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The COVID-19 pandemic is impacting every facet of the economy, including commercial construction and real estate. While the depth of some of the impacts may not be known for months, if not years, there are several emerging trends shaping these industries now.

Construction Financing Issues

In the early days of the COVID-19 pandemic this spring, many companies looked at stopping, or at least pausing, construction projects due to the uncertainty about the economy. Many projects remain paused as owners continue to worry about their long-term viability or if there is demand for office or retail space when so many businesses are closed or people are working remotely.

A survey conducted by the Associated General Contractors of America (AGC) in June found that 68% of contractors had seen a project canceled as a result of the COVID-19 pandemic; 48% saw a project that had begun before the pandemic halted.

While some projects were paused to meet with shelter-in-place orders in states and cities where construction was not deemed essential, financial considerations also were a major concern. More than one-third of projects were stopped because of a loss of revenue to pay for the project, whether that be from lenders, investors or government revenue such as taxes.

Under many contracts, if an owner decides to pause construction, it will ultimately be responsible to pay the contractor for the delay.Similarly, if an owner cancels a project, under the standard American Insititute of Architects (AIA) contract documents, the owner will be responsible for a termination fee or the contractors lost profit on the project.With project financing also drying up, however, it may be uncertain where that funding will be coming from.

With projects on pause, banks are also seeing an increase in defaults on construction loans. Construction loan delinquencies at U.S. banks climbed 23.8%during the first quarter according to the Standard & Poors Global Market Intelligence Report.Anticipating this, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES) passed by Congress made it easier to modify construction loans. Under the CARES Act, an owner may qualify for a forbearance arrangement, an interest rate modification, or a revised repayment plan.The CARES Actalso provides that any loan modification does not constitute a reportable troubled debt restructuring (TDR) or a default, and therefore will not negatively impact the credit of the borrower.

Construction Supply Chain Issues

One major challenge impacting still ongoing construction projects is difficulty in getting the needed materials on time. During the peak of COVID-19 shut downs this spring, many producers of building supplies either closed completely as they were not deemed essential businesses by their local governments or reduced their staffing and capacity to help support social distancing efforts among employees. This has led to a shortage in numerous supplies and ongoing supply chain issues.

In June, the ACG found that 25% of contractors were experiencing project delays or disruptions due to a shortage of construction materials, equipment or parts. Additionally, 38% of respondents said suppliers had notified them or their subcontractors that material deliveries would be late or cancelled.

Depending on the materials being delayed, supply chain disruptions can impact the timing of a construction project by days, weeks, even monthstime that in many cases cannot afford to be lost as contractors often face tight deadlines for delivering projects.

To help minimize disruption, contractors should request weekly updates from suppliers on the availability of necessary materials. A contingency plan for obtaining materials that may face shortages or delays should be developed. Contractors should also provide updates, in writing, to their clients both on potential supply chain issues and the steps that are being taken proactively to mitigate those risks and, if needed, look to renegotiate potential changes to the project completion schedule.

While it is generally the responsibility of the contractor to ensure a project is completed on time, there may be some contractual remedies for unexpected supply chain delays caused by the COVID-19 pandemic. For example, many contracts contain force majeure clauses or other language around impacts arising from circumstances that could not be foreseen or outside of the control of either party involved in the contract. Often these clauses call for an extension of time to complete the project but may not change the payment terms.

Lease Issues

The pandemic is also triggering force majeure clauses in commercial leases. A June bankruptcy court ruling in In re: Hitz Restaurant Group offers some guidance to landlords and tenants seeking to enforce force majeure language in their leases.

Hitz Restaurant Group, which operates a number of restaurants around Chicago, filed for bankruptcy on Feb. 24, 2020. One of its landlords, Kass Management Services, Inc., asked the court to require Hitz to pay rent due under the lease even after filing for bankruptcy. Citing force majeure language in the lease, Hitz argued that it was excused from the rent obligation as a result of the executive order prohibiting on-premises consumption of food and beverages in restaurants issued by Illinois Governor J.B. Pritzker on March 16, 2020.

The court ruled that Hitz had to pay its full March rent, since it was due before the executive order was issued, but the obligation to pay rent thereafter was reduced in proportion to the ability of Hitz to generate revenue.Based on Hitzs estimate that 75% of the restaurant was unusable due to the executive order, Hitz only owed 25% of its rent obligations for April, May and June. The court also rejected the landlords argument that Hitz could not enforce the force majeure clause because it did not apply for a Small Business Administration loan to meet its rent obligations.

