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TO CUE: To position in readiness; to signal or prompt May 2014 | Volume 1 - Issue 2

e-Commerce: the future and viability of retail p. 10

St. Louis Association of

REALTORS®

Commercial Division

12777 Olive Blvd., St. Louis, MO, 63141 314.576.0033 - phone 314.576.7143 - fax www.stlcr.org communications@stlrealtors.com

... 3

President’s Report

4

Internet Sales Tax Fairness

6

The ABC’s of Government Incentives

7

Retail Trends to Watch

8

Legislative Update

10

Brick and Mortar: The Future of Retail

11

CEO Update

12

Market Trends

About this magazine... Editorial Director Dawn M. Kennedy Managing Editor Laura DeVries Associate Editor Becca Grober For editorial inquiries contact Laura DeVries at ldevries@stlrealtors.com. For delivery or distribution questions contact Becca Grober at bgrober@stlrealtors.com.

MAY

June 10 - USGBC St. Louis - Cortex Development

May 1 - Industry Expo

June 19 - IREM Great Race Around St. Louis

May 7 - CCIM Luncheon - Business Development & Social Media

June 20 - Smart Growth for the 21st Century

May 22 - 2014 IREM Golf Classic

June 24 - Commercial Broker Luncheon

May 28 - Commercial Broker Luncheon

June 30 - License Renewal Deadline for Brokers

May 29 - Commercial CE at SLAR

*Commercial CE dates subject to change.

JUNE June 3 - CCIM Luncheon - Risk/Reward June 6 - Commercial CE at SLAR

Download our FREE mobile app and stay up to date on everything Commercial. Search STLCR in the app store now. **Our mobile app now has 6 calculators including Cap Rate, Amortization, and NPV/IRR.**

President’s Report by, Douglas K. Dolan, CCIM 2014 Commercial Division President

2014 is a year of change and refocus for the Commercial Division of the St. Louis Association of REALTORS®. With these changes come new and enhanced member benefits. The Board of Directors for SLAR’s Commercial Division is focused on the needs of its membership. Our industry is stronger when united with other commercial brokers. In order for you to succeed and take full advantage of your membership it’s important that you know about these changes. Please note some of the highlights for 2014:

will introduce service thorugh upcoming webinars and in person seminars.

Xceligent Discount

The CIE Board negotiated a deep discount for Commercial Division members this year - $85 per month provides users access to state-of-the-art market data information in St. Louis and nationally. This is the best price available in the country. Panels of top brokers in St. Louis (industrial, office, retail) will continuously review data to validate its accuracy. Xceligent is the most cost effective program on the market.

Broker Luncheons

2014 is a license renewal year and the Commercial Division will provide free Commercial CE through the month of April to all Commercial Division Members.

Ten broker lunches are held each year showcasing some of the best and most unique listings in town. Owners love the exposure and it is a benefit only offered to commercial division members. Staff members from the Association plan nearly all aspects of the luncheon.

Dedicated Commercial Specialist

Political Action Committee

FREE Continuing Education

Your member benefits include a staff person solely dedicated to the commercial division. Commercial focused collateral includes: • E-Newsletters • Commercial Broker Events • Website • Education • Mobile App • Commercial Professional Standards Administration, and • Lobbying for Commercial Issues

New Online Contracts and Forms

STLCR entered into a contract with an online document management company, formsRus, to manage all of our forms online. Completed forms (Purchase Contracts, Listing Agreements, Buyer Rep Agreements, etc.) can be saved online, emialed, or faxed from a desktop or mobile device. The auto-fill function makes the software even more user friendly. Included in this agreement are eight free “e-signing” sessions were clients can sign documents online! All forms have been reviewed by the Board attorney to confirm compliance with MREC requirements. FormsRus

