by Geoff Grossman

The internet is GREAT at a LOT of things…

Probably seems like the understatement of the millennium, huh? The World Wide Web has revolutionized communication, spawned entire new industries, and killed off quite a few trades, too.

In short, the web has fundamentally alternated the fabric of our society at large, not to mention drastically reshaped much of the business world, and commerce as a whole.

Real Estate and the Internet…

The impact of the internet upon commerce is CLEARLY evident in real estate.

One of the initial adopters of what, at the time, was a rudimentary form of the internet, early Multiple Listing Services put entire market inventories literally at the fingertips of every real estate agent working that market.

Few in the business now remember a time when there was no such thing as “comprehensive inventory list.” A time when agents relied on manually published lists share office-to-office and person-to-person. And local newspapers SINGULARLY DOMINATED real estate advertising.

Landlord + Tenant Deal-Direct Listing Services

Nowadays, beyond just the MLS, there are direct-to-consumer real estate listing and search tools. Landlords can list retail space and tenants can locate said space entirely online. An approach that ostensibly eliminates the need for a broker.

Marketing Vs Sales – Where an Actual Broker Defeats the Internet

But while this so-called “revolution” in real estate seemingly saves landlords on commissions (and potentially lowers rental rates for tenants based on those commissions savings), it forgets the fundamental HUMAN factors that have driven real estate since the very first property ever changed hands.

Yes, the internet is an exceptional marketing tool. Perhaps the greatest our society has yet to devise. But there is an essential difference between MARKETING and SALES. And in the real estate game, there is no better SALES tool than a real live broker.

How so? Well, friends, that’s the central question at play here. And to answer this query, here are four reasons a why a broker is every landlord’s most invaluable sales tool…

Information on its Own Only Has So Much Value…

The internet is GREAT at cataloging information. You can find ANYTHING + EVERYTHING. In fact, online you can stumble across lots you’d rather never have known even existed.

And the internet is great a making vast stores of knowledge immediately accessible. It’s all there, literally at your fingertips.

But information alone is just a pile of facts… You could exhaustively research the three laws of Thermodynamics. But if you’re like most people, that wouldn’t get you any closer to a thorough grasp of physics. For that, you’d need a knowledgeable expert to interpret and explain the material in language that someone short of Ph.D. in theoretical physics could understand.

Similarly, you could compile a list of every 1,500 SQFT retail unit for lease in Los Angeles. But that wouldn’t tell which vacancy genuinely suited your purposes. You’d need a knowledgeable expert to help you make that determination.

Information Vs. Persuasion

As stated above, the internet makes it easy for tenants to determine space availability. Anyone can hop online and pull up a relatively comprehensive list or the retail space available in a given market or even variety of markets.

But again, that’s just a big pile of info. The internet opens the door and peaks interest. But posting your vacancy online doesn’t persuade, it doesn’t close the deal.

That requires a knowledgeable sales professional…

The Value of a Sales PROFESSIONAL

A sales agent offers far more than just facts. An agent knows a property, intimately. An agent knows the tenants in and around the center. Understands the community and surrounding areas. And has a strong grasp on the type of tenant that will thrive or wither in a particular property and given location.

The qualification process, which is the ultimate deciding factor in any retail lease, resides solely with the leasing agent. The internet can’t help you evaluate a prospective tenant’s financial position, track record, or ultimate viability in particular property or broader location.

A Stake in the Final Outcome

The internet doesn’t care one way or another whether you lease your vacancy. It’s just a catalog of information. The internet persists irrespective of your circumstances.

A leasing agent, on the other hand, has skin in the game.

An agent…

== > Is motivated to lease your property as expediently as possible – because that’s how they get PAID…

== > Has vested interest in placing a viable tenant guaranteed to survive over the long haul – lest they must re-lease the vacancy after a failed tenant departs for little or no additional compensation…

== > Strives to do the best job possible – because they want to earn your repeat business and referrals thanks to you sharing your satisfaction with fellow landlords and real estate investors.

