ULI - What’s Next? New Urban Land Institute Report Explores How Fundamental Societal Change Could Dramatically Affect Urban Land Use Through the End of the Decade

ULI - What’s Next? New Urban Land Institute Report Explores How Fundamental Societal Change Could Dramatically Affect Urban Land Use Through the End of the Decade

NAI Global Expands Caribbean Presence with Bahamas Realty Limited

NAI Global, the world’s premier managed network of commercial real estate firms and one of the largest real estate services providers worldwide, announced today it has expanded its Caribbean presence into the Bahamas. The Commercial Department of Bahamas Realty Limited will now operate as NAI Bahamas.

NAI Bahamas, formerly Bahamas Realty Commercial, is one of the largest and most respected real estate companies in the Bahamas, spanning 62 years and three generations of active involvement in the Bahamian real estate industry. The firm offers a broad array of commercial real estate services including investment sales, leasing, tenant representation, property management, appraisal/valuation, research, hospitality and consulting. In addition, the firm specializes in dealing with international buyers and offshore companies who wish to take advantage of the Bahamas’ attractive tax-free status.

“Our new partnership with NAI Global will significantly enhance our ability to reach out to international clients seeking to capitalize on Bahamas’ tax-free status,” said NAI Bahamas Chief Executive Officer, W. Larry Roberts, CIPS. “In addition, our clients will also benefit from our ability to provide services for our clients seeking opportunities in international markets, including the United States.”

“The Bahamas is a key Caribbean market, especially for our corporate and investor clients seeking advice on offshoring and the Islands’ attractive tax policies,” said NAI Global Managing Director, Latin American & Caribbean, David Berger. “With Larry and his team at NAI Bahamas, we now have some of the best Bahamian real estate experts to serve our clients. I am excited about our new partnership and look forward to working together in the coming months and years.”

NAI Bahamas (www.naibahamas.com) is headquartered in Nassau, with an additional two offices and agent representation throughout the islands of the Bahamas.  Headquartered in Princeton, NJ, NAI Global manages a network of 350 offices and 5,000 professionals in 55 countries across the globe.

NAI Rio Grande Valley is a focused commercial real estate brokerage, consulting, development and syndication firm serving the Rio Grande Valley and based in McAllen, Texas. Our mission is to transform real estate opportunities into profits for owners, users and investors.

NAI Rio Grande Valley advises it's customers and clients on how to maximize the value of their assets and utilize real estate to their long term advantage through comprehensive and strategic planning, execution and management.

GlobeSt.com - Long-Term Demand Remains Strong for Medical Office - Daily News Article

GlobeSt.com - Long-Term Demand Remains Strong for Medical Office - Daily News Article

Retail Tenanting Techniques

These fundamental strategies can help to revitalize neighborhood centers.
by Jennifer Norbut
www.CCIM.com

Upticks in consumer spending and hints at economic improvement are fueling some long-awaited positive momentum in the retail sector. Despite the mild industry buzz, the latest data reports offer the view many property owners see when they look around their markets: Vacancy for strip centers rose to 11.0 percent nationwide in 2Q11 — just 10 basis points below the two-decade high of 11.1 percent vacancy in 1990, according to Reis.

Nowhere is the impact of vacancy felt more than in small retail centers, which rely on the health of not only their tenants, but the surrounding community. However, CCIMs say there is some good news: “All is not lost for neighborhood shopping centers,” according to James J. Dunphy, CCIM, of Dunphy Properties in Tampa, Fla. “There are plenty of service-oriented users and restaurants out there requiring space. If you can provide convenience and service with the traditional attributes of a good location, you will be successful long term.”

To make the best of the current market, owners and landlords of small retail centers must be flexible, focused, and creative. But the one thing landlords don’t have to be is rocket scientists. In fact, CCIM retail experts around the country say that the formula for remaining viable under these conditions is rooted in fundamental marketing and tenanting techniques.

