez: Everything is getting more expensive. Transportation costs are absolutely on the rise. We all know labor costs are rising, too. Go to your local restaurant and they are looking for staff. I haven’t walked into any business in the last 12 months that says they have everybody they need.

There are not enough people at any level to cover the demand for services from Americans. That is a problem, and it is putting further pressure on wage increases across the sector.

Nearly 60% of the inflation we are having is fuel related. That is putting a disproportionate amount of pressure on the industries that rely on fuel. If you are a company that is trucking product around, you are relying on fuel big-time. The cost of labor and the cost of fuel are the two biggest strains for companies in the industrial space today.

Harrison: Steel was for a while like toilet paper during the earlier days of COVID. We couldn’t find steel. That

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“ The Midwest markets and the coasts have the lowest vacancies.

Everyone has low vacancies, but most of the Midwest markets have vacancy rates down at 3%.” has since settled down. Roofing is now a big challenge, both the pricing of it and the procurement of it. Usually, it would take less than 12 months of construction to finish building an industrial property when everything is aligned right. The duration of building an industrial site is longer today. We are trying to get ahead of this like everyone else. We are ordering well ahead of getting our building permits so that we can get in the queue and on the schedules. At the same time, costs have grown incredibly. The situation seems to be changing monthly.

Things have gotten better for some materials. Precast and steel have maybe plateaued in terms of lead time. Roofing is still one of the bigger wildcards right now. Pricing is a challenge, too.

We don’t know what roofing will cost until it gets delivered to the site. The day of a guaranteed maximum price before you start construction are over.

That’s one more hurdle to overcome.

It can be difficult for tenants to find industrial space today. Do you see this changing anytime soon?

Gutierrez: It will remain challenging throughout this year. I strongly believe that companies and developers will struggle to find industrial space through 2023. The supply is not there.

The time it takes to build buildings has expanded. The projects that were taking nine months from shovels in the ground to delivery are now taking 10 to 12 months. The ones that were taking 12 months are now taking 14 to 16 months. Everyone working in the development side of the equation has seen their lead times increase.

Harrison: It’s not that tight in Kansas City, yet. It is challenging for some tenants, though. Tenants have to act quick if they like a building or location.

Fortunately, we have a pretty healthy supply under construction. We have about 12 million square feet of industrial space under construction in the market. I expect that we’ll see a really good absorption of that new space, though. We feel pretty good about Kansas City as a healthy market that will continue to grow.

Space is tighter in some of our submarkets. Southwest Johnson County is one of our strongest industrial markets. Honestly, though, it seems like every corner is active with developments. This is a unique market in that demand for industrial space is strong everywhere. Everyone is looking for sites. It’s not just one submarket that is dominating right now. It is pretty spread out. That is good for the health of the market.

What type of industrial space is especially difficult to find today?

Gutierrez: From what I’ve seen, the smaller units are harder and harder to find. They are not being reproduced.

There is not a lot of multi-tenant or small buildings in development because of economies of scale. Developers prefer to build a 6- or 7-million-square-foot building instead of a 200,000-square-foot building that accommodates four or five tenants.

Commodity costs hit you more on that smaller unit. It is more expensive to build them.

Are you still seeing a lot of spec construction in your market?

Harrison: The majority of our work is spec development. We do have some build-to-suit work, but that is a small percentage of our overall pipeline. The spec space is filling up quickly. When we are lucky, and we are sometimes, this happens before we even finish

the building. Buildings are not sitting empty for very long. Knock on wood, but I think that will continue. A lot of these tenants and users don’t have time to have a building built. They need to drop into markets and find a site that is built and ready to go. Speed to market is critical right now.

Are there any markets across the country that you think are especially strong in the industrial sector?

Gutierrez: The Midwest markets and the coasts have the lowest vacancies.

Everyone has low vacancies, but most of the Midwest markets have vacancy rates down at 3%. Some are as low as sub-2%. I am more excited about the Midwest product than I am about the product on the coasts. I think that our distribution mode and supply chain models are changing. If you are producing product in Mexico, you need to ship it right up the highway through Dallas and then up to Chicago. You’ll then hit the Midwest markets to distribute it to the U.S. population because of their location in the center of the country. I’m not saying that California will be dead. You will always have product there. But the growth of where the supply chain is going is coming from down south or in the southeast and then funneled through the middle of the country.

Do you have any predictions on when we might see the industrial market cool off?

Gutierrez: Vacancy rates will go up eventually. At some point, you are going to see developers building too much supply. We are not perfect.

When developers start putting product out there that they are delivering in 12 months and demand starts to cool halfway through, they have to finish building that space. There is always an overhang. But I don’t think we’ll see a huge amount of overbuilding.

Harrison: We’d love to have that crystal ball. But we feel good about where we are at. We are seeing great demand and leasing activity. We are optimistic that the demand is there. That can stop if we go into a real recession, but consumer demand and purchasing power is very strong still. That need for warehouse space will continue. Data centers, cold storage, a lot of things are hitting that will help alleviate any dip in consumer spending. I am bullish about the next six to 12 months.

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A medical clinic across the parking lot from a Target? It’s the new world of healthcare real estate

By Dan Rafter, Editor

T

he success of the multifamily and industrial sectors has been grabbing plenty of headlines. But there’s another commercial real estate sector that’s thriving today, too: healthcare real estate.

This isn’t surprising: The United States has an aging population, with plenty of people in need of a host of medical services. At the same time, the way people want medical care is charging. A growing number of consumers wants to receive their healthcare services at smaller, freestanding medical clinics and surgery centers.

They don’t want to travel to a sprawling hospital campus.

These factors mean that plenty of healthcare providers are once again in expansion mode. And many are

“It has been going on for more than 10 years. It’s the retailization of healthcare. Providers are moving clinics and services closer to their patients and where they live and work.” looking for sites on which to open surgical centers, medical office buildings and multi-speciality centers.

Allina Health is a good example: The healthcare system recently began construction of a multi-speciality

center and primary care clinic in the Minneapolis suburb of Lakeville, Minnesota. Together, the two projects will total 100,000 square feet.

The 75,000-square-foot multi-specialty center at I35W and 185th St. in Lakeville will house an ambulatory surgery center and provide residents with more than 20 specialties, including orthopedics, oncology and women’s health.

Allina Health’s new 25,000-squarefoot primary care clinic will be located in eastern Lakeville, near Cedar Avenue and Dodd Rodd. Both facilities are scheduled to open in the summer of 2023.

Brian Bruggeman and Louis Suarez, senior vice presidents with the Min-

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neapolis office of Colliers, represented Allina Health in its procurement of both facilities. The pair also represented the healthcare system in its newly opened urgent care suite in Savage, Minnesota, and its Apple Valley Clinic, which will soon be expanding its primary care services.

Midwest Real Estate News recently spoke with Suarez about the growing activity in healthcare real estate, both from investors seeking a safe space for their dollars and healthcare systems working to bring their services closer to their patients.

