CHICAGO EYES MIXED-USE PROJECTS TO BOOST STRUGGLING COMMUNITIES |
WAREHOUSE IN DEMAND IN MARKETS LARGE AND SMALL |
DATA CENTERS ATTRACT INTEREST DESPITE OVERALL INSTABILITY |
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This page , left to right : Yin Yang , Bruce Leighty , Phil Banko , Pengtianli |
The situation seemed to make sense — colleges reduced costs ( and headaches ) by allowing private developers to handle student housing , with funds raised through municipal bonds . But COVID-19 has blown a massive hole in that plan , with a tenant pool left dry as many students are staying away from campuses .
A recent report from Bloomberg examined some high-profile projects that are in serious trouble . One example is the new $ 90 million dorm at the California College of Arts in San Francisco . Offering two-bed , dorm-like rooms for $ 1,400 a month — undeniably affordable in a notoriously pricey market — the building was woefully vacant by the end of July , with only 29 percent of rooms re-leased within a few weeks of the first day of school . Another housing development , financed by $ 228 million in bonds at Florida International University , only had 77 percent of units leased when school began in the fall , with the goal being 90 percent .
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The Chicago Department of Planning and Development issued requests for proposals for three projects in underutilized sites in neighborhoods that have struggled to attract large investments . The goal , according to DPD Commissioner Maurice Cox , is to produce mixed-use , pedestrian-friendly projects that will encourage further investment in surrounding communities .
City officials are considering tax increment financing , tax breaks , and purchase-price write-downs to assist potential developers . The three targeted sites are :
• A 32,200-square-foot site in Austin on Chicago ’ s West Side that includes a 14,340-sf bank building for mixed-use rehabilitation .
• A 23,000-sf site that includes six parcels of land on the South Side that can be used for commercial / residential buildings .
• Two sites , totaling 4.28 acres , in Englewood for a walkable , mixed-use town center .
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Industrial has stood out in terms of performance in the tumultuous first half of 2020 , and the market sector appears primed for continued strong returns to come . According to Beyond the Global Health Crisis , a special report from Marcus & Millichap , the pressures related to stay-at-home orders and changing consumer behaviors will increase demand for last-mile inventory warehouse / industrial space .
Vacancy rates in both primary and secondary / tertiary markets have ticked up slightly since the pandemic hit , sitting just above 5 percent after 2Q2020 , but year-overyear rents for both market segments continue to increase . The report highlighted the crucial role of warehouse facilities near population centers ( from primary to tertiary ), with demand growing as online sales of grocery and household items become a part of everyday life for millions of Americans .
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Considering the consequences of national and worldwide shutdowns in the wake of the coronavirus pandemic , data centers are positioned to remain in demand . Workers and students depend on remote connections , so the need for these large facilities should only increase . Investors are taking note — with some willing to pay a premium . According to 2Q2020 data from Real Capital Analytics , newly purchased data centers had an average capitalization rate of 5.5 percent , a decrease from the 6.4 percent in 2Q2019 and a significant drop from the all-time high of 7.9 percent in 2Q2012 .
While many specialty properties expected declining or steady demand in 2020 , data centers still hold promise . Overall investment is down across all specialty sectors , but data centers are buoyed by demand generated from Amazon and Google , which are looking to acquire such facilities in addition to those they construct on their own .
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