Negotiate, Negotiate, Negotiate

Similar to the sluggish and uneven nature of the commercial real estate market’s recovery, leasing strategies for small retail centers vary depending on a variety of localized factors. While tenants in one center may be motivated by free rent, another may want tenant improvement dollars, while another may seek early occupancy. Regardless of the location or center, the key to securing new leases in this environment is flexibility.

In some markets, time is on the tenant’s side. “We have offered early occupancy in lieu of free rent, allowing the tenant to take possession 30 to 90 days prior to lease commencement,” says William W. Hyatt, CCIM, of LanDel Realty in Fairhope, Ala. “In some cases that allows the tenant to rehab the existing space or build out new space.”

Common incentives in strong markets, TI allowances can help tenants ink the lease. In the current market, Hyatt says he’s offering TI allowances in the $10 per square foot to $30 psf range, depending on whether the property is being rehabbed or if it’s a new build-out.

With economic uncertainties weighing heavily, cash-strapped property owners may not have the luxury of offering TI allowances. “I’ve found lately that landlords do not have the capacity to provide TI allowances due to market constraints or lack of financing,” says Jorge A. Rodriguez, CCIM, director of retail at Colliers International in Orlando, Fla. To help move deals forward in these situations, Rodriguez has opted to secure rent abatement periods that are equal to “market” TI amounts.

For instance, in a recent transaction, “I represented a national retail chain on an 86-month lease where the landlord provided a rent abatement period of 26 months in lieu of providing the typical TI allowance.” This arrangement resulted in five years of rental income to the landlord, and the tenant was pleased with the concession. The abatement period only applied to base rent, requiring the tenant to pay operational expenses at occupancy, he adds.

Offering shorter lease terms, free rent, and graduated rent structures also may help to secure tenants in small centers. In fact, “many landlords prefer to offer free rent over tenant improvement money these days,” says Alaina H. McGlothlin, CCIM, sales associate at CB Richard Ellis in Oklahoma City. “Offering a period of six to 12 months of 50 percent rent is another way to meet the needs of both landlords and tenants.”

Specifying and spreading out the rent-free months provides landlords with another negotiating tactic. “Offer additional free rent if tenants will take it in months 12, 24, 36, and 48 instead of during 60 days on the front end of the lease,” says A. David Zoller of The Weitzman Group in Dallas.

Ultimately, before going to extreme lengths to lease up vacant spaces, landlords must conduct thorough due diligence. “The most important thing to evaluate in this market — and what the deal you offer is dependent on — is the credit and financial stability of the tenant,” says Gary W. Lyons, CCIM, SIOR, vice president of Investment Sales and Corporate Services at Lincoln Harris in Raleigh, N.C. “It’s important to understand the operating history and experience of who you are getting into your center.”

Target Service Tenants

“Service tenants are ideal for smaller centers,” Lyons says. Financial and insurance companies, dry cleaners, hair and nail salons, restaurants, convenience stores, and special medical service providers, such as dentists and chiropractors, all benefit from the easy access, parking ratios, and complementary tenant mix of neighborhood centers. And, these localized service businesses generally are looking for the same things when choosing a location: “Good visibility, strong traffic counts, and high foot traffic areas,” Lyons adds.

In centers that can support larger, national tenants, “it is helpful to have an anchor that has some name or brand recognition,” says Christopher Baj, CCIM, a commercial specialist with Michael Baxter & Associates Commercial Real Estate and Property Management in Stroudsburg, Pa. “The tenant can be national, regional, or even local as long as there is some name recognition,” which makes the center attractive to both customers and other tenants.