Legal representation is present at each Commercial Division Board meeting to monitor local and state laws affecting our industry. We have insight to oppose or promote legislation BEFORE it becomes the law of the land. A specific focus on commercial issues involving signage, permitting, and impact fees were addressed in 2013. Our 700 member organization will recognize those among us who were the most successful elephant hunters in the industry for 2013. In its inaugural year, nearly 50 properties were submitted, represented by 13 different companies. Our Board invites your participation in 2014. Contact Susan Wagner if you want to contribute to the success of your industry. y

SLAR 360 is a brand new program, developed for brokers and their new agents. Each month, new agents will be sent a short video about the Association, their business, and the real estate industry. Each email will be packed with resources specifically for a new agent. Videos and emails will be focused specifically on helping agents build their business and sphere of influence from the ground up.

Want more information? Visit www.realagentrewards.com/SLAR360.

Internet Sales Tax Fairness Legislation Faces Hurdle in House

by, Vijay Yadlapati NAR Sr. Legislative Rep. - Financial Services

The Issue

As a result of a Supreme Court ruling in the early 1990s, Internet retailers have largely been exempted from collecting state and local sales taxes on their sales transactions because these tax laws were seen as overly complex and placing too heavy a burden on interstate commerce, unless the retailer had a physical presence in the state. Since that time, the number of people and businesses using the Internet for e-commerce transactions has grown exponentially, and a large component of these transactions remain tax-free. At issue is the fact that brick-and-mortar retailers must collect and remit state “sales-anduse” taxes, yet many remote sellers - such as catalog and online - only vendors - are exempt from such requirements. As a result, Internet retailers have an unfair advantage over their community-based counterparts, and states are losing out on billions of dollars in much-needed (but uncollected) revenue.

Impact on Americans

Enzi (R-WY) and Durbin (D-IL).

NAR Policy

Passage of H.R. 648 and S. 743 are necessary due to the deteriorating fiscal condition of many state and local governments. These budget shortfalls could lead them to opt for higher real estate and other property taxes/fees on consumers and business to make up for this lost revenue.

Legislative Outlook

Going back to 1994, the issue of marketplace fairness has had more than 30 hearings in both the U.S. House of Representatives and Senate, including hearings before the U.S. House Judiciary Committee in both 2011 and 2012. In May 2013 the Senate passed S. 743. This legislation would create authority for state governments to collect sales taxes on Internet sales for goods that are delivered to their states, which would level the playing field between brick-and-moratar and e-commerce retail businesses while assisting the states in collecting billions of uncollected state sales taxes. With the passage of S. 743, the fate of Internet sales tax fairness rests with the House. The House bill, which closely resembles the Senate version, has been stalled in the House Judiciary Committee, where Chairman Robert

Web-based purchases, he opposes the bill as currently written becuase it would force businesses “to wage through potentially hundreds of tax rates and a host of different tax codes and definitions.” The bill, he says, “still has a long way to go.” Also, convincing conservative Republicans that the proposal would not amount to a tax increase on online consumers remains another major hurdle for the Marketplace Fairness Act. Chairman Goodlatte held off on scheduling a markup last year, but he said he would hold a hearing on the issue in early 2014. The Chairman has released a list of principles for developing his own legislation.

Current NAR Action

In a January 2014 joint letter sent to Chairman Goodlatte, NAR along with hundreds of organizations that collectively represent more than 3 million American businesses - large and small - called for immediate action on the long overdue issue of marketplace fairness. Citing more than 20 years of inaction and the Supreme Court’s recent decision affirming that this is a matter for Congress to address, the letter urges Congress “to make the 2013 holiday shopping season the last where Main Street businesses must compete at a government-created price disadvantage.” y