In reaching its decision, the court found the force majeure clause in Hitzs lease unambiguously applied to rental payments and the executive order was the cause, at least in part, of Hitzs inability to pay rent because it restricted the restaurant to take-out, curbside pick-up, and delivery.

Although the Hitz decision is not binding in other jurisdictions, other courts may use a similar analysis for businesses required by law to shut down or reduce operations during the pandemic. Tenants should review their leases to see if the force majeure clause specifically references governmental orders and allows for excused performance of lease obligations, including payment of rent. For landlords, the Hitz case is a reminder to carefully draft force majeure clauses to allow for more time to pay rent, instead of excusing payment altogether or to include express language that force majeure does not apply to rent.

Regardless of how long the COVID-19 pandemic lasts, or how long the residual economic effects linger, it is likely this pandemic will create a lasting impact on the commercial construction and real estate market. What those changes are remains to be seen, but it will be vitally important that contractors, building owners and tenants more carefully consider things like force majeure clauses and their potential impact on contracts long into the future.

Brooks Pierce is dedicated to keeping our clients fully informed during the COVID-19 crisis.

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COVIDs Lasting Impacts on Construction and Real Estate Trends - JD Supra

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New Home Construction and Residential Renovations - TAPinto.net

Dead malls have been viewedas attractive targets for industrial conversion projects in recent years, but nowthe retail-to-industrial conversion trend is expanding to shopping centers that are merely wounded, but still alive.

The Metro Mall in Queens, where Amazon leased industrial space formerly occupied by retailers Toys R Us and Kmart.

Mall owners this year are increasingly considering projects that wouldconvert vacant department store space in existing malls into last-mile distribution facilities as demand for industrial space has far outpaced retailduring the coronavirus pandemic.

Simon Property Group is in talks with Amazon to turn some of itsvacant department store spaces formerly occupied by JCPenneyand Sears into e-commerce distribution centers, the Wall Street Journal reported Sunday. Simon CEO David Simon, speaking on the REIT's earnings call Monday, said he could notrespond to "market rumors," but he did speak to the larger trend.

"Generally, the important thing going on that we're seeing is that moreand more retailers are distributing their e-commerce orders from their stores, so they're fulfilling from their stores and there are also the curbside pickup and all sorts of fulfillment options available," Simon said. "That's a good trend long term for us, but beyond that I don't want to get into logistics or any kind of speculation around Penney or Amazon."

Brookfield Properties, another major U.S. mall owner,isbeginning to experimentwithusing space at its active shopping centers for industrialdistribution space. The CEO of Brookfield'sretail group, Jared Chupaila, discussedthe strategy on the firm's earnings call last week.

"We have begun to test and trial with retail tech companies that are providing solutionsforlast-mile delivery and other fulfillment solutions where we can use otherwise unused space at the back end of shopping centers to help consolidate the packages and provide greater convenience to the couriers, all of which is expediting the delivery of the product and the volume of the product that couldbe delivered to the end customer," Chupaila said on the call, according to a Seeking Alpha transcript.

Amazon has already shown a willingness this year to lease space formerly occupied by retailers for its distribution facilities. In February, it signed a 10-year deal for 300K SF at the Rentar Plaza mall, also known as the Metro Mall, in Queens,Commercial Observer reported.

About 190K SF of the space Amazonwill take at the Queens property was formerly occupied by Kmart and Toys R Us. The property continues to operate as a mixed-use asset with existing retailers such as BJ's Wholesale Club, Jennifer Furniture and Burger King.

The REIT analyst who asked Simon about the Amazon deal, Mizuho Americas Managing Director Haendel St. Juste, toldBisnowthe conversion projects make more sense now because of the damage the coronavirus has wroughtin the retail market.

"Post-COVID, we now have a scenario where we have bankruptcies and store closures on top of what we've already seen the past couple years," he said. "Right now, the prospect of filling up a bunch of empty anchor boxes, who is the next user of that space? It's not like you've got a line of people queued up to take that space. You can read the tea leaves. The times are changing. The nature of the mall itself is changing."