However, for many smaller neighborhood retail centers, high-profile anchors are not a standard component of the tenant mix. A range of franchisees as well as local mom-and-pop businesses generally fill the storefronts of these properties. As a result, these centers present a prime opportunity for CCIMs to lend their expertise. “As CCIMs, we need to help the owners of these centers understand what tenants can afford to pay each month,” says Charles A. “Mac” McClure, CCIM, chairman of McClure Partners in Dallas. “In this age of $24 to $30 triple-net rents, it can be impossible for a hair or nail salon to create sufficient income to pay the rent.” In some cases, landlords must “reduce the rent to where a tenant can make a living” while making sure the pro forma for the income of the business moving into the space makes sense, McClure adds. 

Landlords may not have to look too far to find prospective tenants. “Target in-market prospects and find out what it will take for them to move,” Zoller says. Landlords who have a competitive edge should “consider buying out [a prospective tenant’s] lease for a long-term deal at an above-market rate.” While it may seem like a hard sell to lure a tenant across town at an above-market rate in the current climate, Zoller sees it as an opportunity. “Our goal as brokers is to show them what they can accomplish in sales by asking them, ‘If you could do 14 percent more in sales, wouldn’t it be worth paying 4 percent more in rent?’”

Where competition is tight, attracting in-market tenants requires landlords to pay extra attention to details, such as the signage, landscaping, parking lot upkeep, and other aesthetic aspects of the property. To sway prospects, “we have to be cleaner, brighter, cheaper, and more in touch with tenants’ needs,” Hyatt says. As part of the deal, some relocating tenants may be looking for extra incentives, such as rent reductions and early occupancy. If a center can offer these things, “it gives you a competitive edge against other centers.”

However, tenant relocations may require an extra step in the due diligence process to ensure landlords are seeing the whole picture. “I usually contact the corporate office if they are franchised tenants to find out if they are relocating due to declining sales, problems at their current location, or corporate relocation mandates,” advises Samuel S. Fung, CCIM, principal with Oregon Commercial in Medford, Ore.

Market on a Micro Budget

Marketing a challenged center — one that is in a poor location or has low traffic counts — requires tremendous creativity, Lyons says. “Most landlords of smaller centers are not capitalized well enough to spend large sums of money. The goal is to keep the capital outlay to a minimum but provide enough incentives to motivate the retailer to make a commitment.”

Creating co-tenancy arrangements can infuse new energy into centers as well as improve the overall tenant mix, CCIMs advise. “A doughnut shop has heavy morning traffic, sub shops are heavy at lunch, fitness centers are busy after normal work hours, yogurt shops are busy between 2 p.m. and 5 p.m. and after dinner hours,” Hyatt says. The revolving traffic restaurant tenants create benefits other service businesses such as medical-related services, convenience stores, and hair and nail salons.

With so much of the interest in small enters coming from local drive-by traffic, it’s critical to “effectively utilize any of the property’s on-site monument signage to promote awareness and availabilities,” Rodriguez says. Though contrary to the high-tech online marketing capabilities available today, old-fashioned techniques still have value: Posting banners, affixing marketing brochure boxes to the property’s exterior, and hanging window posters are effective ways to gain attention at very small centers, according to CCIM experts.

Tried-and-true, low-cost improvement projects, such as enhancing signage, updating landscaping, cleaning windows, and keeping the property litter-free can make an impression as well, Baj says. “And don’t forget to upgrade your image with existing tenants,” he adds. “Prospective new tenants frequently talk to existing tenants to see how happy they are in their location and space. Word of mouth still goes a long way today.”

Jennifer Norbut is senior editor of Commercial Investment Real Estate.

Finding Friends and Followers

Social media outreach has become an integral part of the marketing strategy for mega retailers such as Walmart and Target, which have amassed more than 7.7 million and 5.2 million fans on Facebook alone. Landlords and owners of small retail centers can quickly and affordably adapt a similar strategy on a smaller scale to create awareness for their property as well as for their tenants.

For instance, Samuel S. Fung, CCIM, principal of Oregon Commercial in Medford, Ore., recently helped a client create a Facebook presence that includes each tenant’s business. Instead of only relying on print advertising or snail mail, “if a tenant has a special promotion or discount sale, they can post it on Facebook in real time,” he says. Fung also helped a restaurant tenant maximize its presence on Facebook by uploading pictures of specialty dishes as well as a video about the restaurant.

