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Remember when everybody was freaked out about toilet paper? Well, the empty shelves haven’t gone anywhere. Supply chain issues impact everything from the holiday shopping rush to home improvement.
Unfortunately, commercial real estate isn’t exempt from market forces. So the same market forces that are leaving supermarket shelves empty and container ships still full of cargo are at play in terms of slowing down commercial real estate development and other elements of the commercial property cycle.
We wanted to address this by looking at the current news of the industry and talking about solutions. At the end of the day, it is still about solutions, despite the Chicken Little speculation that the world is on fire and it’s impossible to get business done. It’s just a matter of thinking differently, pivoting, and facing the problem head-on.
So let’s start with an exciting story. Many commercial real estate fans will bemoan the lack of opportunities in their local market. But Omaha-based Goldenrod Companies isn’t just looking at Omaha.
They’re down in Fort Worth, planning a mixed-use development project. Not only are there plans for office space, but there are also 147 multi-units and nearly 12,000 square feet of retail and dining space.
Now, keep in mind that Goldenrod is far from a small real estate investment firm. Indeed, the company has over $2.1 billion dollars of assets under management. However, there still can be supply chain delays as commercial projects need significant amounts of materials to pull off.
Student living options seem to be quite different compared to when we were in college, but hey, the city isn’t getting any cheaper. We swing over to Virginia to look at a project that’s finishing up this August: Ascend RVA. An old gas station vanished, and in its place is an incredible $26 million dollar building.
The building will eventually have everything from studio units to four-bedroom apartments, with an emphasis on being fully furnished. Rents will range from $1300 to $3400 a month, giving The Opus Group plenty of chances to recoup their money.
New construction like this has its own set of risks, but one of the top issues that impact big development like this is getting all of the proper paperwork in order with the city. Opus had to work with an external legal team and an external planning group to handle project approvals, as well as work through other issues.
The zoning had to change to allow for 12-story buildings, which was not a quick change; this project began back in the middle of 2019!
It’s near Virginia Commonwealth University, and it’s being marketed as future student housing. Of course, they won’t turn down renters that aren’t VCU people.
The focus on luxurious student housing is an interesting one, as it dovetails away from the bare bones mentality that many of us grew up understanding as the college experience. The demand from students for nicer living accommodations is a fairly recent one, and it reflects a different standard of living than what used to be considered acceptable.
One of the most important elements of a successful commercial real estate development project is definitely financing. Since we’re talking about large-scale projects, that makes a lot of sense.
We wanted to highlight a great deal out in Jersey City. EPIRE is a New York-based development group that just snagged $36 million dollars for an upcoming condo project in Jersey City’s Powerhouse Arts District.
The development isn’t expected to finish until mid-2023, but we still wanted to highlight it. It’s a collaboration between EPIRE and BHI’s Commercial Real Estate Group. BHI is providing the construction financing that EPIRE needs to get the job done.
Having the money in hand will help EPIRE handle costs better, including securing materials for the project. A large lump sum of cash can help reserve materials and utilize existing supply networks more effectively than if suppliers have to ait on development projects to have the funds.
Of course, at this level, flexible terms aren’t uncommon, but available cash opens doors all the time.
We also thought this project was interesting because of the location. The Powerhouse Arts District of Jersey City is continuing to grow and receive new attention from developers.
A lot of attention is invested in expanding housing options, which is a sign that developers are counting on professionals moving in to take advantage of the walkability and amenities within the area.
As the markets continue reaching for recovery, labor shortages are also in play. The reasons for labor shortages can vary by location.
For some, returning to work means figuring out daycare, and daycares have had a hard time reopening. It could be concerns around schools, as local school districts still experience teacher shortages due to ongoing illness and aftereffects in the pandemic.
Understanding the impact of labor shortages within commercial real estate development means looking at the construction workers and other important professionals within a development plan. Project managers, supervisors, administrative staff, and more also feel the impact of these changes.
Pulling off good real estate development practices then means looking at the potential to go off schedule and adding in more time to complete projects. Since none of us have a crystal ball, we are simply projecting, speculating, and planning. In other words, it’s all part of the plan.
Supply chain issues are unlikely to go away anytime soon. However, as you can see from the stories featured in this article, development is still taking place. The real delays are found in getting project approvals, organizing assistance, and ensuring funding.
The important takeaway for us is to make sure that we’re breaking down development into the proper components and then handling each component effectively.
Giving up the need for a certain deadline takes away stress and ensures that everything is still executed with the best standards in place.
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