How strong is the healthcare real estate market today?

Louis Suarez: We have seen a lot of activity. It has been robust throughout 2022 and the end of 2021 across the board. A lot of changes came with COVID. Healthcare providers faced a lot of issues. Some providers had to make a system-wide adjustment of how they delivered healthcare. Some put projects on hold. Those projects are starting to come back online now.

It is similar to what we are seeing in the economy in general: There is a lot of growth in different areas.

Healthcare providers look at the rooftops and growth in areas before they decide to open a facility in a community. As the market changes and grows, healthcare providers look to expand in those areas, too. Wherever we see a lot of new rooftops is where we see a growth in the demand for healthcare services.

This growth in the demand for healthcare real estate has been going on for a while now, right?

Suarez: It has been going on for more than 10 years. It’s the retailization of healthcare. Providers are moving clinics and services closer to their patients and where they live and work. A lot more healthcare will be delivered from locations where historically we had seen retail.

How has the way patients now want healthcare delivered changed the real estate plans of healthcare providers?

Suarez: Patients are looking for convenience. So providers are moving a lot of the ambulatory services off of hospital campuses. There is also a cost model here: It is less expen-

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Midwest Real Estate News

“Healthcare building assets have been in demand for several years because of their stability and the length of the leases for their tenants. It is a product type that has been incredibly sought-after by investors.” sive to deliver healthcare outside of the hospital than it is to do it in the hospital. These smaller, off-campus locations free up spaces and services so that providers can provide more of the acute-care services on hospital campuses. You are seeing that with surgery centers and multi-disciplinary specialty groups pushing out to all the submarkets.

In new developments, cities and developers are looking at how healthcare can fit into an area that has a lot of retail in it. If a group is going to develop a large tract of land that includes retail and other services, it will plan where healthcare can go in conjunction with it. It’s not just a clinic stuck at the tend of a strip mall. It’s about putting real thought into where healthcare fits in that traffic pattern. Where does it fit in that complex? How does it fit within a larger development? It’s not about putting a neurologist next to a nail salon. It’s about thoughtful placement of these healthcare services.

Can you give an example of how this more thoughtful placement works?

Suarez: It’s not always easy to do correctly. You must manage traffic, parking and accessibility. But healthcare providers do want that visibility, signage and easy access. They want that high traffic flow. Healthcare providers are often looking at the same factors that retailers are interested in. Because of this, both healthcare and retail can be incorporated into the same developments very thoughtfully.

A good example is a project in Woodbury, Minnesota. There is a Target on

the east side of the development. One of the outlots has a 30,000-squarefoot medical office building for a large pediatric group. Down on the other side of the lot is another healthcare clinic. Thinking holistically, where do young families go to shop? Target is one of the first places they go. And the Target has a pharmacy. It makes sense to have a pediatric office in close proximity to that Target.

The medical office has its own separate parking lot, which is important, too. You don’t want a family walking their kids by a super high-traffic area.

The way you move in front of a retail center is different than how you move in front of a healthcare provider. With healthcare, you want to park right in front of the building. The development has a separate access point and parking for the medical uses but is designed to be near the Target. It makes a lot of sense.

What other interesting trends are you seeing in healthcare real estate in the Twin Cities?

Suarez: Minnesota has been a leader in healthcare for decades. We have very large healthcare systems that provide excellent healthcare. We have seen more consolidation. We have seen very large groups that have merged and are now offering services across the region. We are going to see more of that consolidation. Independent healthcare providers are still growing, but they are consolidating.

There are fewer of them. That is a trend we have been seeing and will continue to see.

In what submarkets are you seeing the greatest number of new healthcare developments?

Suarez: It mirrors where you see the main retail hubs. Primary care clinics are scattered throughout our market, but the larger specialty groups are locating in those main hubs of retail where you see a lot of strong traffic.

Communities like Maple Grove, Edina, Woodbury and Lakeville are seeing a lot of healthcare real estate. There are some developments in Brooklyn Park and Eden Prairie. We are starting to see a lot of development in these pockets where historically there had been a significant amount of population and retail growth. That’s why Lakeville makes so much sense for the Allina developments: It is such a growing community.

Do you think the demand for healthcare facilities will continue to grow throughout 2022?

Suarez: Healthcare building assets have been in demand for several years because of their stability and the length of the leases for their tenants. It is a product type that has been incredibly sought-after by investors.

The demand among investors who want to acquire healthcare properties is far higher than the supply. There are not many buildings for sale or products available. It is a challenge to get into this market.

The demand for this asset class will stay solid. A number of former clinics shut down in the last year or so, in part because of COVID. A lot of those properties have been sold and have become repositioned. There is not a glut of healthcare properties out there. There is still a limited amount of quality healthcare assets for investors. That demand is driving people to build new developments. I foresee more of that continuing forward.

What will also continue is this thoughtfulness around healthcare development. It’s no longer good enough to say that you have an outlot and you’d like to put a healthcare facility there. Now it has to be planned for as part of the original design of the development. That forethought will become more common.

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OFFICE

Midwest Real Estate News

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The COVID game-changer: Healthy offices now a must-have, not a nice-to-have, for building owners, employers

By Dan Rafter, Editor

H

ow healthy are offices across the United States?

And are employees more likely to return to the office – at least on a parttime basis – if their employers take the steps necessary to boost indoor air quality, improve natural light and surround their work areas with green spaces?

These are questions tackled by Joanna Frank, founding president and chief executive of the Center for Active Design in New York City.

The center is the operator of Fitwel, a certification system originally developed by the U.S. Center for Disease Control and Prevention that measures how healthy offices are.

The health of indoor working spaces

“This lets you know that this is not a one-size-fits-all solution. You have to respond to the needs of the users of a space.” is a hot topic today, thanks in part to the COVID-19 pandemic and the desire of employers to bring their workers back to the office after so many have worked remotely for more than two years.

Consider these facts from the Center for Active Design: • Indoor air pollutants are generally two to five times greater than outdoor levels of air pollution.

• Poor light quality and uninspiring views in offices cause employees to miss more time from work with illnesses.

• Employees greatly benefit from natural, green surroundings, which are often a small investment for companies and building owners to make.

Frank said that employers and building owners should invest in ways to improve the health of indoor office spaces, especially if they want to bring their workers back to their conference rooms, cubicles and desks.

To do this, though, owners and employers need to understand what makes a building or office space

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May/Junel 2022

healthy. Frank said that there are three keys.

No one-size-fits-all solution First, building owners must address of the needs of the occupants of a building.

“This lets you know that this is not a one-size-fits-all solution,” Frank said. “You have to respond to the needs of the users of a space.”

Secondly, it’s important for employers and owners to enact strategies that have already been proven to produce cleaner air, happier employees and a more productive workplace.

Employers should search out the evidence to prove that the investments in healthy spaces they are making will provide results.

And maybe most importantly, employers and building owners must measure the impact of their healthy workspace initiatives. They must also share these results with their tenants and employees.