“Internet marketing tools like Facebook and LinkedIn are free,” Fung notes. “Every retail center — large or small — should take advantage of these tools.”  

THE FUTURE OF DRUGSTORES: OPERATORS BROADEN OFFERINGS TO CAPTURE MARKET SHARE

OCT 18, 2011 9:29 AM, BY ELAINE MISONZHNIK, SENIOR ASSOCIATE EDITOR

This summer a new store opened in New York City that created more buzz than retail industry insiders had witnessed in quite a while. The store does not belong to a luxury apparel brand on swanky Madison Avenue, however. It’s a 22,000-square-foot drugstore in Manhattan’s Financial District.

The store, operated by regional chain Duane Reade, which is owned by Walgreen Co., blows apart the very idea of what a drugstore is supposed to be. Located on 40 Wall Street, in a former Chase Manhattan Bank building, it features on-site hair and nail salons, an in-store health clinic, an expansive grocery, fresh food and a makeup section worthy of a department store.

There is a stock ticker running near the entrance to the store, to update Wall Street professionals on the direction of the market. There is a holographic Virtual Assistant that greets customers at the door, provides recommendations on available products and gives information about store operating hours and services.

And just so there is no mistake about the message Duane Reade is trying to send with its new store, the word “Upmarket” is displayed in big bold letters above its front doors, and repeated throughout the aisles.

To be sure, this Duane Reade is located in a part of town populated by high-flying hedge fund managers and Wall Street brokers used to ten figure bonuses, so it’s catering to very affluent consumers. And with its uber-extensive list of services, this particular store is more likely to be a marketing play designed to get Duane Reade’s name into media outlets than a prototype of a sustainable merchandising strategy portfolio-wide, according to Mike Tesler, head of Retail Concepts Management, a Norwell, Mass.-based retail consulting firm.

To view a gallery of images of the Duane Reade on Wall Street click here or on the image above.

At the same time, it does serve the same purpose as other drugstore chains’ efforts to expand their product selections: to set Duane Reade apart from the competition.

The store at 40 Wall Street happens to be on the extreme end of the spectrum, but Duane Reade has been remodeling its stores throughout the city to forge a better connection with its customers and project what its executives call a “New York attitude.” The strategy has allowed the chain to become more geared toward specific neighborhoods instead of selling the same products using the same techniques in areas as disparate as the Upper East Side and Coney Island, according to Brendan Langan, director of retail insights with Kantar Retail, a Columbus, Ohio-based retail consulting firm.

Duane Reade’s parent Walgreen Co. has also been remodeling its namesake stores throughout the country, and recently announced plans to upgrade its location at the iconic Empire State Building in New York, taking over 10,000 square feet on the second floor. Walgreens previously operated on the ground and concourse levels, but with the new move visitors to Empire State’s Observatory deck will be able to enter the drugstore right after they finish their tours.

CVS Caremark and Rite Aid Corp. have not stayed far behind, each launching new store formats and introducing new initiatives to target multiple consumer segments. In fact, all three national drugstore operators expanded their product selections and store fleets over the past few years. They realize that with thousands of locations already operating they have little room for new store growth, but continue to face stiff competition from discounters and dollar stores.

That has meant that the best way for drugstores to establish relevance with consumers has been to create new reasons for people to make frequent trips to their stores.

“They are really trying to clarify what their value proposition is in a very crowded retail landscape,” says Langan. “What we are starting to see is a lot of momentum against it. They really look to define what their positioning it.”

To achieve this goal, drugstores are rolling out upscale concepts, urban store concepts, co-branded stores and value store formats; they are focusing on wellness initiatives and launching private label lines, as well as adding on more non-traditional products like liquor.