A map from CBRE showing the retail-to-industrial conversion projects that have moved forward across the U.S. since 2017.

A CBRE report released last monthfound 59 retail-to-industrialconversion projects that have been completed, begun construction or been proposed since 2017.That is up significantly from January 2019, when there were24 such projects.

Many of the conversion projects CBRE found are full-scale redevelopments of completely vacantmalls, but CBRE Associate Director of Industrial and Logistics Research Matthew Walaszek said he is increasingly seeing owners look to convert vacant space in malls that continue to operate.

"That's something we have seen and we would point to as the next phase for the blending of retail and industrial," Walaszek said of the conversion projects in existing malls. "We will absolutely see more and more of that."

The conversionstrategyhad begun prior to the pandemic, asthe industrial market has performed much better than retail in recent years, but thecoronavirus has accelerated the trend as more people shift their shopping behaviors to online deliveries, Walaszek said.

"COVID has accelerated a lot of the trends that have been happening already," Walaszek said. "We're looking at new forecasts where e-commerce as a proportion of overall retail is higher than what we had previously anticipated."

Walaszek said CBRE has one retail landlord client, which he declined to name, that is looking for opportunities across 15 different markets to convert retail spacesto industrial. In addition to mall owners converting vacant big-boxspace, Walaszek said he is also seeing a growing trend ofdepartment store tenants shrinking their retail footprint to set aside space for delivery facilities.

"We're going to start seeing more concrete examples of retailers repositioning their footprint and incorporating logistics, especially as e-commerce grows and there's going to be a need for returns," Walaszek said.

Transwestern Senior Managing Director Mark Glagola, a D.C.-area industrial broker,said he has heard a great dealof talkin the market about the conversion projects and sees it as an emerging trend, but he has yet to see completed examples of projects that mix industrial and retail space.

"The industry appears to be really kicking this tire hard, and I do think things will happen, they just haven't happened yet," Glagola said. "We haven't figured out the logistics of how the fulfillment centers fit into a retail environment, and does it remain a retail environment? I do think they will happen, but they're still sizing each other out."

Glagola said he sees several potential logistical issues withusing vacant department stores in existing malls as industrial space, such as malls not having enough loading docks and the industrial and retail traffic mixing in the parking lot.

"The issues include the physical logistics and the potential mix of retail and industrial tenants from an asset management perspective," Glagola said. "Some facilities may be able to do it because they may be able to segregate the uses, others won't because they can't. Not every retail property is the same."

In addition to thelogistical concerns, St. Juste said there are also potential issues involved with the lease agreementsmall owners have with inline tenants, some of which depend on having a retail anchor.

"What does the mall look like if you don't have two or three anchors? And then there are co-tenancy risks that come into play," St. Juste said. "Inline tenants that have struggled and are looking to reduce square footage and get lower rents now could potentially get a get-out-of-jail-free card at some malls with potential co-tenancy clauses."

While there could be challenges withconverting department stores to industrial, St. Juste said mall owners don't have many better options.

"Priority No. 1 right now is, 'Let's figure out what we can do with all this excess space in a market where clearly retail is at risk and we need to think of a better path,'" he said. "It's just one more thing to try to make the best use of their space and stay ahead of the curve a bit."

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'The Nature Of The Mall Is Changing' As Simon, Brookfield Eye Converting Anchors To Industrial - Bisnow

After years of construction, the $80 million River Place facility is almost ready

Downtown Wilmington will soon welcome the grand opening of a high-rise neighbor.

River Place, an $80 million, 13-story mixed-use development slated to contain residential, parking and retail space, has not only made strides in attracting commercial and residential tenants, but is almost finished with construction.

Lucien Ellison, Senior Managing Partner for East West Partners, who has worked with the city on the project, said the to-do list is "getting smaller and smaller."

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The building welcomed its first apartment resident last week, and more residents are expected to move in by the end of August. So far, 10 out of the 79 apartment apartment units have been leased, Ellison said. A majority of condo residents have already moved in with only 10 more left for sale out of 92 units.

Along with the influx of condo and apartment residents came the project's 403 parking spaces, which finished construction in May and is currently open to the public.

Meanwhile, the buildings commercial tenants - Axis Fitness, Bank of America, Mellow Mushroom, the Nutrition Spot, and more recently, Dollar General-owned DGX - are working on outfitting their spaces, with some expected to open in September.