This means that building owners must be able to show their tenants that healthy initiatives are helping them attract and retain employees and that these workers are more productive now that healthy initiatives are in place. And employers must show their workers that their indoor air quality ratings are high, more outdoor light is bathing their offices’ interiors and that employees are calling in sick less often.

The key here? Companies are not likely to pay more to lease office space just because it is healthier.

And building owners are not likely to invest in green space, air-purification spaces and indoor gathering spaces just to be nice. Owners and tenants need to see that these healthier additions will pay off, whether this means giving owners additional tools to attract more tenants and charge higher rents or giving tenants the amenities they need to convince employees to return to the office or attract and retain the best talent.

“The more research-based strategies you have promoting health, the higher the degree of tenant satisfaction,” Frank said. “The more things you do to promote health, the more

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OFFICE

Midwest Real Estate News

“People are now demanding that their companies be able to demonstrate how they are promoting and protecting their health. Before COVID, we weren’t seeing individuals asking for a healthier work environment. That has now changed.” likely you are to retain workers.

You must be able to demonstrate those business outcomes if you are a building owner. Real estate needs that proof. Real estate demands that you can show that return on investment.”

Fortunately, Frank said, this isn’t difficult to prove. As she says, there has always been a direct correlation between the health of a business’ workers and their productivity.

What has changed since COVID, though, is demand: Workers are now demanding healthier office environments.

“People are now demanding that their companies be able to demonstrate how they are promoting and protecting their health,” Frank said.

“Before COVID, we weren’t seeing individuals asking for a healthier work environment. That has now changed. That is a game-changer.

We knew how to create healthy office spaces before COVID. We had a massive body of evidence showing how to do this. The difference now is that the workers are demanding this, which is persuading companies to explore their options.”

And employees want proof that companies are taking steps to promote their health, Frank said. It’s no

longer enough for companies to say that they are taking steps to boost indoor air quality, for instance.

Today, they must show their workers actual statistics and test results proving that their claims are true.

“It has changed from health being a nice-to-have before COVID to being a must-have today,” Frank said. “It used to be that building owners would think about healthy building measures after they took care of everything else. But now, owners can lose their Class-A tenants to other buildings that are demonstrating how they are promoting health and wellness.”

Creating the healthy workplace What are some of the steps, then, that building owners can take to boost the health of their tenants?

Frank said that companies and their workers today are focused heavily on indoor air quality. It’s important, then, for building owners to improve the air-purification systems and air flow in their buildings. They need to bring more outside air into their workspaces.

This will boost not just the physical health, but also the mental health of building occupants, Frank said.

High-quality natural light is important, too, for the physical and mental health of occupants, Frank said. And offices need outdoor light to flood their spaces, not artificial. Frank said that studies have shown that natural light is directly related to employee productivity.

Another key is that building occupants have access to nature and green spaces. This could be a small rooftop garden or even the addition of indoor plants.

“You can do this in any building,” Frank said. “It doesn’t have to be new construction. You can bring nature into a space very effectively by using green walls, plantings, whatever you have. Bringing nature into the office is very important for employees’ mental health and feelings of well-being.”

What also matters is building trust, Frank said. This means that building owners and employers must show workers real numbers showing how effective their healthy measures are.

And they must share these numbers even if they show that a particular measure isn’t having as much of an impact as they had hoped.

And if the numbers show bad news?

Employers and building owners must share their plans for replacing or improving whatever measures aren’t working, Frank said.

Consider indoor air quality. Building owners and employers can’t just say that they are using a certain level of filtration. They must explain why they are using it, Frank said, and what their air-quality goals are.

“People have become very educated about indoor air quality,” Frank said. “You need to provide details.

You need to tell tenants about how much outdoor air you are bringing into the building. You need to be measuring indoor air quality in a consistent way. And what will you do if you are not achieving the results you want? That is a tough one for building owners. There is risk involved. You need to have policies in place explaining how you will respond if your system provides less-than-optimal air quality.”

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OFFICE

Midwest Real Estate News

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Amid changing tenant expectations, here’s how the real estate industry is adapting

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By Cory Bultinck

he prolonged COVID-19 pandemic has continued to have a strong impact across the real estate industry, from construction and brokerage operations to the marketing of listings and property closings. That uncertainty presents special challenges in working with existing tenants of leased space.

Building management professionals and tenants themselves have stepped up to outfit properties to support the safety, comfort and overall well-being of their occupants, whether they are workers, customers or short-term visitors.

“As tenants review their long-term space needs and seek changes to their real estate footprint, flexibility has become the norm. With in-office head counts expected to be reduced for the foreseeable future, it’s important to stay open to renegotiating lease terms early to satisfy taenants who might otherwise look to cut and run.”

Today, a strategic focus on retaining tenants and attracting new ones is paramount. In a nationwide survey of 450 building managers and real estate consultants conducted in the summer of 2021 by Blue Skyre IBE and market research company HarrisX, a whopping 94% said their properties have either already or were in the process of upgrading HVAC filtration systems.

Two-thirds of buildings have hand sanitation stations and frequent cleaning of high-touch areas, and 62% of those surveyed say temperature checks were required to enter the office.

A full 60% of property managers reported having a documented contingency plan for dealing with COVID-19 surges and 30% were preparing one.

Renegotiating lease terms As tenants review their long-term space needs and seek changes to their real estate footprint, flexibility has become the norm. With in-office head counts expected to be reduced for the foreseeable future, it’s important to stay open to renegotiating lease terms early to satisfy tenants who might otherwise look to cut and run. The option to sublet their existing space, even for a limited period, has become appealing, especially for tenants unsure of their longer-term space needs.

Existing office tenants with traditional three- to five-year leases are having

What’s influencing office and retail recovery The principal factors needed for office and retail recovery fall into three main areas: • Striking a balance between owner and tenant needs: Property owners are currently focused on tenant retention at all costs, but they also must satisfy investors.

Cory Bultinck

a much easier time shortening those commitments than they have in the past. In the retail sector, investors have reason for optimism. Net newstore openings exceeded closings in the fourth quarter of 2021, and leasing is showing signs of improvement.

Sale-leaseback option Another option gaining traction is the sale-leaseback. A struggling business can improve its cash position by selling its owned real estate while retaining the right to use the property through a long-term lease. Investors seeking quality, income-producing property with a tenant willing to sign a longterm lease may find this an attractive opportunity. These commitments are usually 10 to 15 years.

• Offering plentiful amenities and concessions: Owners and building managers will continue to be generous with concessions and keep rent hikes minimal in the next few years, until tenant demand notably increases. On-demand concierge and delivery services that sprang up in the pandemic are likely here to stay.

• Remaining patient: Organic business growth may not be sufficient to generate absorption for current vacancies. In the absence of major industry shifts or a new industry entering a local market, population growth will be necessary to absorb the oversupply and bring down vacancy rates, especially in large urban centers.

Digital adoption accelerated by the pandemic has had enormous consequences for work life, consumer habits and the spaces people occupy.

