Tag: leasing

• Toward penthouse amenities and smaller units

  

  The NY Times reported this week that, as the ultra luxury real estate market in New York City continues to cool, developers appear to be making two kinds of product adjustments: (1) they are converting the penthouses and rooftops of their buildings from premium residential space into amenity spaces for the broader building and (2) they are shrinking unit sizes to help with overall sales and leasing velocity.

  According to the New York Times, condo prices on Billionaires’ Row in midtown are down 20-40% since the peak of the market in 2014 when this record was set. So developers are responding with more studios and 1 bedrooms, and amenity spaces – many of which now include high end restaurants also open to the public – that ensure no other building has something you don’t have.

  However, there are naturally some differences between condo and rental buildings. Since 2016, 35% of rentals projects in the city have had some sort of penthouse amenity, whereas the number is only 13% for condo buildings. This makes sense given that amenities are such a big driver of leasing. You definitely want your amenities ready for when your leasing office opens.

  What product changes, if any, are you seeing in your market right now?

  Photo by Aaron Burson on Unsplash

  2018.07.28

• Electric vehicles are mostly leased

  At the beginning of this year, Bloomberg published this article talking about how the vast majority of electric car drivers lease, rather than own, their cars. The stats are as follows: In the US, about 80% of electric battery vehicles and about 55% of plug-in hybrids are leased, whereas only about 30% of all vehicles in the country are leased. 

  It is, however, important to note that the above doesn’t include any data points from Tesla. Since they sell their cars direct to customers, as opposed to through dealers, they have no obligation to publicly release this data. And so apparently they don’t.

  Conventional wisdom suggests that if you plan to drive the same car for an extended period of time – the average age of a car on the road in the US is over 11 years – it makes financial sense to buy. But in this case, people seem to be worried about technological obsolescence and the weak resale market for electric vehicles. This may also speak to the type of customers who are currently buying electric vehicles; they are early adopters and don’t want old cars.

  I’ve also seen someone argue that because some states require a percentage of car sales to be zero electric vehicles, it can be more cost effective for manufacturers to sell/lease them at a loss than pay the penalties or buy the ZEV credits. And with a lease, they at least get parts back at the end of the term. But I honestly don’t know much of a factor this plays.

  I hadn’t thought of this before I stumbled across the Bloomberg article, but it all makes sense to me. I find this reversal in ownership interesting because it tells me that how we consume cars can very easily change, and probably will moving forward.

  2018.04.05

• Lease vs. Life

  

  When I was in graduate school in the U.S., I remember it being a pain having to always sign a 1 year lease. I only wanted 8 months so that I could take off during the summers. Too bad Flip wasn’t around back then.

  Flip is a startup that I just discovered, which is positioning itself as the “easiest way to sublet or get out of your lease.” It’s all about reconciling the conflict between lease and life, which don’t always match up.

  The platform is free to listers. So you don’t get charged to post a lease or to flip a lease. Renters get charged a service fee equal to 5% of one month’s rent.

  It’s interesting to think about the surge in short-term rentals and platforms such as Flip that are effectively helping to reduce lease terms by way of streamlining the “flipping” process. 

  Are millennials ushering in a new era of mobility and transience?

  One feature that I think is neat and that I would like to point out is “Bounties.” The platform allows listers to attach a bounty ($) to any listing. Users are then able to grab a unique URL that can be shared around online. If someone takes over a lease via one of your links, you get paid the bounty. Smart.

  In case you’re curious – I certainly was – here’s a ranking of all 50 U.S. states according to how friendly they are to subletters. It also summarizes how to legally sublet. On the friendly side is New York and on the less friendly side is Wyoming.

  Photo by Dan Gold on Unsplash

  2017.06.29

• The evolving gig economy

  This morning venture capitalist Fred Wilson wrote a post on his blog talking about the gig economy and Hillary Clinton’s economic speech last night. 

  Here’s a snippet from Clinton’s talk:

  Meanwhile, many Americans are making extra money renting out a small room, designing websites, selling products they design themselves at home, or even driving their own car. This on-demand, or so-called gig economy is creating exciting economies and unleashing innovation.

  But it is also raising hard questions about work-place protections and what a good job will look like in the future.