Because of the current treatment of Internet retailers, the amount of sales tax that a state or locality is able to collect will be less than otherwise provided. Commercial Byte However, passage of federal legislation National Apartment Occupancy Rate Hits 94.3 Percent allowing states to (DALLAS) - Apartment market researcher Axiometrics Inc. says rental occupancy rates rose to 94.3 percent require Internet nationwide in February, but the size of rental rate increases declined modestly, about 2.8 percent. retailers to collect Company Vice President Jay Denton said the slowing increase was expected, given the run-up in 2010 and 2012. state sales tax for Rental rates actually declined in Washington (-1.5 percent), Philadelphia (-1.3 percent) and online purchases New York (-0.3 percent). - and to level the The highest occupancy rates were in: Athens, Ohio, 98.5 percent; Madison, Wisc., 98.3 percent; playing field between Naples, Fla., 97.8 percent; Odessa, Texas, 97.7 percent; and Stockton, Calif., 97.3 percent. brick-and-mortar and Internet-based retailers - is gaining ground on Capitol Hill. This includes the “Marketplace Fairness Act” (H.R. 684), Goodlatte (R-VA) has voiced concerns introduced by Representatives Womack (R-AR) and Speier (D-CA); and a Senate over the complexity of the bill. While the Chairman recognizes the need to resolve Copyright NATIONAL ASSOCIATION OF REALTORS®. measure (S. 743) authored by senators disputes over collection of sales tax on Reprinted with permission.

NOW OFFERED ONLINE! NEW MEMBER ORIENTATION AND PROFESSIONAL DEVELOPMENT AN ONLINE LEARNING EXPERIENCE TAILORED TO YOUR ASSOCIATION

Real Agent Rewards is an online educational experience for REALTORS®. It started with a need for additional new member orientation classes and varied educational formats. It has grown into an outlet for professional development and continued member engagement. The program was developed for NEW and EXISTING members.

RealAgentRewards.com Exclusive benefits are only available to those who participate. Benefits include tech tutorials, educational materials, and much more.

Communicate with others from your Association using the online forums tool. The forums allow you to discuss best practices and troubleshoot problems.

Rewards are up for grabs, including discounts at the SLAR REALTOR® Shoppe, free CE classes and much more.

Each program is specifically designed for the local Association. The St. Louis Association of REALTORS® is the first local Association to adopt Real Agent Rewards.

New badges will be added regularly. Test your knowledge and your involvement by completing the Quick Start or REALTOR® Advocate Badge.

New members now have two options for completing new member orientation. Orientation can be taken in person at SLAR or online at www.realagentrewards.com.

NEW MEMBER ORIENTATION PROFFESIONAL DEVELOPMENT COMMUNICATION ALL AT YOUR FINGERTIPS

Existing members brush up on your REALTOR® knowledge or access one of the many professional development resources available at www.realagentrewards.com.

Want to learn more? Contact info@realagentrewards.com or 314.576.0033.

The ABC’s of Government Incentives by, Joel A. Smiley, Principal, Attracting Resources

When looking at government incentives, there are two general categories: negotiated and statutory. Governments use incentives to level the playing field in areas that are considered below market, typically resulting from high rates of poverty, unemployment, blight, vacancy rates, environmental issues, or other negative externalities. Incentives may also be used to attract targeted industries with the intent of creating higher wage positions. From a statutory perspective, if a business meets certain criteria, all that they need to do is complete an eligibility application. Applicants sometimes may have to meet with a governing board to gain approval. From a negotiated perspective, it is strictly up to a governing board to determine if and how much a community is willing to invest in the attempt to attract a company to their community. Since most programs stand on their own merit, some can be overlaid on top of one another. When thinking about applying for incentives, two key questions should be asked: 1. How many financial incentives do I need to make the project work? 2. Can the project wait until the incentives are secured? Think about incentives like car shopping. If I know my budget and have priced cars out, I can make a solid argument to back-up my price demand. But, if I sign a contract with the dealer, there is very little leverage I can make to ask for further concessions. Why should a governing body issue additional incentives if they know you are going to develop with a contract in place? You want to begin the negotiations very early in the process. Ideally you may want to identify a few different locations