And attention to a building’s carbon

footprint has become an essential component of any real estate footprint conversation.

Health and safety protocols pertaining to a structure, whether a new build or a retrofit, now double down on concerns like air filtration, insulation and other many other energy-efficiency priorities. Higher green building standards are not only good for the environment, they’ve become essential for business. The investor community’s expectations are changing along with the public when it comes to sustainable practices that will continue to matter long after the pandemic has subsided.

Looking for ways to adapt?

Wipfli can help you navigate real estate decisions during a time of dramatic market and economic volatility.

Our advisors help guide your strategic planning and assess trends that matter most to your business. Making smart investment decisions requires thoughtful, proactive planning, not reactive changes in response to immediate events. We’re here to help you and your investors stay on track for the long run. Learn how we help.

Cory Bultinck is a partner in the Minneapolis office of Wipfli. You can reach him at cbultinck@wipfli.com.

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OFFICE

Midwest Real Estate News

Rate volatility triggers refi opportunities: Plenty of financial incentives to refinance ahead of maturity dates

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By Noah Juran

n the heels of the long-anticipated Fed rate hike in midMarch – its first since 2018 –cost of capital is top-ofmind for real estate owners.

Capital markets have changed dramatically during the past two months because of rising rates and wider spreads created by external market forces. The 10-year treasury has climbed more than 1% since Sept. 1, 2021, and about 75 basis points in 2022 alone.

In addition to its quarter-point rate increase, the Federal Open Market Committee has signaled that the Fed will likely raise rates up to six more times this year and up to four times in 2023. Although that context is important, rate moves are never a sure thing.

Frankly, no one has that crystal ball to say whether rates will move higher when they could just as easily drop 30 or 40 basis points tomorrow.

One of the certainties of the current volatile environment is that now is an ideal time to review your portfolio and look at loans that might be maturing within the next three to four years, to see whether it makes sense to refinance. That analysis takes into consideration key factors – the ability to lock in a new low rate and pull cash out, while also weighing pre-payment premiums to determine how much an owner might save over the life of a new loan.

For example, Northmarq recently conducted a loan portfolio analysis for a client on eight different properties (self-storage and apartment). The analysis took a comprehensive look at pre-payments, current payments, future payments and cash-out ability across different lender and loan product options.

In this case, the pre-payment was a fixed 1% for the next three years. The client believes that rates are going up and recently moved forward with the the refinance of the first loan on a self-storage asset. The client was able

to lock in the rate in the low-3% range on an IO loan, pull out several million dollars in equity and reduce the loan payment by $3,000 a month.

That is a bit of a best-case scenario with a “trifecta” of incentives to refinance now. However, if the owner had not done the analysis, it would not have been aware of the opportunity. If you believe rates could substantially increase in the future, the cost to refinance early could easily be less than a higher-rate loan in the future.

It is important to note, that, comparatively speaking, we are still in a period of historically low rates. The 10-year treasury historic low occurred on Aug. 4, 2020, at 0.52%, while the 10year treasury high occurred on Sept.

30, 1981, at 15.84%. The historical average for the 10-year treasury since 1962 is 5.94% (with a median rate of 5.73%). The 10-year treasury today is above 2.40%.

Despite rate volatility and speculation that rates could move higher, borrowers can still find attractive financing rates and lock in low rates for the next

10 or 20 years. Although lenders are shying away from risk, they are willing to lend on all property types, including stepping back into retail, office and, in some cases, hospitality.

Borrowers will benefit from life insurance company loans that offer early rate locks (at term sheet or loan application), which the lender can hold for three to six months at no additional premium. Some lenders are willing to hold a rate even longer, for nine to 12 months, which delivers the added benefit of reducing any prepayment penalty. Holding that rate for a longer period does come with a slight premium, 2 to 5 basis points per month past three or four months. However, the upside is that it may allow you to reduce your prepayment penalty and provides the added benefit of holding your rate in a rising rate environment.

Another incentive fueling refi opportunities is the strong value appreciation that many property owners have experienced. Property cash flow and values have increased significantly during the last five to 10 years. However, if an owner decides to sell an asset to

realize gains, it creates a question of what to do with the sale proceeds. Can you reinvest in today’s competitive marketplace and successfully complete a 1031 exchange, or could you potentially face a tax on the gain? A big advantage of a cash-out on a refi is that those proceeds are tax-free, and you also continue to generate cash flow from the property.

Oftentimes, borrowers put long-term, fixed-rate debt on a property and forget about it until that loan is about to expire. That is even more true in what has been a long-running period of historically low interest rates. Now that the rate environment is starting to shift, it is a good time to conduct a financial analysis of loans with maturities through 2025 to determine if there are any opportunities to refinance.

Noah Juran is senior vice president and managing director at Northmarq Cincinnati. Northmarq has a loan servicing portfolio of more than $70 billion and is the top servicer of life insurance company loans in the country.

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FINANCE

Midwest Real Estate News

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May/June 2022

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Meeting the demand: A new lending option sprouts in Minnesota

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By Dan Rafter, Editor

s the commercial real estate market continues to thrive, especially in the multifamily and industrial sectors, the demand for commercial financing to support the country’s development boom is only growing.

That’s why the timing of four Minnesota-based credit unions is so ideal.

The credit unions earlier this year launched a new Credit Union Service Organization that is now lending to developers and investors in Minnesota and the upper Midwest.

And the addition of a new lender?

That’s good news for developers and investors who are seeking the dollars they need for new construction, acquisitions and refinances.

Named United Financials Capital and based in Minneapolis, the service organization’s founding members are: • Affinity Plus Federal Credit Union • Hiway Credit Union • SPIRE Credit Union • TopLine Federal Credit Union Michael Dalglish, chief executive officer and founder of United Financials Capital, said that with demand for commercial financing so high, 2022 was the right year to start this new lender.

“We have been on this journey for a long time,” Dalglish said. “We looked at a lot of different potential opportunities in the market to help our credit union members. One of the areas we thought we could make an impact on was the commercial lending space.”

Dalglish said that the individual credit unions that make up United Financials Capital will benefit from the combined financial power of having four working together. And the hope is that even more local credit unions will join the service organization in the coming months.

“There were financing opportunities that credit unions had to say ‘no’ to because one separate credit union couldn’t provide the funds by itself,” Dalglish said. “The size of the opportunity might have been outside its borrowing limits. Collaboratively as a group, they can now look at these opportunities and collaborate on them together. They can find the deals that are the right fit and move on with them.”

A client might come to one of the credit unions in the new organization and ask for a $20 million loan. In the past, that credit union might not be able to provide that amount of financing. But if it is part of United Financials Capital, it might now be able to provide the funds.

“We’re excited to launch United Financials Capital, moving beyond ideas and discussions to collaborative action,” said Dave Boden, president and chief executive officer of Hiway Credit Union and board chair for the new organization. “We’re here to bring the power of credit union values and the combined resources of our organizations to the commercial lending marketplace. We believe this is just a starting point: Our mission,

and obligation, is to serve and support MN credit unions of all sizes We deeply believe we are all stronger if we work together.”