  So, all of these trends are real and none, none is going away. But they do not determine our destiny. The choices we make as a nation matter. And the choices we make in the years ahead will set the stage for what American life in the middle class and our economy will be like in this century.

  The headlines this morning are making it seem like Hillary Clinton is taking direct aim at companies like Uber. But the transcript suggests that she’s being far more balanced than that: these new companies are creating exciting opportunities, and they are not going away, but there are still things to figure out.

  That’s basically how I feel.

  Take, for example, Airbnb. I think Airbnb is a great idea and company. A lot of my friends use it both as consumers and as suppliers of space.

  But for many (most?) condos in Toronto, owners are strictly prohibited from renting out their units on leases that are less than six months. It’s a direct ban on short-term leasing and it’s written into the Condo Corporation’s Declaration.

  And there’s good reason for that. Who wants to buy a condo only to find out that next door is being operated as a nightly hotel? Most people would even prefer that their neighbor is an owner rather than a renter.

  That doesn’t mean I believe Airbnb should not exist. I think we’ll likely end up getting more transparent about how buildings (and portion of buildings) are operating, as opposed to it being a shadow economy. And that could help.

  If you have any ideas for how companies like Airbnb might be better integrated into urban life, I would love to hear from you in the comment section below.

  2015.07.14

• Pre-leasing, pre-selling, and building on spec

  When you build a new office building, the typical strategy is to pre-lease a certain portion of it. That is, you sign leases with a tenant or a few tenants so that you know for sure that X% of the building will be occupied upon completion. It’s a way to manage risk. If you don’t do this, then you are said to be building the office building “on spec.” 

  When you build a new condo building, the typical strategy is to pre-sell a certain portion of it. That is, you sell suites to purchasers based on plan drawings, certain finishes, and a model suite intended to illustrate what that future suite will more or less look like. And the reason this is typical is because most construction lenders will require you to do that.

  So when you see office buildings and condo buildings going up, there are usually already tenants and residents who plan to move in or investors who plan to rent out their suite and have generally transferred that risk away from the developer. 

  Because really the only time that a purchaser or investor wouldn’t close on a condo suite (and walk away from their deposit) is when the market corrects so badly that it actually makes financial sense to do that. That happened in the U.S. in 2008-2009 in a number of markets.

  But by contrast, when you’re building a rental apartment building you don’t have anything to pre-sell and your tenants (unlike office tenants) aren’t going to sign leases with you for some space that will be ready in 3 years. If you’re lucky, they might sign a lease with you for an apartment that will be ready in 3 months. This means that by default you are also building “on spec”.

  Now rental apartments are often considered to be the safest real estate asset class and the least correlated with the macroeconomy. But as a developer and city builder, this dynamic is still something to keep in mind.

  2015.06.29

• Moving downtown

  Last month it was announced that Amazon will be taking 127,000 square feet across 5 floors in a new office tower in Toronto’s emerging South Core neighborhood. The space will be used for about 800 employees and they’re expected to take occupancy this fall.

  At the same time, I learned that Amazon will be joining Apple (positioned 6 floors below them in the same tower) and Cisco in South Core.

  On top of all this, a friend of mine then tweeted out a list of major tenant re-locations here in the city. The data is from CBRE and the timeframe is from 2009 to 2014 (Q1).

  The first thing I noticed when I looked at the data is that there’s a clear trend towards downtown. Perhaps that was the point of the study, but it’s still interesting nonetheless. 

  From Google and Deloitte to eBay and Aol, every single tenant in the CBRE list is or will be moving downtown (or to the shoulders of downtown).

  Here’s what that looks like from a regional scale (red marker is where they were; green marker is where they are going):

  

  And here’s what it looks like zoomed in closer:

  

  This, of course, is a trend that has been happening for years. But I still think it’s worthwhile repeating how clearcut it seems to be. 

  Companies know that their greatest asset is human capital. And they have quickly realized that a lot of young smart people want to live and work in dense walkable communities. They’re simply moving to where people already want to be.

  So here’s a question for the Architect This City community: On a scale of 1 to 10, how important is a company’s location when determining whether or not you’d like to work for them? Let’s talk about it in comment section below.

  2015.04.12
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  1078 St Clair West – Retail has been vacant for years. What gives?

  2012.08.18
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  Coming soon to 1 York St #DirtToronto

  2012.08.11