that are feasible. By not selecting a site you are providing the local government a reason to offer an incentive to attract your business. Another key to the incentive process is to tie the incentives to job creation, building structure, major equipment, or infrastructure. Taxing entitites want to knwo that you are utilizing tax dollars appropriately. By tying tax credits directly to these tangible criteria, they are easier to justify and account for. If creating jobs, there may be a training cost that the county, state, or federal agency may be interested in offsetting. Programs like OJT (On the Job Training) offer companies that hire eligible employees 50 percent wage reimbursements for up to six months of employment. For building structures, property tax abatement may be offered as an incentive to build or expand a facility. Infrastructure can also be negotiated through both the local governing agency as well as utility companies. Infrastructure needs, including water, sewer, electric, gas, storm water, and others, can be seen as beneficial to the area to promote development. This enables justificaiton for the greater good and is an easier sell to the community. y For more information on government incentives for your commercial project, contact:

Joel A. Smiley, Principal, Attracting Resources 314.827.9623 AttractingResources@gmail.com www.attractingresources.com

Do You Know RPA Construction Services? Services These Companies Do... RPA Construction Services will provide the same quality for your project. For over 40 years, RPA Construction Services has delivered first rate construction, construction management, design/build, and renovation work for all types of commercial and industrial projects. Contact Kent Piskulich (kp@rpaconstl.com) or John Piskulich (jp@rpaconst.com) for your next interior finish, building renovation, or new facility.

“Over the past 20 years, Vantage Credit Union has used the services of RPA for teller line additions, office remodels, complete renovations, construction, and more. RPA provides the highest level of service and I would recommend you strongly consider RPAhas Construction “Over theintegrity. past 20 years, Vantage Credit Union used Services and their outstanding team for any of your construction project the services of needs. ” RPA for teller line additions, office - John Hopkins, VP Risk Management

remodels, complete renovations, construction, and more. RPA provides the highest level of service and integrity. “RPA exceeded my expectations as they completed the project on I would recommend youthe strongly consider RPA Contime and on budget. Their communication with me throughout process was outstanding.” struction Services and their outstanding team for any - Bruce Brenneman, VP Real Estate of your construction project needs.” –John Hopkins, Risk Management “YourVP involvement in each project, attention to detail, and

professionalism has been instrumental to the success of the many projects we have worked on together. Thanks again for your teams’ expertise and responsiveness in helping Coca-Cola complete its project on time and in a quality manner.” - David Martinez, Central Region Facility Manager

www.rpaconst.com

“RPA exceeded my expectations as they completed the project on time and on budget. Their communication with me throughout the process was outstanding.” - Bruce Brenneman, VP Real Estate

10 Retail Trends To Watch The Internet’s True Impact on Retail Sales.

Without question, ecommerce retail sales are growing. However, they still remain a small portion of total retail sales. In 3Q13, ecommerce sales totaled $67 billion, which represents less than 6 percent of all retail sales, according to the U.S. Census retail trade report.

Online Media Sales.

Books, music, video, and other items that be digitized and downloaded comprise about 35 percent of Amazon’s sales. Applying this metric to the entirety of ecommerce means that Internet sale of items that cannot be digitized and downloaded is about 3.7 percent. If 3D printing of merchandise becomes possible, the world as we know it will change.

Retail’s Efficient Logistics Model.

Efficiency in logistics has revolutionized retail. For example, Walmart’s cross-docking model provides the best execution of what is called the “last mile in the chain of distribution.” A customer comes into the store, selects merchandise, carries the merchandise to the car, and then transports the merchandise the “last mile” from the store to home. The cost of the final mile is not included in the retail price of the merchandise. On the contrary, delivering merchandise to the customer’s home is a costly and inefficient endeavor. One major Internet retailer spends more than double to deliver than the amount it collects for shipping. Hence, the practical application of the “last mile” principle means that ecommerce is likely to have 100 percent market share of items that can be digitized and may never even reach 10 percent market share of items that cannote be digitized.

“Your involvement in each project, attention to More Sales, Less Space.