There are a lot of projects being developed. From all indications, it looks like a lot of those projects will move forward.”

Dalglish said that the organization will focus on deal sizes between $5 million and $50 million.

But why should developers or investors work with a credit union lender?

Dalglish said that credit unions are community-based and owned by the members of those communities. This means that developers who work with credit unions are instantly connected to those individuals who own the organization. That, Dalglish said, is an important benefit.

“Minnesota credit unions have always been at the heart of small and mid-sized business lending for many communities throughout the state,” said Boden, in a written statement.

“Combining resources and working together through United Financials Capital, we can extend the reach of credit unions to opportunities often not otherwise available, and truly enable the organizations to be a significant economic engine for growth in Minnesota and beyond.”

Dalglish said that the commercial real estate market is particularly strong throughout Minneapolis and the state of Minnesota today. The demand, then, is there for a new lending opportunity, he said.

“There are a lot of opportunities out there,” Dalglish said. “We are excited about that. We see this market as being very, very strong right now.

“That’s a nice story for those developers,” Dalglish said. “If they work with us, they can say that they are helping an organization that represents 500,000 Minnesotans. There is a benefit there in knowing that the funds ultimately get back to those members who own those credit unions.”

Dalglish said that the reaction to the launch of United Financials Capital has been positive. He said that the organization, which officially launched in January of this year, has already underwritten and collaborated on deals that have gotten funded.

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2021 ANNUAL RESOURCE GUIDE

ARCHITECTS/DESIGN-BUILD FIRMS LAMAR JOHNSON COLLABORATIVE

35 E. Wacker Drive, Ste. 1300 Chicago, IL 60601 P: 312.429.0400 Key Contact: Lamar Johnson, FAIA, LEED AP 2199 Innerbelt Business Center Drive St. Louis, MO 63114 P: 314.429.1010 Key Contact: Chip Crawford, PLA, FASLA, LEED GA Website: theljc.com Services Provided: Lamar Johnson Collaborative provides architecture, interior design, landscape architecture, urban planning, and urban design.

Company Profile: Lamar Johnson Collaborative is a full-service design and architecture firm committed to enhancing the quality of the human experience and to improving how design and architecture can impact each individual’s emotional being. By harnessing the power of integrated design, including architecture, interior design, landscape architecture, urban planning, urban design and engineering, the company achieves its clients’ goals and aspirations.

Notable/Recent Projects: 448 N LaSalle, Horizon Therapeutics, Triangle Square, 24 E Washington, T-Rex Lobby Renovation & Art Installation, POPCourts!, Mark Anthony Brewing, Katherine Ward Burg Memorial Garden, EDGE @ WEST, Northwestern Medicine Mokena Medical Office Building, St. Louis County Library – Lynn Beckwith, Jr. Administrative Building and Ladue Branch, Wildhorse Village Mixed Use Development.

BROKERAGE 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 Analytic 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, Five Below, Flip’d, HomeGrown, CentiMark, Paragon Star, Blush Bootcamp, Santa Fe Village Apartments, Pure Fishing, Smart Warehousing, Somera Road, Lightwell Food Hall, Arvest Bank, Mission Peak Capital.

BARBERMURPHY

1173 Fortune Blvd.

Shiloh, IL 62269 Commercial Real Estate Solutions P: 618.277.4400 | F: 618.277.4407 Website: barbermurphy.com Key Contacts: Wayne Barber, Jr., SIOR, Principal, Wayne@barbermurphy.com; Paul Murphy, Managing Broker, Principal, Paul@barbermurphy.com; Steve Zuber, SIOR, CCIM, Principal, Steve@barbermurphy. com; Collin Fischer, CCIM, Principal, CollinF@barbermurphy.com Services Provided: BARBERMURPHY is a full service Commercial Real Estate firm offering their clients on the ground market knowledge and experience in the disposition and acquisition of commercial, industrial, land, retail, and investment properties.

Company Profile: BARBERMURPHY is the largest Commercial Real Estate firm focusing on downstate Illinois and St. Louis. Our growing firm has 19 Licensed Brokers and more than 500 exclusive listings.

Mission Statement: Achieving total client satisfaction through exceptional people providing the best possible Commercial Real Estate Solutions.

CUSHMAN & WAKEFIELD/THE LUND COMPANY

450 Regency Parkway, Suite 200 Omaha, NE 68114 P: 402.393.8811 | F: 402.393.2402 Website: lundco.com Key Contacts: Jason Fisher, CEO, jfisher@lundco.com; Tanya Shapiro, President, tanya.shapiro@lundco.com Services Provided: Our staff of innovative and creative professionals offer a wide range of real estate services including brokerage, commercial and multi-family property management, real estate consulting, investment acquisition, and project and development services.

Company Profile: Cushman & Wakefield/The Lund Company markets and manages over eight million square feet of commercial properties valued at over $1 billion. Also, included in our management portfolio are more than 16,000 apartment units.

FRIEDMAN REAL ESTATE

34975 W. Twelve Mile Road Farmington Hills, MI 48331 P: 888.848.1671 Website: friedmanrealestate.com Key Contacts: David B. Friedman, President/CEO; Gary Goodman, Sr. Managing Director-Brokerage Services Services Provided: Friedman offers a full range of real estate services including commercial and multifamily property and asset management, tenant and landlord representation, investment and loan sale advisory, space planning, design and construction and a unique platform of lenderfocused bankruptcy, receivership and distressed asset services. All services are provided inhouse, though a single point of contact, which guarantees that clients receive the most timely and efficient service available in the marketplace.

Company Profile: Founded in 1987, Friedman Real Estate is one of the largest privately held commercial real estate organizations in the nation; currently managing over 15M SF of commercial space and more than 15,000 apartment homes located throughout the country. Friedman’s commercial brokerage team has over 800 current listings with $20 billion in closed transactions.

Notable Transactions/Clients: • Troy Technology Park - Troy, MI • Sakthi Automotive Industrial Portfolio - Detroit • Greyberry Apartments - Waterford • Tiffany Plaza - Youngstown • West 11 Tech Park – Southfield

GERSHMAN COMMERCIAL REAL ESTATE

150 N. Meramec Ave., Suite 500 St. Louis, MO 63105 P: 314.862.9400 Website: gershmancommercial.com Key Contacts: Chris Fox, CCIM, SIOR, President & CEO, cfox@gershmancommercial.com; Molly Studer, Executive Vice President, Operations, mstuder@gershmancommercial.com Services Provided: Gershman offers an extensive array of commercial real estate services, including brokerage, landlord and tenant representation, investment sales, valuation advisory, market research, corporate services, property & facility management, project/construction management, client accounting and maintenance/engineering.