Ways to be different

Last August, for example, CVS Caremark launched an initiative to convert up to 300 of its units to an urban store concept, devoting more space to non-drug-related items. In some of the converted stores, the amount of space allocated to consumables has doubled. The project proved successful enough that CVS Caremark has opted to expand the rollout. After completing 200 urban store remodels last year, it plans to do another 200 by the end of 2011, according to comments made by President and CEO Larry Merlo during the company’s second quarter earnings call with analysts on Aug. 4.

Rite Aid Corp., meanwhile, announced a partnership with supermarket operator Supervalu to operate 10 co-branded stores with Supervalu chain Save-a-Lot in the Greenville, S.C. market. The stores carry Rite Aid’s health and beauty products and Save-a-Lot groceries under the Save-a-Lot Food Store/Rite Aid Pharmacy name. The partnership has delivered strong same-store sales growth and Rite Aid Corp. is in discussions with Supervalu about expanding the program.

In addition, Rite Aid Corp. converted at least eight of its stores to a “wellness model.” The stores, designed with wider aisles and lower shelves than regular Rite Aids, carry an expanded selection of organic foods and personal care products, as well as homeopathic medicines. “Research shows that with baby boomers aging and the high cost of healthcare, people are increasingly focused on staying well and living longer,” said Rite Aid Corp. President and CEO John Standley during the company’s earnings call with analysts on June 23. “This new format is all about empowering our customers in their pursuit of wellness.”

Rite Aid Corp. plans to make these remodels the prototype of its store renovation program in fiscal 2012. It will also try out a value store format, which company executives hope will help it compete in markets where price is a main advantage.

Walgreen Co., meanwhile, has come back to selling beer and wine at 3,500 of its more than 7,000 stores since last year. The chain used to carry liquor in the 1990s, but abolished the practice after it became too cumbersome to maintain.

In addition, drugstores have been putting more and more emphasis on private label products. Duane Reade recently introduced new private label lines, including DR Delish for premium foods and Apt. 5 Goes Green, an eco-friendly version of its long-standing Apt. 5 line of household products. Walgreen Co. has come out with its Nice! line of consumables. Last year, Rite Aid Corp. spun off Simplify, a value-oriented private label brand of household items and snacks. This year, CVS launched Just the Basics, which encompasses groceries, household products, personal care products and baby care items.

“People are in [drugstores] so frequently that [drugstores have] found it’s very easy for them to sell toilet paper, bottled water and paper plates,” which have not traditionally been drugstore items, says Tesler. “Anything that gets people in, they are fighting each other for it.”

Why now?

All of these changes are taking place because drugstores suddenly find themselves operating in a fiercely competitive retail environment at the same time as their industry is reaching maturity, according to Langan. Prescription medication used to be drugstores’ main traffic draw, but today it’s no longer necessary to visit a drugstore to pick up prescriptions. In fact, many insurers insist that their subscribers use mail orders instead, says Jay McIntosh, president of Consumer Foresight LLC, an Illinois-based consulting firm. Consumers also have the option of asking for home delivery or going online.

Meanwhile, discount behemoths Target Inc. and Wal-Mart Stores now operate pharmacies within their stores, taking away drugstores’ market share in both drug and convenience categories. This year, both retailers launched small format stores in order to be able to enter urban markets, threatening to take on drugstores on their most established turf.

Supermarket chains, including Kroger, Publix and Safeway, started putting pharmacies into their stores as well. And all of these retailers are very aggressive on price, offering 30-day supplies of many generic medications for only $4.

Over the past decade, drugstores also lost another traffic driver in photo development, which used to bring multiple store trips for every roll of film, notes Langan. Those trips have all but disappeared with the prevalence of digital cameras.

Nor can drugstore chains beat the competition by blanketing the country with more units. At this point, all three major drugstore operators—Walgreen Co., CVS Caremark and Rite Aid Corp.—are at or near the point of market saturation. In Walgreen’s case, for example, “With many of the best opportunities already accounted for, its newest retail outlets may never achieve the profitability of established ones,” according to Morningstar analyst Matthew Coffina.