The CBM Difference…

These days, most leasing and sales brokerages provide agents with a phone + computer, and turn them loose. Meanwhile, most of those agents spend the majority of their time hanging around the office, waiting for leads to fall into their lap.

Because it’s the “internet age,” right? So, everything comes to you. Not hardly.

At CBM, “Old School Methods” of retail leasing reign supreme!

So, what does that look like, practically speaking? Our agents are…

== > In the car, driving their territories. Every day. Day after day…

== > Out canvasing, meeting + greeting, glad-handing, passing out flyers, and generally seeing and being seen in their marketplaces…

== > And actively sourcing new listings and potential tenants.

Our agents are NOT…

== > Hanging around the office, playing on the computer, waiting for the phone to ring.

Need Assistance Leasing Your Shopping Center?

If the CBM method of retail leasing appeals to you, find out at: cbm1.com/services.

About the Author

Geoff Grossman, a senior retail broker, joined Centers Business Management (CBM) in 1999. Mr. Grossman primarily handles landlord representation, specializing in retail leasing and investment sales throughout Southern California.


Last fall, international toy merchandising giant, Toys ‘R Us, filed for bankruptcy under Chapter 11 protection. The move was intended to give the struggling business “greater flexibility” in dealing with it’s $5 billion in long-term debt.

Then last month, the company announced the intention to close 184 stores, paring down its 700+ locations across the United States. This step was a further effort to clear the financially ailing retailer’s balance sheet in hopes of attracting a would-be investor to bail out the company.

Unfortunately, the bid failed. As a result, Toys ‘R Us has announced plans to close all US-based stores.

The company’s faltering sales are largely attributed to increased competition from eCommerce outlets, chiefly, Amazon. In addition to a strong push among discount retailers, such as Target and Walmart, to capture a larger portion of the toys sales market. An effort that has proven successful, much to the chagrin of Toys ‘R Us.

Toys ‘R Us has offered no immediate timeline for store closures. And no outline for where the process will begin or how it will progress regionally.

The silver lining…

In CoStar’s recent State of The Retail Market presentation, the firm’s economists noted the majority of Toys ‘R Us stores boasts a strong “location score.”

This is a proprietary scoring metric that factors income demographics, the financial health of adjacent retailers, and overall commercial property values to determine a location’s “investment quality.”

And according to CoStar’s data, Toys ‘R Us anchored or occupied shopping centers demonstrate consistently high investment quality.

This indicates that despite the fact that Toys ‘R Us happens to be vacating a center, the property is none-the-less an ideal site for replacement credit tenant.

In other words, a bevy of prime real estate ripe for willing takers is about to open up!

And this is good for…

Landlords:

Yes, many an aggrieved landlord is about to lose a major credit tenant currently occupying a LOT of space in their center. That said, however, there is a sizable pool of strong replacement tenants waiting in the wings.

Tenants:

The shortage of A+ space has been one of the biggest roadblocks to many expanding tenants. Meanwhile, the locations the majority of Toys ‘R Us stores currently occupy are exactly the type of sites most credit tenants salivate over. And more than a few of these locations are about to become available.

Brokers:

There many big deals looming on the horizon ; —)

Thus, despite Toys ‘R Us’ clear misfortune, the situation is by no means a net loss.


Grocery Stores Slow Expansions, but Prepare Big Changes

By Globe St | February 28, 2018

CHICAGO—Grocery-anchored centers continued to be an attractive property type for investors in 2017, with sales volumes increasing by 5.3%, according to JLL’s Grocery Tracker 2018 report. The asset class remained stable even though investors kept most other retail types at arm’s length.

But regardless of the overall stability, many grocers continue to experiment with new strategies like healthier food options, more advanced technology, and the possibility of alliances with non-grocery companies, leading Chicago-based JLL to conclude that this retail sector will have an eventful 2018.

Last year, the industry took a breather in some ways. Builders slowed the pace of new construction in 2017, opening 13.4 million square feet of space, which represents a decrease of 28.8% year-over-year, JLL finds.