Company Profile: Gershman Commercial Real Estate is a full-service real estate firm providing comprehensive, personalized services to owners and occupiers of commercial property. With an over 70-year history in St. Louis, and firm leadership based locally, we are uniquely positioned as the longest-standing independently owned firm in the metro area.

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 10 million square feet of retail properties for lease and development.

CRESSY COMMERCIAL REAL ESTATE

4100 Edison Lakes Pkwy., Suite 350 Mishawaka, IN 46545 P: 574.271.4060 Website: cressy.com Key Contact: Chris Fielding, CEO Services Provided: Brokerage Services, Property Management, Financial Management & Reporting, Maintenance & Mechanical Services, Development, Architectural Services, Design Services, Project Management, Construction Services.

Company Profile: NAI Cressy, the brokerage division of Cressy Commercial Real Estate provides expert data, marketing and closing services. Our proprietary database and dedicated staff ensure our brokers are able to meet all of your real estate needs and goals. With corporate offices in South Bend, Mishawaka and Indianapolis, Indiana we are able to serve the vast majority of Central to Northern Indiana and Southwest Michigan. Also through our affiliation with NAI Global, we can provide a global network of data for markets nationwide.

KESSINGER HUNTER & COMPANY, LC

2600 Grand Boulevard, Suite 700 Kansas City, MO 64108 P: 816.842.2690 | F: 816.421.5659 Website: kessingerhunter.com Key Contact: John DeHardt Services Provided: Kessinger Hunter & Company, LC is a full-service, commercial real estate firm. Full service includes management, brokerage, development, accounting, and consulting services throughout the United States and globally.

Company Profile: What really sets us apart is our People. Integrity, Passion, Knowledge, and Experience are a way of everyday life for us at Kessinger Hunter. Each group responds to our clients’ needs, and they work together to utilize the resources that come with more than 140 years of experience and 200 associates. We manage over 26,000,000 square feet of property and have developed in excess of 14,000,000 square feet of projects.

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NAI FARBMAN/FARBMAN GROUP

28400 Northwestern Highway, Suite 400 Southfield, MI 48034 P: 248.353.0500 | F: 248.353.0501 Website: farbman.com Key Contacts: Andrew Farbman, CEO, afarbman@farbman.com; Andrew Gutman, President, gutman@farbman.com; Michael Kalil, COO and Director of Brokerage, kalil@farbman.com.

Services Provided: Leasing & Brokerage, Construction, Investment Sales, Asset Management, Site Selection Services, Acquisition & Disposition, Medical Real Estate Solutions, Move Management, Property Management, Receivership Services, Facility Management.

Company Profile: NAI Farbman, a full-service commercial real estate company, is one of the largest and most respected names in Commercial Real Estate.

LAMP INCORPORATED

460 North Grove Ave. Elgin, IL 60120 P: 847.741.7220 | F: 847.741.9677 Website: lampinc.net Key Contact: Ian Lamp, President, ilamp@lampinc.net Services Provided: Design/Build, General Construction, and Construction Management services for additions, build outs, renovations, and new facilities for office, industrial, logistic, technology, and commercial buildings.

Company Profile: Lamp Incorporated has been providing professional construction services for over 80 years. Our commitment of exemplary service to our clients creates projects that are completed early and with exceptional value.

Notable/Recent Projects: Mitutoyo America Corporation North American Headquarters, Aurora, IL. 96,000 SF warehouse addition; 63,000 SF, three-story office addition, which includes high tech showroom, two story atrium, corporate offices/conference room, cafeteria, and locker rooms.

CONSTRUCTION COMPANIES/GENERAL CONTRACTORS ALSTON CONSTRUCTION COMPANY

1900 Butterfield Road, Suite 1020 Downers Grove, IL 60515 P: 630.437.5810 Website: alstonco.com Key Contact: Greg Kolinski, Director of Business Development, gkolinski@alstonco.com Services Provided: Alston offers a diverse background of design-build experience, general contracting and construction management of industrial, commercial, healthcare, retail, and municipal projects.

Company Profile: Alston Construction’s success begins and ends with our approach to planning, scheduling, and choosing the right team. We have been adhering to an open and collaborative approach since our founding more than 35 years ago.

Notable/Recent Projects: 1.5M SF Distribution Center for General Mills. John Pennycuff Memorial Apartments 7-story, 88-units. Call Center with open offices with full-service café, gymnasium, and fitness center for Medline Industries. Freestanding Medical Office Building with 33 exam rooms, rehabilitation gym, and support service/diagnostic space for CHI Health and NexCore Group and a 1.4 million SF build-to-suit distribution center for Medline Industries in Grayslake.

BRINKMANN CONSTRUCTORS

16650 Chesterfield Grove Road, Suite 100 C hesterfield, MO 63005 P: 636.537.9700 Website: BrinkmannConstructors.com Key Contacts: Brian Satterthwaite, President, bsatterthwaite@brinkmannconstructors.com; Thomas Oberle, EVP, toberle@brinkmannconstructors.com; Rebecca Randolph, Senior Director of Client Relations & Marketing, RRandolph@brinkmannconstructors.com Services Provided: General contracting services including design-build, design-assist, and construction management.

Company Profile: Brinkmann Constructors is an employee-owned construction company focusing on finding the best right answer to save clients money and time. From our offices in St. Louis, Denver, Kansas City and Richmond, Va., Brinkmann works nationwide on construction projects in the senior living, multifamily/ student housing, warehouse/distribution, retail/mixed use, office, healthcare, and hospitality/ entertainment markets.

Notable/Recent Projects: Expo at Forest Park – St. Louis, MO – Transit-oriented development with 2 buildings totaling 457,100 SF with 287 apartment units, retail and parking; Raymore Commerce Center 3 – Raymore, MO – 1 million SF design/build warehouse part of a larger industrial logistics park planned; 3000 Huron – Denver, CO – 354,000 SF mid-rise apartment building in downtown Denver with 300 units; Woodleigh Chase – Fairfax, VA - Three building, 618,000 SF senior living community with 262 units.

CLAYCO, INC.

35 E. Wacker Drive, Ste. 1300 Chicago, IL 60601 P: 312.658.0747 Website: www.claycorp.com Key Contacts: Bob Clark, Executive Chairman & Founder, clarkb@claycorp.com; Kevin McKenna, President - Construction Group, mckennak@claycorp.com Services Provided: Clayco is a full-service turnkey real estate, architecture, engineering, design-build and construction firm.

Company Profile: Clayco specializes in “the art and science of building”, by providing fast track, turnkey design build solutions in North America for commercial, institutional, industrial and residential building types. Clayco looks “beyond these walls” focusing on helping our clients fulfill their mission.

Notable/Recent Projects: St. Louis – Centene Campus, 100 Above the Park, Benson Hill, Delmar Devine Chicago - Willis Tower Transformation Project, Macy’s Flagship Redevelopment, Fulton East, Upshore Chapter National – Blue Origin, Dominion, Centene East Coast HQ, Amazon E Commerce, Penn State.