Branching out

On-site health clinics have been one tool that drugstores have found successful in driving more customers to their stores. Since most of the clinics operate seven days a week and require no appointment, they offer more convenience than a visit to a regular doctor’s office, at least when it comes to common conditions. Customers who don’t have health insurance might also find drugstore clinics less expensive, since the typical visit costs less than $100. Plus, there is the added benefit of having customers’ medical records and prescription histories already in the pharmacies’ systems—something many large medical institutions have a spotty record with, notes McIntosh.

Rite Aid is trying value-oriented drugstores as well as ones with expanded “wellness” offerings.

To that end, CVS Caremark opened 39 so-called MinuteClinics year-to-date in 2011, bringing it to a total of 598 clinics nationally. Over the next five years, the company would like to open an additional 100 MinuteClinics, according to comments made by Larry Merlo.

Walgreen Co. also operates Take Care Clinics at its stores, which focus on prevention and treatment of common illnesses. As of May, it ran 360 such clinics. And Rite Aid started opening PromptCare health care clinics at some of its stores in 2008.

Drugstores have also realized that they could get more shopper traffic and drive more front-of-store sales by stealing customers from supermarkets and convenience stores, says Tesler. Carrying food, liquor and convenience items not only helps drugstores create more reasons for customers to visit their stores. “You might not be out for a quart of milk, but you might remember you need one while you are there,” says Tesler.

Shopper traffic has been the driver behind Rite Aid’s new value format and Duane Reade’s new upscale format. Because there are so many drugstores around the country and they are so easy to get to, the various sector competitors need to set themselves apart from their peers. By making some of their stores geared toward local preferences drugstores achieve the goal of being the stores to go to within their neighborhoods, according to Craig Johnson, president of Customer Growth Partners, a New Canaan, Conn.-based retail consulting firm.

Prime assets

Drugstores’ real estate holdings represent one of their best assets in their battle with competitors from other sectors. All three major operators exercised excellent site selection strategies over the years, going after corner locations on major thoroughfares near large residential areas, according to Nick Coo, director in the Irvine, Calif. office of real estate services firm Faris Lee Investments.

As of May 2011, Walgreen Co. operated 7,715 drugstores around the country, plus 258 stores under the Duane Reade brand. The chain has been particularly good at leasing the coveted right-hand corner locations that are positioned in the path of commuting consumers’ homebound paths, says Tesler. Today, Walgreen Co. has a store within three miles of 63 percent of U.S. consumers, according to Coffina. CVS Caremark operates approximately 7,266 drugstores nationally, and Rite Aid operates 4,704 stores.

“They have huge fleets and they compete as a convenience store without the gas pump,” says Johnson. “And they’ve had a very strong niche in a lot of urban areas, where it was difficult for chains like Target and Wal-Mart to enter.”

This should help drugstore operators ward off competition from the discounters, who have had limited luck expanding in major urban markets. Because regular Walmart and Target stores measure more than 100,000 square feet, they’ve had a lot of trouble breaking into cities like New York, where retail real estate is at a premium and huge chunks of space are hard to come by. Wal-Mart Stores’ and Target Corp.’s smaller urban stores, most of which will concentrate on selling groceries and necessities, should help them overcome that problem, but they will still be light years behind Walgreen Co., CVS and Rite Aid, who already have large established customer bases in the cities.

Still, increased competition from without could result in further consolidation within the drugstore sector. The most vulnerable player right now appears to be Rite Aid Corp., which has a low credit rating and is struggling to bring down its debt level. Over the past year, the company was also forced to close 63 underperforming stores and rumors persist that the chain may be sold.