The wide range of available technology offersinstrumental retailers more efficient detail, and professionalism has been to inventory control and space needs. They are applying the 80/20 rule - 20success percent of their of their sales grossworked margin. Theon the of SKUs the generate many most projects we and have result: Retailers can generate more sales per square foot in less space causing together. store formats Thanks to shrink. again for your teams’ expertise and responsiveness in helping Coca-Cola complete Bigger Players Dominate. The supermarket sectorin is being consumedmanner.” by dominant players with its project on time and a quality larger stores. – David Martinez, Central Region Facility Manager

National Anchors.

In large shopping centers, national credit-tenant anchors are winning out over same-category regional and local tenants.

Big-Box Woes.

Large vacant boxes are becoming increasingly more difficult to re-tenant.

Exclusive Use.

Second-generation retail space is being increasinly impacted by exclusive-use lease provisions.

Service Tenants Triumph.

Landlords are making greater use of service tenants to maintain occupancy. A recent study revealed that service tenants comprised RPA Construction Services will provide the same quality forlessyour than 15 percent of total occupancy 10 years ago versus more than 25 The Internet’s Other Impact. percent today.first project. For over 40areyears, Construction Services has delivered Online sales not only RPA impacting the retail sector, but the Internet is creating more informed consumers. Well-educated shoppers are rate construction, construction management, design/build, and - Gary M. Ralston, CCIM, CPM, SIOR causing pressure on retail margins, which translates into pressure by tenants to renovation work for all types of commercial and industrial projects. lower rent. Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.

Contact Kent Piskulich (kp@rpaconst.com) or John Piskulich (jp@rpaconstr.com) for your next interior finish, building renovation, or

Legislative Update • Restores grandfathered rates by repealing sec. 207 of Biggert-Waters when new flood maps are issued.

Interested in the St. Louis City and County merger? Come join the discussion at Urban Affairs.

by, Maureen McDonnell, Director of Government & Public Affairs, SLAR

Flood Insurance Premium Rates for Commercial Properties at a Glance Commercial properties were among the hardest hit by the implementation of Biggert-Waters. NAR heard your concerns with implementation loud and clear with your help successfully lobbied for hte passage of the Homeowner Flood Insurance Affordability Act, S. 1926 in the Senate and H.R. 3370 in the House. Below is an outline of recent news on the act, and the impact to commercial real estate. HR 3307: • Repeals the time-of-sale provision in Biggert-Waters (sec. 205) that triggered the largest premium increases for commercial properties; - Under Biggert-Waters, purchasers of commercial properties would have been required to pay the full risk rate within one year of purchase. - Under H.R. 3307, these buyers can assume the existing policy (including grandfathering), and will only see rate increases of UP TO 18 percent per year until they reach the full actuarial risk rate. • Refunds excessive premiums to those who bought a property before FEMA warned them of new rates; and

May’s forum will feature Better Together STL, a non-partisan research firm. The discussion will focus on the potential unification of St. Louis City and County. Want the inside scoop on future Urban Affairs Forums? Contact Martina Johnson at mjohnson@stlrealtors.com to get on the email list.

Tell us what you think. Help SLAR MR, and NAR advocate for you. You have an opportunity to help the St. Louis Association of REALTORS®, Missouri REALTORS®, and the National Association of REALTORS® gauge the reach of our collective networks and enable us to effectively plan for future public policy discussions. By understanding our network of relationships with elected officials, we can build advocacy programs that help advance our positions on any number of issues that directly impact you. Let your voice be heard and strengthen the REALTOR® community by filling out a brief survey here.

Record Breaking Attendance at March Urban Affairs Featuring CORTEX On March 6, over 65 REALTORS® met in the Central West End to learn how the CORTEX Innovation Community is revitalizing the central corridor with business, residential, and retail development - including the region’s first Ikea. Check out the hashtag #STLUrbanAffairs to catch up on the live Twitter chat

from the event, or visit the Urban Affairs page on our website to view the slide show presentation and sign up for future forums.