Among the other completed projects are a multi-level staircase connecting Front Street to Bijou Park with Water Street. An access to Bijou Park that would re-connect Chestnut Street to Water Street is expected to be finished in the next six weeks.

The current focus is to finish up the roadwork around the building, including the portion of Water Street between Grace and Chestnut streets. This portion, which has been closed for construction since 2018, should be paved in the next four weeks.

Although much has been accomplished, Ellison said the COVID-19 pandemic has slowed down the projects completion, decreasing the amount of workers on the site by about 25%.

Hurricane Isaias didnt help either. As a result of the storm, the building was left with water intrusion on the first floor, an issue workers are currently addressing.

Nonetheless, Ellison thinks the project could be fully completed within "the next couple months."

"I was thinking wed be way done by this point but were not so the timeline has changed so much that I dont even want to speculate on it," Ellison said.

Reporter Noah Johnson can be reached at 910-343-2364 or njohnson12@gannett.com.

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Downtown Wilmingtons 13-story development nears grand opening - StarNewsOnline.com

The former Anderson Storage building, above. Below, Chris Cole in the space being readied for Glen Goldbaums Lambs & Wolves salon.(Photos by John T. Ward. Click to enlarge)

By JOHN T. WARD

With the opening last week week of Sickles Market and Booskerdoo, Red Banks Anderson Storage building has all but completed a transformation in the works for almost two decades.

But for developer Chris Cole, who oversaw the project, its just another day at the office.

The north entrance of the new Sickles Market, above, and below, a rendering of the shipping container retail project planned for the site. (Photo by John T. Ward. Click to enlarge)

Whenever I finish one of these, I always feel like its a just a pause in the evolution of a property, said Cole, partner in the Metrovation development firm. Because were constantly working on whatever we do.

For example, the Grove at Shrewsbury, which Metrovation also built and owns. Im working on the next three years there how we are we going to continue to evolve and keep it interesting for our customers, he said.

As Cole spoke, a small crew was creating a green wall of plants steps away in the Anderson buildings lobby, part of a new addition that features timbers recovered from the onetime home of the Seattle Times.

The entryway separates the new Sickles Market, which hosts a Booskerdoo coffee and baked goods stand inside, and Bottles by Sickles, a liquor shop opened in October. It is space that can be used by customers of Booskerdoo and Sickles to hang out with a sandwich or coffee, Cole said.

But if the latest milestones are something of an anticlimax for Cole, theyre something else for Glen Goldbaum, whos planning to move his Lambs & Wolves salon and art gallery from Bridge Avenue to the second floor of the Anderson building.

Over the past 12 years, Goldbaum has seen the area undergo significant transformation, including construction of the Station Place apartments on Monmouth and Oakland streets, and Metrovations own West Side Lofts, a 91-unit apartment building at Bridge Avenue and West Front Street.

Now under construction just a block away is Denholtz Properties Rail development, which will bring 57 new apartments and retail space to a site that abuts the train station.

After all weve been through to get to this point, this feels like hope, Goldbaum said of the Anderson project.

A red brick fortress constructed at the corner of Monmouth Street and Bridge Avenue in 1909, the Anderson warehouse had been vacant for an estimated 25 years by the time Cole acquired it for Metrovation in late 2006. Its roof had begun to collapse.

What attracted him? I just liked the charm of it, said Cole, a 54-year-old Fair Haven resident. Theres always a feel to these things, and I thought we could do something interesting with it.

What that something might be, however, took years and several detours to be realized.

Before Metrovation came along, restaurateur Adam Rechnitz, owner of the Triumph Brewing Company in Princeton, and his now-deceased father, Two River Theater founder Bob Rechnitz, envisioned combining their creations in the Anderson site, which they and other family members acquired under the name Gemini Group in 1997.

In 2002, after Gemini acquired the former Blaisdell Lumber property on the opposite side of Bridge Avenue as the future home for the theater, Triumph proposed a three-floor, 360-seat microbrewery for the Anderson site, under plans that went before the borough planning board.

But Triumph eventually chose to open in Metrovations West Side Lofts project, also on the Blaisdell site.

Metrovations first run at transforming the 27,000-square-foot Anderson structure called for 23 residential units above two street-level stores, which won board approval in 2006. But the firm abandoned that plan in 2012, citing poor economic conditions following the global credit crisis.