“It’s not surprising that overall grocery store expansions fell in 2017, when compared to the boom in 2016,” says James Cook, the company’s director of retail research. More than one-third of new store openings were in just three states: CA with 1.6 million-square-feet, and NC and VA with growth of 2.7 million-square-feet across both states. “Retail follows rooftops, so the states with strong population growth will continue to see an influx of grocers.”

Consumers have become partial to specialty grocers, discount grocers and wholesale clubs, he adds, putting pressure on the largest grocery chains. “But we are seeing strong local chains competing head to head, and winning. Locations within the trade area and in the right markets is key.”

Healthier food choices, especially at affordable prices, was one of the three main strategies which helped many grocers compete. Aldi, Lidl and Grocery Outlet have done well by embracing gluten free and vegan-only diets. Aldi, for example, launched LiveGFree, a gluten free product line, in 2014, while Lidl offers shoppers a vegan option.

Moves like this helped Aldi expand its market share, JLL finds. The discount grocer significantly grew its presence last year in CA, VA and TX. And it plans to invest $3.4 billion in store expansions over the next four years while also remodeling 400 existing properties.

Grocers that sell products under private labels also have a competitive advantage. Consumer tastes can change quickly, JLL points out, but private labels allow grocers to quickly respond to market changes. Furthermore, cutting out the middlemen can double profit margins. Albertsons, one of the nation’s top grocers, recently added hundreds of new USDA-certified organic products to its O Organics private label. The line just hit $1 billion in sales in the most recent year, a 15% increase, and the grocer plans to add hundreds of more new products in 2018.

Like most brick-and-mortar retailers, grocery stores have begun establishing online shopping options. Still, JLL finds that online penetration in the sector remains at a mere 0.8%.

But property owners can expect grocers to continue experimenting with online shopping, grocery delivery and click and collect. Kroger opened its 1000th ClickList store, where customers can have items brought to their car after ordering online. The service has been a hit with shoppers, and Kroger has seen digital sales more than double since the launch.

JLL advises investors to pay attention to the strategies adopted by grocers. “Owning a property anchored by one of the top grocery chains is no longer a guarantee of strong performance,” says Chris Angelone, the company’s retail investment sales leader. “Owning retail is like owning an operating business, and investors need to keep in mind changing consumer preferences.”

The biggest recent news in the grocery world was Amazon’s $14 billion acquisition of Whole Foods. The implications of that move are not yet clear, but JLL expects more partnerships between grocers and non-grocery companies “that focus on innovation and technology that can build upon digital networks, logistics, delivery, and customer engagement.”


Which Net Lease Assets Are Selling Like Hotcakes?

By Globe St | March 1, 2018

CORONA DEL MAR, CA—Single-tenant retail assets priced $5 million or less continue to sell with the most velocity due to having the largest audience of prospective investors and all-cash buyers that are less dependent upon financing, Hanley Investment Group EVP Bill Asher tells GlobeSt.com. In addition, he says grocery-anchored shopping centers with reported successful sales and a complementary mix of Internet-resistant retailers will continue to be in high demand and command top-of-the-market pricing.

“In 2017, we saw sellers continue to push the market with aggressive pricing on the marketing and sale of single-tenant retail, especially coming off peak market pricing in 2016 driven by record-low interest rates and investor demand,” says Asher.

He adds that overall activity and buyer interest decreased, with buyers proceeding with more caution in previous years. This created larger spreads between where a property was listed for sale, what range buyers submitted offers and final closing prices. “Watch for brokers to strategize with sellers in more depth in 2018 in properly adjusted pricing to better meet the transitioning market on all retail product types to more efficiently and effectively consummate sales this year.”

Another development that was pleasing to the net-lease sector was where 1031 exchanges wound up in the new tax plan. “We were pleased when the 1031 exchange was left alone in the tax bill, and that activity will continue to support our business as long as it remains intact,” says Adam Scherr, an advisor with Sands Investment Group. However, he tells us there is some concern with interest rates rising since the end of last year and a lag time between rise in cap rates and interest rate.