RHAF 25th Anniversary Appeal is Off to a Great Start! The REALTORS® Housing Assistance Fund (RHAF) kicked off its first ever capital campaign this February to celebrate the charity’s quarter of a century milestone. We are pleased to announce that we already have two corporate sponsors! MARIS has agreed to continue its longstanding support of RHAF by pledging $10,000 as a Silver Anniversary Level Sponsor. USA Mortgage has displayed their devotion to ending homelessness by becoming a $1,000 Helping Hand Level Sponsor. In addition, thank you to everyone who attended REBarCamp St. Louis, which donated $1,000 of process, or CE classes at Investor’s Title, which donated $805 to RHAF! Please join these generous donors and affiliate sponsors in the fight against homelessness by giving to RHAF today. For more information on sponsorship levels or how you can get involved with RHAF, visit our website at www.stlrhaf.org or email Martina Johnson at mjohnson@stlrealtors.com. y

Congratulations to the 2013 Heavy Hitters Awards Winners

Work Hard, Play Hard Most Closed Transactions Mark Palmer CBRE, Inc.

The Apprentice Rookie with the Most Closed Transactions Nick Cascella Cassidy Turley

Office Space, Sale Largest Office Sale Kevin Bittman CBRE, Inc.

Size Doesn’t Matter Smallest Transaction Peter Pfeifer Hilliker Corp.

Office Space, Lease Largest Office Lease Tripp Hardin CBRE, Inc.

Made in St. Louis, Sale Largest Industrial Sale Brian Bush & Tim Convy CBRE, Inc.

Too Close for Comfort Largest Multi-Family Transaction Andrea Kendrick Hendricks-Berkadia

Made in St. Louis, Lease Largest Industrial Lease Ed Lampitt Cassidy Turley

Retail Therapy, Sale Largest Retail Space Sale Matt Bukhshtaber & Paul Fusz, Jr. CBRE, Inc.

Land Rush Largest Land Transaction Peter Sheahan & Josh Hibbits NAI DESCO

Retail Therapy, Lease Largest Retail Space Lease John Shuff NAI DESCO

Brick and Mortar: Can it push back the e-commerce wave? by, Dawn M. Kennedy, MSPM, RCE, e-PRO, Green CEO, St. Louis Association of REALTORS®

For many years, REALTORS® specializing in retail and office space have avoided the looming presence of e-commerce, both in terms of consumerism and telecommuting. The future is always uncertain, but may not be as doom and gloom as the media portrays.

The Future of Retail

Let’s start with some statistics first; slightly over five percent of all retail sales are completed through the internet (according to the U.S. Department of Commerce). E-commerce has its largest impact on media consumables. Amazon. com indicated that 35 percent of all retail sales come from digitized media such as online books, movies, and music. While 35 percent is a big chunk of sales, (a product which typically consumes large amounts of retail space) it only accounts for eight percent of the nation’s retail sales according to the National Bureau of Economic Research. It is imperative to be cognizant that the eight percent gain of a particular online product may not translate into eight percent less retail space needed. For instance, when typewriters were replaced with portable laptops the office market did not disappear. There are some definitive strategies which may help brick and mortar retailers cash in on the e-commerce craze. The first is to ensure a mobile experience while in store. For example, an aisle return number for a particular item or a QR code leading consumers to more information about a new product makes the shopping experience more interactive. Second, web fulfillment of a purchase to move investory, and third, resolve pricing discrepancies between online and physical merchandise. This type of mobile experience is part of the omni-channeling movement in retail. Omni-channeling is where the retailer provides a seamless experience by

integrating mobile, web, and brick and mortar, merging inventory systems and marketing platforms, in order to deliver an optimum and mirrored singular shopping experience. According to journalist Steven Jacobs of StreetFight Business Journal (2014), omni-channeling is becoming a reality and a boon for retail leasing. “Last year, online eyewear retailer Warby Parker did something that seemed like a step backwards: it announced that it would open a number of physical stores around the country. But the company was just the latest in a string of e-commerce firms to invest in physical locations. Bonobos, Frank and Oak, and a handful of other online sellers have launched full-service brick-and-mortar stores in recent years, while eBay and Etsy piloted smaller initiatives in 2013 aimed at creating a bridge between their online marketplaces and the physical world.”