Four years later, Metrovation went back to the board with plans for a four-story addition and other changes to nearly double the size of the structure, with retail space on the ground floor and offices above.

Cole told redbankgreen last week that he had been looking to land a single retail tenant, and decided one day to pick up the phone and call Sickles owner Bob Sickles, who was receptive to the idea.

Little by little we got more comfortable with it, Cole said, and the deal was announced in April, 2016.

In addition to what Cole calls an urban, grab-and-go version of the Sickles farm-style market in Little Silver, the buildings tenants includeSawtooth Group, an ad agency that took over the fourth floor last October, becoming the first occupant in more than three decades; Salt Design Company, an interior design firm; Applied Energy Group, a solar power company; Red Rabbit Aesthetics, a skincare boutique; and Dr. Robyn DelNegro.

Its still not full. Theres a breathtaking 6,000-square-foot third-floor space in the original part of the building that remains vacant, though talks with a possible tenant are underway, said Cole.

The final piece? Shipping containers, to be stacked on an island in the parking lot and used to incubate business that might someday grow up, move out and be replaced by another startup, Cole said.

While no tenants are yet lined up, theres a lot of people working out of their homes doing drop-off who have approached us, he said. The idea is get them stabilized as retail operations and then give them a gentle nudge out of the nest.

The containers are expected to debut in the spring of 2021, he said.

Goldbaum, who used the Anderson building for photo shoots when it was vacant, said Cole successfully maintained the integrity of the structure.

You wouldnt know whats old and whats new in here, he said.

Cole, characteristically, is reluctant to describe his creation as singularly transformative to the immediate area, which is also home to the Galleria at Red Bank, a former uniform factory converted to stores and offices in the 1990s.

I see it as evolution, rather than one big change, Cole said. Were just one contribution to it.

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RED BANK: ANDERSON 'EVOLUTION' ROLLS ON - redbankgreen

A third apartment building on Main Street gained approvals from the Riverhead Town Board last week.

The board voted unanimously at its meeting Tuesday to grant a special permit and preliminary site plan approval for the proposed building at 331 East Main Street.

The developer plans to build a four-story, 36-unit building on the .36-acre site. The units will all be market-rate apartments in other words, they will not be workforce housing apartments restricted to tenants whose incomes are under certain thresholds.

The developer will provide 34 parking spaces for tenants a reduction of two spaces from its original proposal to accommodate a town board request for ground-floor retail space. The original plans called for ground-floor display windows only and board members felt that does not meet the zoning codes requirements for active ground-floor uses. The plan has been amended to add an 812-square-foot retail space on Main Street at the expense of two ground-floor parking spaces.

An existing building on the site built around 1855 by blacksmith Richard Norton may be moved off-site if the town can find a suitable location. The developer will contribute $70,000 to the cost of moving the building.

The town Landmarks Preservation Committee suggested moving it across the street, to an area of the municipal parking lot between the Tuthill-Mangano Funeral Home and the Howell House. The Landmarks committee said relocating it there would fill a large gap in the row of historic houses that grace the entrance to Riverheads downtown. Discussions about a possible new location are ongoing.

The developer must still obtain final site plan approval from the town board, after it meets conditions imposed by the preliminary approval, including submission of engineered drawings and building elevations.

The other two apartment buildings on Main Street as well as one on Peconic Avenue were built as workforce housing projects.

Peconic Crossing on West Main Street has 45 rent-controlled apartments. It was completed and occupied in 2018.

Riverview Lofts is located on East Main Street and McDermott Avenue and is nearing completion and slated for occupancy this fall. It will have 116 workforce housing rental apartments plus ground-floor restaurant uses and parking.

Summerwind Square, the first apartment building constructed downtown under zoning adopted after the 2003 master plan was approved, is a four-story mixed-use building on Peconic Avenue, with 52 workforce housing apartments and commercial uses on the ground floor. The building was occupied in November 2013.

Nineteen workforce housing apartments were developed on the second floor of the former Woolworth building. The apartments have been occupied since February 2015. The ground floor has 25,000 square feet of commercial space, currently occupied by a fitness center, a hair salon, a flower shop, a mobile phone store and a bagel shop.