“When you look at Rite Aid, you see a fundamental shift in terms of their philosophy. What you are looking at is a retailer that has employed very homogenous store bases becoming multi-format and more focused on localizing and clustering,” says Langan. “Over the next 12 to 18 months, this is their window to show what they can do.”

Cal-Comp Expanding in Reynosa

Written by Mike Buetow   Circuits Assembly

Friday, 14 October 2011 07:39

REYNOSA, MEXICO -- Top 10 EMS company Cal-Comp USA has purchased a 125,000 sq. ft. manufacturing facility here to perform electronics manufacturing services, in particular for a major supplier of set-top boxes. The site, immediately across the border from McAllen, TX, will be operated by Cal-Comp de Mexico, a newly established subsidiary, and it is expected to employ approximately 500 people within two to three years. Cal-Comp plans to close an existing site in Reynosa obtained in its acquisition last year of Spectragraphics. Cal-Comp will transfer all equipment and move 70 employees from that site to the new facility, and will hire approximately 75 new employees before the end of 2011. Cal-Comp USA is a subsidiary of the New Kinpo Group of Taipei, Taiwan, a $6 billion electronics design and manufacturing company with factories in China, Thailand, Singapore, the Philippines, Brazil and Poland. NKG employs 36,000 workers in electronics design, manufacturing and logistics for the consumer, computing, industrial, automotive, medical and communications markets. The company ranked sixth on the CIRCUITS ASSEMBLY Top 50 last year. The impetus for the expansion came from a US customer that markets TV set-top boxes, the company said. NKG has been manufacturing the products in China and Thailand, but after evaluating the full cost of ownership of the product for the North America market, the customer requested that the manufacturing be relocated from Asia to Mexico. Other electronics products will also be manufactured in the new facility. "This major expansion in Reynosa, Mexico shows our commitment to the North American market and to serving our customers anywhere in the world," said Simon Shen, president of Cal-Comp. “We see a bright future for this facility and look forward to building a presence there to serve a variety of customers.” Looking to relocate your business? Contact us today and learn how NAI Rio Grande Valley can help you around the corner or around the world! We are your Commercial Real Estate Professionals!

NAI Global Chief Economist Analyzes the European Debt Crisis in Newest White Paper

In his newest white paper, European Debt Crisis NAI Global Chief Economist, Dr. Peter Linneman, summarizes the origins of the European sovereign debt crises that have dominated the global financial headlines and analyzes the current status of debt in Greece, Portugal, Italy, Ireland and Spain in addition to assessing the impact that default will have on the European economy. “Europe’s sovereign debt crises are changing daily, yet are making little progress toward long-term solutions. The only questions are when, how and who will be left holding the bag?” said Dr. Linneman. “The principal danger is that when Greece defaults, either voluntarily or involuntarily, there will be considerable capital market uncertainty and renewed rounds of government intervention to save local banks.” The white paper examines strategies to minimize the impact from a Greek default on other European countries, the possibility of default in other Euro Zone countries and presents possible real estate investment opportunities that may arise as a result of distress in the European banking sector. European Debt Crisis analyses the European sovereign debt crises and the impact of a default on the Euro Zone countries and banks. This latest white paper follows Beware of Inflation, where Dr. Linneman assesses the potential destructive power of inflation and its impact on commercial real estate. NAI Global’s white papers and research resources are available for free download at www.naiglobal.com under Publications/Articles & White Papers.

BATA PLASTICS COMING INTO MCALLEN MARKETPLACE

BATA Plastics, Inc., a full-service plastics recycling company based out of Grand Rapids, Mich., had been surveying the Rio Grande Valley to set up a second operation to service a large client manufacturing truck components.  Already familiar with the large number of manufacturing taking place in Reynosa, Mexico, BATA saw the value that the city of McAllen offered. While allowing BATA to service its established client on the U.S. side, McAllen's proximity to Reynosa presented them with the opportunity to offer its plastic recycling processes to other manufacturers south of the border. For over 20 years BATA has purchased surplus and rejected parts of post industrial plastics from manufacturers and scrap dealers. Services they offer include custom toll grinding, size reduction-shredding, pellatizing, baling, sorting, metal separation, fines separation and drop trailers, to name a few.
    