But why is there a need for a strategy to integrate physical retail space in the e-commerce world? As was stated earlier, only a small percentage of retail sales are done through e-commerce and the fact is that many retail lines simply do not lend themselves well to a complete online experience. Would you prefer to test drive a real car or trust a virtual simulation? Humans rely heavily on the five senses (sight, sound, touch, smell, and taste) to make judgments about the world around them, and as of yet, the laptop cannot

fulfill those needs.

Office Space

Many similar limitations occur in the office space industry. Although telecommuting has been around since hte computer, it is often not embraced by companies. Even Yahoo, one of the nation’s largest internet companies, has recently suspended telecommuting (working from home) for its employees. The U.S. Census Bureau estimates that only 1.9 percent of employees work from home. The bureau has also found that 45 percent of all working Americans hold a job that is compatible wit at least parttime telework. So why has this trend not taken off ? According to Citrix TeleResearch (2011) the primary obstacle is management resistance. It is simply too

difficult to manage staff remotely. Issues of trust and abuse are very difficult to overcome. Many companies have done exceedingly well with a hybrid approach that allows for both office and work from home time. This approach benefits the office REALTOR® as physical space is still required. Again, we see an integration of physical spaces with virtual technology. This move towards integration rather than moving towards online-only bodes very well for the retail or office REALTOR®. y

CEO’s Commercial Update and national advocacy program for which dues dollars are allocated. Just as we watch and react, or are proactive locally, we also track progress in federal bills.

by, Dawn M. Kennedy, MSPM, RCE, e-PRO, Green CEO, St. Louis Association of REALTORS®

A Bill to Watch: SB 1896

Although SLAR does a tremendous job in having your back on local legislative issues such as sign ordinances, rental ordinances, and impact fees, we are just part of a state

On March 12th, 2014, Senator Sherrod Brown, announced his innovative legislation: “Manufacturing Communities Investment Act, new legislation which would build on the proven success of the New Markets Tax Credit (NMTC). NMTC incentivizes community developers to invest in low income areas. Brown’s bill would spur local job creation by extending and enhancing the NMTC to allocate additional dollars for investment in struggling manufacturing communities” (Office of Senator Sherrod Brown, 2014). Bill Bradley (2014), for the journal Next City, stated that the bill had strong partisan support. The bill was an Obama adminstrative directive, “The decree comes straight from the White House, according to the New Market Tax Credit Coalition.

In the 2013 and 2014 fiscal year budgets, the Obama administration lobbied for a manufacturing incentive in the mold of the NMTC. The demand for NMTC allocations has far outpaced the supply. In 2012, there were applications for $21.9 billion credits. The program had a cap of $3.5 billion” (2014). The New Markets Tax Credit, along with the companion bill, the Manufacturing Communities Investment Act, have now been referred to a congressional committee as of April 2nd, 2014. The committee will consider the credit before sending it on to the House or Senate as a whole. y

Realtor Party ®

1st Quarter Industrial Market Trends Market Highlights • The St. Louis industrial market is continuing its year end momentum by posting another quarter of positive absorption as activity remains vibrant. • Rates continue to rise for the supply constrained Class A warehouse properties. Coupled with decreasing concessions, particularly in the form of free rent, the market is seeing tenants locking into longer lease terms. • Roughly 2 million square feet of new speculative construction could begin to break ground in 2014, ending a six-year hiatus on new speculative developments. • Following the heels of a record setting year for investment sales, the market is expected to witness a significant decrease in institutional sales because of a shortage of viable product. Conversely, the market continues to see increased interest in tenants looking to purchase as both the local and national economy improve and as tenants have greater clarity into their financial outlook. • Vacancy rates are epected to continue to decline throughout 2014, potentially by as much as 100 basis points.