HUNTINGTON CONSTRUCTION COMPANY

28400 Northwestern Highway, Suite 400 Southfield, MI 48034 P: 248.353.0500 Website: farbman.com Key Contacts: Andrew Gutman, President, gutman@farbman.com; John Line, Executive Vice President of Property Management and Construction, line@farbman.com Services Provided: Huntington Construction offers General Contractor, Construction Management, Owner/ User representation options for all commercial real estate throughout the Midwest.

Specializes in ground up construction and tenant improvement work as well as specialized construction. We are your full service, one-stop shop for all of your construction needs.

Company Profile: Huntington Construction is a recognized leader in the commercial construction industry serving as a General Contractor and Construction Manager. Huntington has over 30 years of experience in all areas of commercial construction and specializes in tenant improvement work for office, industrial, retail, medical office and medical office as well as design build and ground up construction.

Notable/Recent Projects: Recently Huntington has performed on several ground-up, single tenant developments, a corporate headquarter construction job and hundreds of jobs in-between, in 2019.

MCSHANE CONSTRUCTION COMPANY

9500 West Bryn Mawr Avenue Ste. 200 Rosemont, IL 60018 P: 847.292.4300 | F: 847.292.4310 Website: www.mcshaneconstruction.com Key Contacts: Mat Dougherty, PE, President, mdougherty@mcshane.com Services Provided: McShane Construction Company offers more than 35 years of experience providing design-build, design-assist and general construction services on a national basis. The firm’s diverse expertise includes build-to-suit and speculative warehouse, distribution and manufacturing facilities, as well as multifamily, commercial and institutional developments.

Company Profile: Headquartered in Rosemont, Illinois with regional offices in Auburn, Alabama, Irvine, California, Phoenix, Arizona, Madison, Wisconsin and Nashville, Tennessee, McShane Construction Company provides comprehensive construction services on a local, regional and national basis for a wide variety of market segments. The firm is recognized as one of the Chicago area’s most diversified and active contracting organizations with a reputation built on honesty, integrity and dependability.

Notable/Recent Projects: Abt Electronics – the construction of a 430,000-square-foot addition to Abt Electronics’ warehouse and showroom facility in Glenview, Illinois, including two three-story office blocks and 407,000 square feet of warehouse space. Industry Center at Melrose Park – the new construction and interior buildouts of three speculative industrial buildings totaling 652,000 square feet in Melrose Park, Illinois.

MERIDIAN DESIGN BUILD

9550 W. Higgins Road, Suite 400 Rosemont, IL 60018 P: 847.374.9200 | F: 847.374.9222 Website: meridiandb.com Key Contacts: 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 Profile: 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: Clarius Park Joliet Building #2, Joliet, IL - 906,517 sf speculative industrial facility for Clarius Partners. Commerce Park Chicago Building B, Chicago, IL - 602,545 sf speculative multi-tenant industrial facility for NorthPoint Development. Halsted Delivery Station, Chicago, IL 112.000 sf package delivery station on a 17-acre redevelopment site for Prologis.

PEAK CONSTRUCTION CORPORATION

9525 W. Bryn Mawr Avenue, Suite 810 Rosemont, IL 60018 P: 630.737.1500 | F: 630.737.1600 Website: peakconstruction.com Key Contacts: Michael P. Sullivan, Jr., CEO & Founder, msullivan@peakconstruction.com; John Reilly, President, jreilly@peakconstruction.com Services Provided: Peak Construction Corporation offers design/build and construction management services through a strategically developed culture, highly regarded for dynamic problem-solving abilities and a network of alliances that allow Peak to bring in experts and partners from a wide spectrum of fields and roles.

Company Profile: Peak Construction Corporation is a privately-held, well-capitalized design/build general contractor. For 25 years Peak has delivered industrial, hospitality, office, healthcare, retail, multi-family and specialty construction projects on-time and on-budget.

Notable/Recent Projects: Peak’s recent Midwest projects include Scannell Properties’ DuPage Business Center Phase II in West Chicago, Elgin Distribution Center, and Strongsville Commerce Center in Ohio, NorthPoint Development’s Bristol Building I and Janko Group’s Bristol Business Park, both in Wisconsin, as well as various tenant improvements throughout Chicagoland and Wisconsin.

www.rejournals.com SUMMIT DESIGN + BUILD, LLC

1036 W. Fulton Market, Suite 500 Chicago, IL 60607 P: 312.229.4630 | F: 312.229.1147 Website: summitdb.com Key Contacts: Adam Miller, President, amiller@summitdb.com; Deanna Pegoraro, Vice President, dpegoraro@summitdb.com; Larry Blouin, Vice President, lblouin@summitdb.com; Jon Silvers, Business Development, jsilvers@summitdb.com Services Provided: Summit Design + Build, LLC is a provider of full service general contracting, construction management and design/ build construction services for the commercial, industrial, multifamily residential, office/tenant interiors, hospitality and institutional markets.

Company Profile: Located in Chicago’s Fulton Market and with regional offices in Tampa, FL and Austin, TX, Summit Design + Build has been involved in the design and construction of over 330 buildings and spaces totaling more than 7 million square feet over the firm’s 17 year history.

Notable/Recently Completed Projects: 1400 W Monroe (Luxury Multifamily Residential), 113 E Oak (Ground-up Retail), Open Kitchens (Industrial), Glen Oak Country Club (Recreational), 448 N LaSalle – WeWork (Co-working office), Elmhurst Hall (Restaurant) and La Galera Produce (Industrial), New Buffalo Retreat (Luxury Residence), Eli’s Cheesecake (Industrial) and 718 Main (Multifamily).

LAW FIRMS GOULD & RATNER

222 N. LaSalle St., Ste. 300 Chicago, IL 60601 P: 312.236.3003 | F: 312.236.3241 Website: gouldratner.com Key Contact: Linsey Cohen, Chair, Real Estate Practice, lcohen@gouldratner.com Services Provided: Counsel on nearly all real estate transactions, including purchase, sale and financing of office, industrial, hotel/hospitality and residential/multifamily development, as well as commercial and retail leasing, multiparcel assemblage, tax-deferred exchanges, management agreements, construction financing, litigation and environmental issues.

Company Profile: Gould & Ratner lawyers translate legal knowledge and business acumen into practical solutions that work for our clients, who include entrepreneurs, family businesses, and middle-market and Fortune 500 companies in real estate and many other industries in Chicago and nationwide.

KRIEG DEVAULT LLP

One Indiana Square, Suite 2800 Indianapolis, IN 46204 P: 317.636.4341 | F: 317.636.1507 Website: kriegdevault.com Key Contacts: David A. Adams, Partner, dadams@kdlegal.com Stephen A. Studer, Partner, sstuder@kdlegal.com Services Provided: Acquisitions and Dispositions, Leasing, Construction, Development, Environmental, Land Use and Zoning, Finance/Debt/Equity, Tax Structuring/Tax Credits, Foreclosure/ Bankruptcy.