Plans for at least three other apartment buildings are in the pipeline: a 170-unit apartment building adjacent to Riverview Lofts; 28 apartments on the upper floors of a proposed extension to the Suffolk Theater; and 45 apartments on the upper three floors of a four-story building on the site of the former West Marine building.

The construction of the Peconic Crossing and Riverview Lofts buildings, along with the 170-apartment building proposed for the former Sears site adjacent to Riverview Lofts sparked controversy in the community, with residents complaining about the height and mass of the apartment buildings. The town hired a planning consultant to develop a pattern book for downtown development. It also hired another planning firm to update the 2003 comprehensive plan. Both of those planning projects are in progress.

The DC-1 zoning use district, which applies to the Main Street corridor, allows multi-family apartment buildings, up to five stories tall, by special permit of the town board. The code puts a cap of 500 new dwelling units in the Downtown Center-1 zoning use district.

The DC-1 district is within the Riverhead Parking District. Developers of properties within the town parking district are not required to provide off-street parking for their projects. Instead, properties within the district pay a special tax intended to fund parking facilities.

The town board held a public hearing in March 2018 on a proposed code amendment to require developers to provide on-site parking for new residential units built own property within the parking district or in the alternative make a payment in lieu of parking, or PILOP, when on-site parking is not practical. The proposal drew opposition from downtown property owners, who objected that it adversely impacted their property rights.

The proposed code has since undergone some revision and the revised draft will be presented to the parking district committee at its next meeting, Councilman Tim Hubbard, the town board liaison to the parking district, said today.

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New apartment building approved by town board - RiverheadLOCAL

Curt Gunsbury wants to replace a vacant parking lot and auto repair shop in northeast Minneapolis with a seven-story apartment building.

City zoning rules say that because the site is in a commercial zone hes required to devote a portion of the building to storefronts. Gunsbury says prospects to fill that space are dim.

Nobody wants it, and nobody is willing to pay for it, he said.

While such requirements are well-intentioned, he said, there are rows of empty storefronts near his proposed project that have had For Lease signs in the windows for years. He worries there will be more.

So Gunsbury plans to ask the city for permission to replace some of that required commercial space with walk-up apartments, which are easier to fill than retail, he said. If denied, Gunsbury said the apartment tenants will end up subsidizing the cost of any vacant retail through higher rents.

If were talking about affordable housing, this [retail rule] is absolutely the wrong thing to do, Gunsbury said, saying it can jack up rents on the tiniest units by $20 per month.

With rising commercial vacancy rates in the Twin Cities, developers are imploring city planners to let them build more apartment units on the street level where commercial space is now required. While planning departments try to make cities more livable with such mixed-use projects, developers argue vacant commercial space increases rents at a time when renters can least afford it. Plus lenders are less willing to finance such projects.

The situation is putting community planners and developers at odds over a popular, long-standing planning concept thats been credited with creating more vibrant, walkable communities in urban and suburban areas alike.

Minneapolis City Council Member Andrew Johnson said developers have a responsibility to make neighborhoods more active and said he regularly gets calls from small businesses seeking affordable spaces. So he said he often pushes back when apartment developers complain they cant find retail tenants.

Developers can make a profit, he said, suggesting that they need to re-examine their commercial rent levels and work harder to find small local businesses that would benefit the community. He also suggested they forgo luxury lobbies that go largely unused and invest instead in a little coffee shop.

Jeffrey Herman, president of Urban Anthology Commercial Real Estate in Minneapolis, said COVID-19 has essentially destroyed the inner-city commercial market and the prospects for a recovery are uncertain. And while developers would love to land a neighborhood coffee shop or locally owned service business, many of those merchants cant afford the kind of new space thats getting built. If you put in a neighborhood florist you almost have to pay them to be there because they dont make any money, he said.

Mixed-use zoning is a long-standing concept thats aimed at incorporating a variety of uses into a single development. Its supposed to enable people to live, work and shop in high-density areas. Its seen by cities as a more efficient use of land and resources.

But Gunsbury and other developers say such requirements often have unintended consequences. With demand for commercial space waning and demand for rental apartments raging, they want more flexibility.

Ted Abramson, senior vice president of multifamily investment properties for CBRE Inc., said he recently sold a 118-unit apartment building in St. Paul where 70% of its apartments rented within seven months of opening in November. But the first-floor retail space is empty.

