'Green' Isn't Just About Making A Difference; It Matters To Younger Investors, Business Owners

Are you one who rolls your eyes when NBC, MSNBC, Univision, CNBC, M-O-U-S-E all put a little green logo at the corner of their screens once a year during their "week focused on environmental issues?"

Eyes then glaze over as news stories or syposiums talk about LEEDs certification and "environmentally responsible" or "green buildings?"

Yep. I know it well. Have seen it often. But if you are an investor/owner who thinks this is so much "hooey," think again. Its not about whether you as an owner believe the hype, or whether you think it is alot of Chicken Little-ish wah-wah. Its about what your tenants, and their customers, and your future tenants believe. AND WANT.

As the old saying goes, "perception is reality." And the base of clients out there for leaseholds isn't getting any older. But as more and more Gen-Xers, Gen-Yers and the like come into more funds, start building businesses and catch the entrepreneur bug, they are increasingly looking for lease space that is "green-friendly." You already knew these generations of future clients -- whether they be tenants next week or buyers next year -- already exploit technology like no one's business. But they are more in touch with -- and advocates for -- green building standards, sustainable community planning, energy efficiency, and the like. They are consumers, whether of electronics, food, or clothing, and they are gravitating toward firms with green policies.

Some statistics from a recent program presented to our Blue Rock Midwest commercial real estate network meeting a few weeks ago:

-- If given the choice between two office spaces in two different buildings, with all other factors being equal (rent per square foot, TI, rent bumps, etc.), the prospective tenant -- by a large margin -- will choose the "green building."

-- Though there are added costs to "green" building design, or retrofitting, above traditional construction methods, "sustainable" buildings routinely demand and get a premium per square foot rate.

-- "Sustainable" building design frequently reduces operating costs. And the one most intangible argument: For a Tenant who wants to "go green," they feel they are a part of something important, and socially responsible.

Again, if you don't buy in to the discussion, that's fine. But your future Tenants want it. Don't take my word for it. News today from New York is that LinkedIn, the world's leading social networking tool for business has decided to lease the entire 25th floor in New York City's Empire State Building. Why? Partly because the owners are completing a "green makeover" of the building that cost $550 million. A popular networking tool utilized worldwide by business people of all ages (but with a demographic that skews young), LinkedIn is only one example. Google is doing the same in Mountain View, Calif. Here in Central Ohio, the brand new Franklin County Courts building was designed from the ground up to be green.

Going "green" attracts business, also. Numerous automobile dealers across the U.S. have installed "windmills" adjacent to their businesses. Whether those wind machines are hooked into the grid remains to be seen. But for younger auto buyers, most of whom are environmentally conscious, the windmill is not just a highly visible landmark to be used to give people directions. There is a subtle "sell" here from the retailer, signalling to the world that the business is a supporter of alternate forms of energy. And for a young car buyer trying to decide where to check out new or used rides, the environmentally conscious tend to lean to businesses they perceive as thinking as they do.

Again, it is entirely irrelevant what you and I think. What is vitally important is what a growing -- and economically powerful --  percentage of Tenants and future investors want. More importantly, "green" is what they are absolutely enthused about and willing to pay for.

A Tale Of Two (MOB) Theories...

No, this post has nothing to do with Tony Soprano, but the headline probably did intrigue you! I'm talking about MOBs as they apply to CRE. Confused? Okay, enough of the acronyms -- here is the MOB 411 .....

So on the one hand prognosticators are saying there isn't a better time to invest in Medical Office Buildings (MOBs), as the market changes.

Specifically, CCIM Institute reported recently, quoting from a report entitled The Outlook For Healthcare, that demand for medical services in the U.S. will mushroom. That, combined with an aging population, healthcare reform, population growth and advances in medical technology, all will drive demand for modern medical-office buildings in coming years. Specifically, the net result will be an increased demand for new and refurbished MOBs.

Okay, with that said...

Then, the same week comes details from a roundtable discussion at the 2011 Medical Office Buildings & Healthcare Facilities Conference, attended by nearly 700 healthcare real estate executives. The headline from the conference (sponsored by the Building Owners and Managers Association)? Though there is a perception that physicians are rolling in dough and have no trouble paying hefty rents for luxurious medical office space, that is not the reality. Most physicials, in truth, are dealing with declining reimbursements from both Medicare and Medicaid -- making cost containment a priority for both the healthcare community and developers.