Company Profile: The professionals of Krieg DeVault’s real estate, environmental and commercial real estate lending groups provide practical, comprehensive legal services to our clients to assist them from concept to completion of their real estate projects.

REINHART BOERNER VAN DEUREN S.C.

1000 N Water Street, Suite 1700 Milwaukee, WI 53202 P: 414.298.1000 Website: reinhartlaw.com Key Contacts: Deborah Tomczyk, Shareholder, dtomczyk@reinhartlaw.com; Joseph Shumow, Shareholder, jshumow@reinhartlaw.com Services Provided: Reinhart is a full-service, business-oriented law firm that delivers cost-effective solutions for today’s most important real estate needs, including land use and zoning; tax-incremental financing; tax credits; 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.

SARNOFF & BACCASH

Two N. LaSalle St., Ste. 1000 Chicago, IL 60602 P: 312.782.8310 | F: 312.782.8635 Website: sarnoffbaccash.com Key Contacts: James Sarnoff, jsarnoff@sarnoffbaccash.com; Robert Sarnoff, rsarnoff@sarnoffbaccash.com Services Provided: Sarnoff & Baccash is a leading and recognized law firm concentrating solely in the field of property taxation. We help client’s secure favorable taxes in Illinois through property tax appeals, incentives and consulting.

Company Profile: Sarnoff & Baccash’s clients include Owners, Developers, Managers, REIT’s, Fortune 500 Companies, Private Equity Firms, etc., in connection with commercial property, high-rise and low-rise apartment buildings, condominium associations and single-family home portfolios.

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MULTIFAMILY FINANCE FIRMS ASSOCIATED BANK

45 South 7th Street, Suite 2900 Minneapolis, MN 55402 P: 612.359.4414 Website: associatedbank.com/cre Key Contact: Paul Schmidt, Executive Vice President / Head of Commercial Real Estate, Paul.Schmidt@associatedbank.com Services Provided: Our clients include professional developers of income producing commercial real estate, including multi-family properties, retail, office, storage, student housing, and industrial.

Company Profile: Commercial Real Estates offices are located in Chicago, Milwaukee, Madison, Green Bay, Cincinnati, Indianapolis, Minneapolis, Detroit, St. Louis, Dallas and Houston. Associated BancCorp has total assets of $35 billion and is one of the top 50 financial services holding companies in the United States.

BELLWETHER ENTERPRISE (BWE)

1375 E. 9th Street, Suite 2400 Cleveland, OH 44114 Website: BWE.com Key Contacts: Ned Huffman, CEO; DJ Effler, President Services Provided: As an independent partner of Enterprise Community Partners, Inc., we support its mission of creating and preserving affordable housing in thriving communities. With an unwavering commitment to regional expertise and unmatched customer service, we are making an impact beyond the bottom line. With offices throughout the country, we provide a wide variety of loan products from Life Insurance Companies and Pension Funds, Freddie Mac Optigo™ seller/servicer, Fannie Mae DUS Lender (Multifamily affordable and Market Rate Housing Lender), FHA, USDA and CMBS to name a few.

We are Capital on a Mission!

Company Profile: BWE is a national, full-service commercial and multifamily mortgage banking company that puts people and communities first. We provide flexible, competitive financing solutions with streamlined underwriting and enhanced loan servicing for Market Rate, Affordable Housing, Workforce Housing, Manufactured Housing Communities, Seniors Housing, Senior Communities, and Long-term Care Facilities.

Service Territory: We originate, close and service loans for multifamily and commercial real estate properties throughout the country

COLLIERS MORTGAGE

(Colliers Mortgage is the brand used by Colliers Mortgage LLC and Colliers Funding LLC.) 90 South Seventh Street, Suite 4300z Minneapolis, MN 55402 P: 612.376.4000 Website: colliers.com ( find us under services) Key Contacts: Tim Larkin, SVP Agency Financing, tim.larkin@colliers.com; Gregory Bolin, SVP Commercial Financing, greg.bolin@colliers.com Services Provided: Colliers Mortgage offers a comprehensive and wide range of products and services designed to meet our clients’ financing, funding and capitalization needs. Our experts are available to help clients’ access federal agency loan programs, structure competitive financing packages for borrowers and lenders, or identify capital sources for capitalization requirements.

Company Profile: Colliers Mortgage is a full-service nationwide mortgage banking firm. We connect multifamily owners and developers with the appropriate financing and funding options to execute their project plans. We are one of the industry’s top providers of multifamily financing and are currently servicing in excess of $10 billion of loans.

Service Territory: Nationwide

GRANDBRIDGE REAL ESTATE CAPITAL LLC

14 North Tryon Street, Suite 2000 Charlotte, NC 28202 P: 704.332.4454 | F: 704.332.1931 Website: grandbridge.com Key Contacts: Matthew Rocco; Chairman of the Board / CEO, MRocco@Grandbridge.com; John Randall; EVP / National Production Manager, JRandall@Grandbridge.com Services Provided: Grandbridge provides comprehensive CRE and capital markets solutions on a national basis. As a full-service leader in commercial/multifamily finance, Grandbridge is a fully integrated commercial investment banking company that originates commercial/multifamily real estate loans, services loan portfolios, provides asset and portfolio management, and offers investments sales, and estate brokerage services.

Company Profile: Grandbridge’s lender relationships include leading insurance companies, pension fund advisors, CMBS investors, investment banks and capital markets. Grandbridge is a Fannie Mae DUS® lender, a Freddie Mac Optigo® lender for Conventional Multifamily, Seniors Housing and Targeted Affordable Housing, and an FHA MAP and LEAN approved lender.

Service Territory: The company operates its comprehensive CRE and capital markets, loan origination, investment sales, and servicing and asset management services nationwide (28 offices).

M&T REALTY CAPITAL CORPORATION

Chicago, IL P: 312.203.5410 Website: mtrcc.com Key Contacts: Monty Childs, Managing Director, mchilds@mtb.com Services Provided: Multifaceted Affordable Housing Specialists.

Debt financing and loan servicing. Fannie Mae DUS® lender, Freddie Mac Optigo® Lender, FHA/HUD Healthcare & Multifamily lender. Correspondent with life companies and CMBS lenders. Bridge loan program for qualified borrowers.

Company Profile: M&T Realty Capital Corporation® is a wholly-owned subsidiary of M&T Bank—one of the 20 largest US-headquartered commercial bank holding companies. Full-service mortgage banking company that provides competitive financing nationwide for commercial real estate. In 2021, M&T Realty Capital originated $5.1 billion in loans, and currently services a portfolio of more than $24.4 billion.

Featured Transaction: Sandy Spring Village-M&T Bank and M&T Realty Capital Corporation provided $26,227,000 of capital to finance Sandy Spring Village – a 56-unit affordable housing property located in Montgomery County, Md. This transaction demonstrates our 1-stop financing. M&T provided the construction and permanent take-out loans, and in conjunction with Stratford Capital, the LIHTC equity.