 In their Michigan headquarters, BATA Plastics, Inc. has received LEED Silver certification. The U.S. Green Building Council defines LEED as an internationally-recognized green building certification system acknowledging projects that implement strategies which can improve environmental and health performance. BATA Plastics is the first plastic recycler in North America with this distinguished certification. While the City of McAllen has been actively promoting a 'go green' initiative with its residents, companies such as BATA Plastics certainly provide the city with a partner knowledgeable in environmental responsibility.

As they launch their operation in the McAllen Foreign Trade Zone with the assistance of the McAllen Economic Development Corp. and Lamar Lawson, a McAllen real estate broker, the workforce will begin with 10, and steadily increase as the list of clients grows. The McAllen operation will be approximately 50 percent of the Michigan operation in terms of square footage. Their workforce in Michigan consists of 95 employees, and the goal is to grow the McAllen operation to that same level. With the number of manufacturing plants across the border, it is quite possible to see this taking place in the near future.

-- Carlos Telles, Marketing Director, McAllen Economic Development Corporation

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A few tips about buying commercial real estate

Posted: Saturday, October 8, 2011 6:28 pm

By Mark Hampton, Toya Ohlrich and Joe Castilleja For New Braunfels Herald-Zeitung 

NEW BRAUNFELS — You’ve heard the old saying, real estate is about location, location, location. And it’s pretty much true regardless of the property type or owner.

Location is definitely important when it comes to commercial real estate. But once you get past this universal truth — that location is key — the differences between the residential and commercial varieties start to emerge.

Residential real estate is about your primary dwelling place. It’s about having a roof over your head for you and your family.

But commercial real estate is quite different. It’s usually about producing income for a business owner or investor. Which brings us to what I like to call the two types of commercial property owners:

1. Users

2. Investors

Users are typically business owners. They need commercial real estate space to house their business. It provides a place for them to sell their products or services. Issues like accessibility/parking, proximity to other businesses that create customer traffic (traffic counts), community demographics, applicable zoning, visibility and, of course, costs are all important. Users can buy or lease the commercial property space for their business.

Investors are a different breed. They’re looking for the commercial property itself to be their income-generator. They’ll buy commercial properties and lease them to others, eventually selling parts of their commercial property “portfolio” when it makes sense to do so.

Investors see real estate as a good alternative to some of the options available on Wall Street. Real estate is less volatile, a good long-term investment and, in Texas, very consistent. Commercial real estate provides two big advantages for investors:

1. Income production

2. Tax depreciation

Investors, typically on the advice of their accountant, will eventually sell a commercial property when its depreciation cycle is coming to an end, taking the profits from the sale and reinvesting in another property through a 1031 Exchange. This is why some large chains/franchises build new stores and retires others.

If you’re thinking of buying commercial property, whether for its direct use (from which to run a business) or as an investment, it’s important to hire a Texas Realtor experienced in commercial real estate. Realtors with the CCIM (Certified Commercial Investment Member) designation have undergone specialized training in commercial real estate.

Also, realize that financing the purchase of a commercial property is different from obtaining a home mortgage loan. Commercial real estate loans usually require at least a 20 percent downpayment, are traditionally amortized over 20 years, and have a three- to five-year balloon. Meaning they reset after 3 or 5 years with a new rate depending on the market.

In Texas, a large share of state and local revenues — particularly those that fund public schools — comes from property taxes. In local communities, it’s advantageous to have a good mix of residential and commercial properties in order to have a broad tax base. That way, individual homeowners aren’t overburdened with an unfair share of the tax load.

Commercial real estate has similarities to residential real estate. But whether you’re considering being a user or investor, you can see there’s more to finding the right space than just location, location, location.