He said its increasingly difficult to get such projects financed because lenders understand the growing demand for housing but remain leery of retail especially because its hard to land those sure-bet anchor stores such as Target, Cub Foods or Aldi.

The underwriting and the credit that a lender is willing to give toward the retail component on those mixed-use developments is heavily scrutinized, Abramson said. Even pre-COVID-19.

David Daly, a CBRE senior vice president of retail properties, said city rules can create a big risk for builders even if the deal gets financing. A housing developer could build out its first floor for a restaurant only to wind up with a fitness center tenant instead and a significant renovation bill.

Drew Johnson, senior vice president of development at Oppidan Investment Co., said mixing restaurants with housing is particularly costly because developers have to install industrial kitchen odor scrubbers or grease exhaust vents that can add $250,000 in costs.

Oppidan thought it had a home run of a plan for the city to approve when it presented its 2018 plan for 150 market-rate apartments upstairs, anchored by a Cub Foods on the first floor of its Hiawatha Avenue and 46th Street project in Minneapolis. The city, however, wanted more. It asked for small storefronts along the 46th Street side instead of just a solid wall or a window into Cubs meat section.

Oppidan complied and built a series of storefronts. But 20 months later, the 4,000-square-foot commercial space, which cost $1.2 million to build, has never had a renter. If occupied, the space could have generated $100,000 a year in rent.

The irony of it is that the citys whole policy was to help activate the street with storefronts, said Johnson. Now its a mini black eye on an otherwise successful project.

Developers often ask planning commissions for exceptions to such requirements, a process that can be time-consuming and expensive with no promise of success.

When the Minneapolis Planning Commission approved Lupe Development Partners plans to build two apartment buildings on Lake Street near Lyndale in May, the approval came with strings.

Lupe was required to include 10,000 square feet of retail on the first floor. That didnt sit right with Lupes vice president, Steve Minn, who complained to the city that its retail mandate was too great, especially when a whopping 25,000 square feet worth of storefronts sat vacant nearby.

Minn wanted to use his first floor for more affordable apartments, a community room and a fitness room. He won an appeal in June. Now construction crews are set to begin work this month on the $32 million, seven-story Lago building. It will have 132 apartments and 2,000 square feet of retail.

The purpose and the good intentions for which the retail [mandate] was originally to be a part of [apartment builds] are no longer true in the marketplace, Minn said. What you ultimately get is empty storefronts.

Minn and other developers say theyll plead with cities to let them swap retail for community rooms, fitness centers and party rooms that can be used by renters and sometimes the community. Alex Gese is taking that approach to help secure approvals to build an apartment building in south Minneapolis that would replace a longtime neighborhood restaurant. During a recent presentation to a committee of the citys planning commission, some members suggested adding commercial space to the building.

Gese, who owns other commercial properties in the area, is reluctant to revise his plans. Retailers and restaurants in the area are already struggling and hes had to lower rents, he said. If the city persists, Youre going to see empty storefronts all over the city, and I dont want to add to the glut.

Correction: A previous version misidentified Urban Anthology Commercial Real Estate.

Read the original:
'Nobody wants it.' Twin Cities developers push back on mandated storefronts in apartment buidings - Minneapolis Star Tribune

Construction is underway on a new development in Macomb.

Neighboring businesses said this brings potential for more foot traffic.

There's now a construction site in front of Farm King on East Jackson Street in Macomb.

"We are expecting to see at least maybe three new businesses, retail, commercial investments there," Macomb Area Economic Development Corporation Executive Director Kim Pierce said.

She said while they're not ready to announce what businesses plan to move in, it's an exciting time for the community.

"I know that everyone involved in it is excited to see it's finally getting some dirt moving and we'll be able to see some new construction," Pierce said.

Down the street, Brown's Shoe Fit owner Jimmie Koller said it's always nice to see new businesses pop up in the area.

"The more options that come to town is good for everybody," Koller said.

Koller has been in the east part of town for 16 years now. He said it's exciting to see the area grow.

"It means that we're moving forward as a community," Koller said. "We've got more stuff coming to town, which is going to increase everybody's foot traffic."

He said the new development also has the potential to bring over a new and younger crowd of shoppers.

"With where our population is set up, when the students come in, if it's something that benefits them, they'll start shopping more on this side of town and stay in Macomb when they spend their dollars," Koller said.