So which theory is right? Both actually.

For developers, the focus is now on constructing new properties at different price points, especially out-patient facilities. And be focused on size, speed and spend -- the three S's. For investors, medical office still can be a very smart investment. If purchased right (and I mean by carefully looking at the numbers and making a reasonable offer, NOT stealing it), and most importantly, if managed properly!

Conditions will vary across geographic markets and will be somewhat dependent on local socio-demographics and the eventual evolution of the healthcare market. Generally, MOB have proven to provide reliable cash flow and investment returns, performing well during both good and bad economic times. The only wild card is federal intervention into healthcare, which in actuality is not intervention into healthcare, but an attack on the insurance industry. But that is a post outside the realm of real estate. Except for how the insurance industry's real estate needs are being impacted by these proposed changes. But that is a subject for another day.

Sufficed to say, the properties an evolving healthcare industry will require must evolve themselves to account for continued advances in technology, mergers and acquisitions among hospitals and health systems, and a shift toward employed rather than independent physicians.

If some predictions are correct -- and economist E. Gary Shilling projects that MOB demand will increase some 19 percent by 2019 -- savvy investors, assisted of course by seasoned commercial/investment real estate counselors, will stay ahead of this curve.

2011 Inductees To OMHOF A Reminder

When I need a jarring reminder that my "bad days" aren't that bad, there are several "places" I can go: the slow death of one of my aunts from brain cancer, the lingering death of my father from congestive heart failure, and so on.

Last Friday, I participated in a event, that I had only watched from a distance before, that adds to the list. The 2011 induction ceremony of the Ohio Military Hall of Fame.

All of these veterans honored last week were lucky to make it home alive, but what distinguishes the Class of 2011 from other service veterans is that they were decorated for Valor. They weren't just "there," but risked their lives for a greater objective.

I was honored to serve as Master of Ceremonies for the 2011 ceremony last Friday at the Ohio Statehouse. Listening to the citations, and pondering those actions described while standing just feet from most of these men or their families, brings it all back home. When I think I am having a bad day, it is nothing compared to the significant sacrifice of their youth, whether it was in one of the world wars, Korea, Vietnam, the Gulf War, or the Global War On Terror.

To the Board of Directors of the OMHOF, thank you for honoring me by asking me to emcee the event. It is a day I will never forget.

And of these honorees, we should never forget how they fought for our freedoms, and the reminder it gives us of the men and women who sacrifice right now (often in anonymity) who are fighting for our freedoms in faraway places even today.

Sister Residential Company Rolls Out Text Marketing Technology

Prudential One REALTORS is our sister residential company, operating in some 17 counties in southwest Ohio, with a number of offices anchored by a huge presence in Cincinnati and Dayton. In fact, POR is the largest Prudential residential franchise in Ohio.

Anyway, I wanted to comment on a nifty marketing tool they recently rolled out. An "Text To MLS" tool that enables buyers using a smart phone to receive detailed information and photographs about a specific home, and similar homes being offered in the same neigborhood, by simply texting a five-digit number to POR.

Pretty slick.

As my colleague Nancy Cropper says, if you can vote for Dancing With The Stars or American Idol, you can use this service! Gotta love technology.....

VLOG: Life Settlement Notes Help CRE Sellers, Buyers Bridge The Gap

ASU Study Shows That Commercial Market In Phoenix Rebounding

Why is it important to note that fundamentals of commercial/investment real estate are coming back in Phoenix, Ariz.?

Because the Phoenix area -- like Las Vegas, like Southwest Florida, and a handful of other areas -- were among the hardest hit by the DROP in housing and commercial property values. So here we have an independent study by a major university noting that commercial property prices in the Phoenix area are "gaining steam."

More good news and yet another piece of the larger puzzle illustrating the market is coming back strong.

Warren Buffet Says CRE Showing Signs Of Strength

Respected financier/investor Warren Buffet -- who is financing many multifamily acquisitions through a joint venture around the U.S. -- acknowledges that the commercial/investment real estate sector is showing signs of strength.

“There’s been certainly less of a crack in prices than I would have expected,” Buffet said in an interview Sunday in Omaha, Neb., where his Berkshire Hathaway organization is headquartered.

For the full story, click here.