# of Bldgs

Investory (SF)

Total Available (SF)

Total Vacant (SF)

Total Vacancy Rate (%)

Direct Vacant (SF)

Direct Vacancy Rate (%)

Available Sublease (SF)

Qtrly Net Absorption (SF)

YTD Net Absorption (SF)

Flex/R&D

290

12,629,617

1,873,684

1,541,133

12.2%

1,488,913

11.8%

52,220

-35,788

-35,788

Light Industrial

1,613

34,169,046

2,466,430

1,921,430

5.6%

1,921,430

5.6%

28,912

1,080

1,080

Manufacturing

441

38,189,526

2,712,526

2,551,060

6.7%

2,340,500

6.7%

210,560

-18,291

-18,291

Truck Terminal

44

1,808,471

30,000

30,000

1.7%

30,000

1.7%

0

0

0

Whse- Distribution

1,652

136,413,187

20,083,501

16,017,138

11.7%

15,959,091

11.7%

435,187

523,221

523,221

Grand Total

4,040

223,210,235

27,166,127

22,060,761

9.9%

21,739,934

9.7%

726,879

470,222

470,222

Notable Transactions Property Name

SF Leased or Sold

Company Name

Market

Type

Lease/Sale

13330 Lakefront Dr

542,500

True Manufacturing

North St. Louis County

Whse/Dist

Lease

2171-2231 Hitzert Ct

433,520

Wainwright Industries

South St. Louis County

Whse/Dist

Lease

Globe Warehouse

272,192

Americo Realty Company

St. Louis County

Whse/Dist

Lease

*This report provided courtesy of Xceligent.

1st Quarter Office Market Trends Market Highlights • After a strong second half of the year, absorption was nearly flat during the first quarter and came in at a negligible 45,476 square feet. • With yields decreasing in hot markets, secondary markets such as St. Louis will see increased activity from institutional investors looking to place their cash. As a result, St. Louis will see rising interest from landlords getting their buildings valued and as a result several large buildings are expected to come to market in 2014. • True speculative construction still appears to be a ways away as lease rates are not high enough to justify new construction with the exception of the Clayton area. In addition, additional headwinds are being created from companies like Express Scripts, RGA, and Savis who have moved out of their existing spaces into new build to suit construction, thereby opening up large blocks of space seemingly every 12-18 months. • Vacancy rates are expected to continue to decline throughout the remainder of the year and could easily be 100 basis points lower a year from now.

# of Bldgs

Investory (SF)

Total Available (SF)

Total Vacant (SF)

Total Vacancy Rate (%)

Direct Vacant (SF)

Direct Vacancy Rate (%)

Available Sublease (SF)

Qtrly Net Absorption (SF)

YTD Net Absorption (SF)

A

122

19,085,100

3,264,157

2,568,500

13.5%

2,510,532

13.2%

251,740

120,376

120,376

B

337

21,879,273

4,452,200

3,740,899

17.1%

3,740,899

17.0%

75,932

-53,670

-53,670

C

122

7,327,700

1,361,009

1,128,941

15.4%

1,128,941

15.0%

210,560

-21,230

-21,230

Grand Total

581

48,292,073

9,077,366

7,438,340

15.4%

7,340,842

15.2%

726,879

45,476

45,476

Notable Transactions Property Name

SF Leased or Sold

Company Name

Market

Building Class

Lease/ Sale

Beaumont Building

100,132

Beaumont Exchange LLC

St. Louis City

C

Sale

Paragon Building

21,670

Midwest Mortgage Capital

West St. Louis County

A

Lease

US Bank Plaza

19,717

MVP

St. Louis City

B

Lease

Pierre Laclede Center II

15,190

Belden Wire

Mid St. Louis County

A

Lease

Woodsmill Office Center

13,985

Liberty Mutual

West St. Louis County

C

Lease

*This report provided courtesy of Xceligent.

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the CUE, May 2014