Pierce said every time a new business comes to town, the hope is that more follow suit.

"Anytime you can get new investment in the community, especially when times are really uncertain, it's a tremendous boost," Pierce said. "You know, sales tax is a good thing too, so hopefully that increase will help."

Pierce said they plan to announce what businesses plan to move into the new space in the next couple of days.

She said there's no set time line on it, but construction will continue for several months and businesses plan to move in as soon as possible.

See the rest here:
Construction starts on new development in Macomb - WGEM

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Launch in 2002, Vindico has worked with the worlds leading retail real estate developers to coordinate the deals, spaces and tenants that come together to open industry defining airport and shopping centre developments. With sister businesses Pop Retail and Volstrukt, Vindico is at the forefront of meeting the changing ways brands connect with buildings and spaces through the reinvention of the retail real estate industry. Vindicos innovative approach to giving developers opening day certainty is based on a move away from traditional, resource-heavy consulting to tackle the volatility, complexity, and dependency of todays retail development with agile, risk-aligned project solutions. Please visit: http://www.vindico.global or http://www.retailmomentum.com/india About ANAROCKANAROCK is Indias leading independent real estate services company with a presence across India and the Middle East. 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ANAROCK has a team of over 2000 certified and experienced real estate professionals who operate across all major Indian (Mumbai, Navi Mumbai, Pune, Ahmedabad, NCR - Delhi, Gurugram, Noida, Ghaziabad, Chennai, Bangalore, Hyderabad, Kolkata, Lucknow) and GCC markets, and within a period of two years, has successfully completed over 400 exclusive project mandates. ANAROCK also manages over 80,000 established channel partners to ensure global business coverage. Our assurance of consistent ethical dealing with clients and partners reflects our motto - Values Over Value. Please visit http://www.anarock.com. About ANAROCK RetailANAROCK Retail is the retail advisory and consulting arm of ANAROCK Group, Indias leading independent real estate services company with a presence across India and the Middle East. 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Disclaimer :- This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI

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ANAROCK Retail Partners with UAE''s Vindico for Post-COVID-19 Store Designs, Integrated Leasing and Tenant Coordination - Outlook India

Developers hope to break ground in 2021

| Published: 2020-08-11 16:00

An illustration of the central park proposed for the Twinbrook Quarter development in Rockville.

Courtesy Saul Holdings

Developers hope to break ground next year on a major building project along Rockville Pike that will include a Wegmans grocery store.

Last week, after more than a year of often tense public debates, the Rockville Planning Commission gave unanimous approval to the first of six phases of development.

The project is intended to transform a seven-block stretch of Rockville Pike into a world-class, mixed-use area, according to developers from Saul Holdings, the company leading the project.

Plans call for demolishing 240,756 square feet of existing commercial property and replacing it with 11 mixed-use buildings with office, retail and entertainment space and up to 1,865 apartments.

Developers have also proposed a 1-acre park in the center of the property to serve as public gathering space, dog parks, three new roads to accommodate traffic through the area and bike lanes.

The first phase includes a 92,000-square-foot Wegmans at the corner of Halpine Road and Rockville Pike, up to 460 apartments and a parking garage.

A 176-foot-tall office building is expected to be built once Saul Holdings has procured a tenant, according to Planning Commission documents. Construction on the first phase is expected to be completed in 2024.

Later phases include more housing, retail, restaurant, a possible child care facility and a 9,000-square-foot entertainment venue. In total, the project encompasses more than 2.8 million square feet of development

Construction on the complete project is expected to span about 30 years.

The multimillion-dollar project drew attention last year when information surfaced that new residences could strain already crowded Richard Montgomery and Walter Johnson high schools.

Enrollment at the schools is anticipated to be pushed over the maximum capacity generally allowed before residential building projects are put on hold.

The Rockville City Council in February 2019, however, voted to allow certain champion development projects to be granted an exemption from the school capacity rules test, which calculates the number of students a new residential development project would have.

If capacity at any school affected by the project exceeds 120 percent, development applications are generally denied.The Twinbrook Quarter project meets qualifications outlined by the council to receive an exemption

It is the first project to receive the exemption.

Caitlynn Peetz can be reached at caitlynn.peetz@bethesdamagazine.com

Read more:
Twinbrook Quarter development, with Wegmans, approved in Rockville - BethesdaMagazine.com