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10 Must Reads for the CRE Industry Today (January 23, 2019)

Long-term ground leases bring down the income from iconic office buildings in major U.S. cities, according to the Wall Street Journal. San Francisco is considering a tax on empty storefronts, reports San Francisco Chronicle. These are among today’s must reads from around the commercial real estate industry.

  1. Ground Rents Weigh Down High-Soaring Icons “The allure of owning an iconic building gets more complicated when the ground beneath it belongs to someone else. Investors that control some of the choicest buildings in New York, San Francisco, Washington, D.C., and other major U.S. cities are grappling with the consequences of agreements made decades ago. In many instances, the original developers benefited signing long-term leases for the land rather than coming up with the money to buy it outright, thereby trimming initial development costs.” (Wall Street Journal, subscription required)
  2. WeWork is Moving onto Starbucks’ Turf with New Coffee Shops with Workspaces “WeWork Cos., the fast-growing provider of flexible offices, is to launch a new kind of casual work space that will function as its own branded coffee shop. The company’s Made by We retail offering is opening its first location at 902 Broadway in New York’s Flatiron neighborhood, according to a statement. WeWork’s parent company, The We Company, said the site will act like ‘a new town square.’ WeWork tenants as well as members of the public will be able to book 100 workspace seats and six meeting rooms by the minute, hour or day – a sort of Starbucks SBUX, that can be booked in advance.” (MarketWatch)
  3. Marriott CEO Says Hotels Aren’t a National Security Target, but Experts Beg to Differ “Marriott CEO Arne Sorenson said Tuesday he doesn’t think the company is ‘going to be in anybody’s crosshairs’ when it comes to national security concerns, but experts have pointed to China as the likely culprit for the company’s cybersecurity breach that affected over 300 million customers. Sorenson’s interview with CNBC at the World Economic Forum in Davos, Switzerland, comes a few months after the company disclosed a massive hack that affected up to 383 million people and included 5.25 million unencrypted passport numbers.” (CNBC)
  4. Proposed Bill Targets Money-Laundered, Terror-Funded Skyscrapers, LLCs “The iconic skyscraper at 650 Fifth Ave. towers above the edge of Rockefeller Center like a giant middle finger to US victims of terrorism. Built in 1978 by Iran, it has been a stark and shameful reminder that the US government has consistently failed to prevent criminals, and even terror-supporting nations, from profiting off property in America. Eighteen years ago, the Patriot Act mandated new anti-money-laundering regulations and ordered them overseen by the Treasury Department. But Treasury “temporarily exempted’’ real estate at the time — and that directive has yet to be lifted.” (New York Post)
  5. Vacancy Glut in SF Could Spur Tax on Empty Storefronts “When people see the empty storefronts that have multiplied in San Francisco the past few years, they often blame competition from online vendors for the death of small retailers. Supervisor Aaron Peskin sees another culprit: landlords who intentionally keep their properties vacant until they can extract higher rents from potential tenants. Now he wants to repopulate those storefronts by taxing property owners with consistently empty units.” (San Francisco Chronicle)
  6. Apple Expansion Moves Show How Silicon Valley is Losing its Grip on the Tech Jobs “Apple’s recent announcement that it’s building a new $1 billion campus in Austin, Tex. adds momentum to the trend among tech startups and investors to look beyond Silicon Valley to incubate and grow the next generation of innovative companies. Moreover, in what amounts to doubling down on its satellite strategy, Apple also said it will establish new sites in Seattle, San Diego, and Culver City, Calif., as well as expand in cities across the U.S., including Pittsburgh, New York, and Boulder, Colo. over the next three years — welcome economic boosts for those areas.” (MarketWatch)
  7. The (Data) Science of the Deal: How AI Will Transform Commercial Real Estate “Artificial intelligence is infusing virtually every sector of the modern economy, and real estate is no exception. From machine learning algorithms that match homebuyers to listings to chatbots attending to clients’ needs, the real estate industry is buying into technological solutions that aim to make the industry more efficient, profitable and service-oriented. In commercial real estate, however, AI has yet to gain a significant foothold. But the technology carries the potential to transform the core of the industry: the transaction process.” (Forbes)
  8. A Home Depot Explains Why Pushing for ‘The Store of the Future’ Could Backfire “Holographs, AI booths, and touch screens? Omnichannel spaces that maximize both the shopping experience and digital-order fulfillment? Flying, robotic salespeople? Well, Albert Vita, Home Depot's in-store experience and visual merchandising director, thinks we should all take a deep breath. He spoke about the importance of always thinking through retail innovation in a conversation with moderator and Zivelo CEO Healey Cypher at the National Retail Federation's 2019 Big Show in Manhattan on January 13.” (Business Insider)
  9. From Afterthought to Amenity: Emanuel’s New Approach to Chicago River Improvements “Mayor Rahm Emanuel is pushing through a series of initiatives aimed at taking advantage of intense commercial developer interest along the Chicago River to improve the waterway’s recreational potential for the public. Emanuel today will present before the City Council an executive order establishing a new multi-governmental body to identify more open space and public amenities along the river. On Thursday, the Chicago Plan Commission will take up a series of guidelines developers of riverfront property will have to meet.” (Crain’s Chicago Business)
  10. Shannon Wynn, Who Made Dallas Hip, Now Just Wants Living Here Affordable “If you are new to this city, or not old enough to remember when the Taco Cabana on Lower Greenville was a placed called Tango, Wynne is the man ‘who gave Dallas hope that it could be hip,’ as this newspaper wrote in a 1989 profile. And 30 years on that's probably still his legacy. You might have known his works when his eat-and-drink destinations had names like Nostromo, Rio Room, Rocco. Now they're called the Meddlesome Moth, Mudhen, Rodeo Goat, the Flying Saucer, Flying Fish and, until recently, Lark on the Park at Klyde Warren.” (Dallas Morning News)
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