Still, the net-lease investment market is seeing increased velocity and deal flow on a national basis, Kyle Gulock, senior managing director of Charles Dunn Co. Inc., tells us. “The main drivers for this are a strong economy, job growth and overall consumer confidence. This has led to increased deal flow across all sectors of the real estate industry, which has created an expanding buyer pool of 1031-exchange buyers.” Gulock says that 82% of the net-lease transactions his group completed in 2017 involved a 1031-exchange buyer from California.

With a market that appears to be trending toward a more consistent, higher-interest-rate environment, net-lease investors should be paying more attention to their strategies with existing properties they own and properties that they are looking to acquire, says John Read, first VP with CBRE’s National Retail Partners—West team. “Interest rates and cap rates remain near historical lows, and it makes sense to sell, buy and/or refinance. If investors are not doing one or all of these in today’s market, they might be missing an opportunity.”


Vibrant Retail Pockets Exist Everywhere

By Globe St. | February 26, 2018

The “demise” of brick and mortar retail, pop-up shops, new technologies, decreasing sales, increasing sales, destination retail—opinions on the future of retail are many and varied, causing a pause among traditional investors. That is according to a panel at the recent MBA’s CREF/Multifamily Housing Convention and Expo 2018. “As ecommerce continues to grow, the risks and opportunities for lenders remain difficult to forecast,” panelists said.

In the brick and mortar, e-commerce, demographics and technology session, panelists took time for a reset and provide their perspectives on retail real estate and the components necessary for success in an e-commerce environment. Victor Calanog, chief economist and SVP of REIS, said that the big boogie man in the room is how online sales are affecting brick and mortar. But he said the answer is that the number is really only 9%, which he says is “surprisingly low.”

But that number, he says, includes things like gasoline and car sales, and if you strip those out, the number is closer to 30%. “Sure, there is a lot of stress on brick and mortar, but those scary headlines don’t capture the full picture.”

Calanog explained that it is easy to really highlight stories of store closing, but there is a lot happening out there that don’t highlight that the action might just be shifting somewhere else. “What’s more important is to look at which brick and mortar are doing well and why.”

Ryan G. McCullough, senior real estate consultant at CoStar Portfolio Strategy, says that while there is some concern from retailer productivity, ultimately when we look at what public retailers are reporting today at in store sales, they are 19% less than they have done over a long term average. But what does that mean for the market, he asked? “It means closures in some cases, but it is for the worst performing stores.”

In some cases, he explained, e-commerce is complimentary to brick-and-mortar. “If we didn’t have online sales, we would have about 300 million square feet more space occupied for retailers. The question then is, if e-commerce is hurting some stores, but it is benefiting others, how can we tell the difference?”

He pointed out that vibrant retail pockets exist everywhere. “When you look at the assets you are lending on, you have to think about all that. Tenants also plan an important role in the success of a center long term and location quality is a strong predictor of loan performance.”


Another ICSC Idea Exchange is in the books!

With nearly 1,000 CRE professionals, related service vendors, and municipalities in attendance, this was one of the Southern California Idea Exchange’s biggest gatherings ever.

This year’s Idea Exchange saw a look, new location, and a leap in attendance + exhibitor participation over last year’s go-around. Now that ICSC’s Western Division Conference has found a new home at the Los Angeles Convention Center, ICSC organizers chose to relocate the annual Southern California Idea Exchange to the Anaheim Convention Center. Just a block over from Downtown Disney, the convention center looms over the back side of Disney’s California Adventure theme park.

And with 870+ pre-registered (a 300+ attendee jump over last year’s tally of 520) and 120 exhibitors (30 more than last year’s 90 total exhibitors) clearly, the change of scenery was a positive shift!

As usual, CBM exhibited at the event, hosting the table you see above. And our talented team of industry-leading retail leasing agents + property managers were on in hand in force, meeting and greeting all comers.

If we didn’t see year this year, hopefully, we’ll catch the next time around. Stay tuned!


In a recent post, we outlined the legal steps necessary to remove a homeless person from your shopping center.

But as that post illustrated, taking the legal route is a time consuming, arduous, and often ineffective approach… Unfortunately, many homeless habitually return to centers over and over, even after an arrest and jail stay, which is usually short (as trespassing is a misdemeanor charge).

This is largely because a great many homeless are mentally unstable and tend to frequent locales they’re familiar with or comfortable in.

So, if legal action is a stalemate, what’s the solution to keeping the homeless off your property?

Here are seven strategies that have proved successful in discouraging homeless from taking up residence at retail shopping centers:

Redesign Landscaping

Large bushes and shrubbery positioned alongside buildings make for excellent blinds. The homeless can hide or sleep behind such vegetation day or night..

Alternatively, succulents (for ground cover) and palm trees eliminate convenient hiding places.

Diligently Trim Landscaping

But what if a complete landscape replacement planting is NOT in your budget (which is certainly true for many)? Attentive landscaping maintenance is your next best alternative.

Regularly pruning bushes and shrubbery, ensuring they’re lean and trimmed back goes a long way toward eliminating common hiding places for would-be homeless campers.

Secure Dumpsters, Trash Enclosures, Storage Sheds, and Other Out Buildings

Just about every strip center has a dumpster for trash and recycling collection. And many have trash enclosures (technically intended to keep people out of dumpsters), well others also feature storage sheds or other out buildings.

Unfortunately, these containers and storage areas are among the most popular hiding spots and sleep quarters for homeless campers. Ensuring such containers and areas are always under lock + key provides a strong deterrent.

Restricting Access to Any Areas Open to Potential Loitering

Many strip centers have overhangs and alcoves in various places around the building exterior.

Gating, fencing or otherwise limiting access to these areas eliminates another hiding and sleeping spot popular among homeless campers.

Preventative Maintenance

The clutter of litter and trash gives a property an unkempt aura. And such locations seem to invite transients, as they tune into the vibe that: “no one maintains this property, so no one will bother me here.” Moreover, homeless tend to blend into poorly maintained centers, appearing to be part of the property’s “natural landscape.”

The presence of homeless is quite apparent, however, at a property that’s clean, clear and well-maintained.

As such, keeping your property clean and well-maintained is another strong deterrent.

Onsite Security or Security Patrol

If homeless loitering or camping at your center is a particularly egregious problem, and the legal route has proven ineffective, private security is another option.

Of course, you would bill the service back to your tenants as a CAM expense. Given the added cost, however, private security only makes sense if tenants agree the homeless presence is a strong detriment to their business, and security is only reliable recourse.

But keep in mind, there are options to mitigate costs. A regular security patrol is a lower cost alternative to permanently installing a security guard onsite.

Proactive Response Plan

Whether you’ve gone the legal route and have a standing police order, contract with private security, or have designated a property manager to deal with the homeless, defining a specific response plan is a useful tool.

If a tenant notices a loitering transient, who do should they contact first? And how is the response escalated from there?

A swift and consistent response is often an effective deterrent to homeless occupation of your center.

Need Help Clearing the Homeless From Your Shopping Center or Managing Other Aspects of Your Retail Property?

For many retrial strip centers, homeless are a fact of life. And any hope of completing eliminating the problem is unlikely to come to pass.

But as outlined above, there are strategies to mitigate the problem. And hiring a professional property management firm can help!

A property manager can…

== > Solicit competitive landscaping bids, should you decide to redesign your landscaping.

== > Monitor landscaping and oversee vendors to ensure your center’s vegetation remains trimmed and lean.

== > Monitor dumpsters, trash enclosures, and other storage facilities to ensure they’re clear homeless intruders and locked up tight.

== > Monitor sweeping and trash collection vendors to ensure your property remains clean and clear of trash and other debris.

== > Solicit bids for security services, should you decide to hire private security.

== > Act as the contact point-person in your proactive response plan, initiating either police or security contact.

Meanwhile, this is a just thin sliver of the services professional property management provides.

For More Information on CBM’s Property Management Services…

Visit our Services page at cbm1.com/services.


We’ve all seen them, right?

Shopping centers in which vacancies appear to linger forever. And sadly, when empty shop spaces hang around, vacancies seem more apt to increase, rather than the other way around.

And if you’re a shopping center landlord, this is an all too familiar, not to mention frustrating scenario. Especially when you’ve hired a leasing broker to fill your property’s vacancies.

It’s also a sign…

That it may be time for some “new blood.” In the retail real estate industry, this phrase means it’s time to bring in a new leasing agent with fresh perspective and potentially a new bag of tricks to get your center leased.

The fact that new blood me be in order doesn’t diminish your current agent or their efforts to lease your property. Truthfully, your agent is likely perfectly competent. But for whatever reasons, their undertakings have fallen short.

And in this situation, a new agent is often preferable to letting your center remain vacant. Because for a landlord, there’s nothing more anguishing than watching your profits evaporate, while fretting that other tenants may be contemplating jumping ship, too.

And lingering vacancy is not the only sign it’s time for some new blood. Other agent habits also indicate the need for a change.

Toward that end, here are three signs that it’s time to hire a new leasing agent…

Infrequent Communication

A dedicated agent regularly updates landlords. Your leasing agent is your conduit to what’s happening with your property. As such, your leasing agent should be reporting to you at least once a week. Even if the update is: “nothing new to report.” In the absence of regular updates, you’re left completely in the dark and wondering what’s happening with your property???

Moreover, you’re paying for your leasing agents services. You shouldn’t have to chase them for information. Instead, keeping you informed should be your agent’s #1 priority!

Undocumented Leasing Efforts

Even is a leasing agent quickly leases a vacancy, as a landlord, you can’t help but wonder: “What are these guys REALLY doing for me???”

It’s easy to take your leasing agents efforts for granted. But a dedicated agent, however, is hard at work sourcing a quality tenant for your property.

And such agents documents their efforts with progress log. This log includes all…

== > Incoming tenant inquires (whether from sign calls, LoopNet or web-search, referrals, etc…)

== > Tenants contacts (dedicated agents maintain active tenant lists and promote new listings to those tenants)

== > Tenant rep brokers contacts (dedicated agents cultivate strong relationships with active tenant rep brokers and promote relevant new listings to those brokers)

== > Corporate real estate reps the agent has shared the vacancy with (listings in exceptional locations may interest corporate tenants. And savvy agents have avenues by which to reach corporate real estate reps and promote relevant listings to those reps)

Poor Follow Through

If you’re like many landlords, you’ve probably received a call from a prospective tenant that sounds something like this…

“I left 17 messages for the listing agent, and they haven’t returned any of my calls!? I REALLY want to lease your space! PLEASE CALL ME.”

The “17 messages” claim is likely an exaggeration. And of course, leasing agents have their own tenant vetting process. But a tenant that’s motivated enough to seek out a landlord’s contact info and reach out directly is at least worth a callback.

Never mind that your agent should follow up on all tenant inquiries. And report the outcome to you, whether the lead pans out or not.

Need Some New Blood to Lease Your Shopping Center?

If, in addition to lingering vacancy, the other points outlined above resonate with you, it may be time to consider bringing in some “new blood” to lease your shopping center.

And if you’re in the market for new leasing services, CBM can help! Since 1987, we’ve served hundreds of landlord’s, leasing thousands of retail spaces throughout Southern California.

For more information, visit cbm1.com/services.


Broad Yet Subtle CRE Changes Coming Through Tax Reform

By Globe St. December 27, 2017

“The new tax law is generally benign for commercial real estate, but there are many nuances that will affect investor’s real estate and their after-tax returns,” says John Chang.

CALABASAS, CA—The passage of the long-anticipated tax reform legislation will take effect next year, leading many investors to the arduous task of recalibrating their strategies and assessing how the changes will affect their assets. As John Chang, first VP of research services for Marcus & Millichap, explains, “The new tax law is generally benign for the commercial real estate sector, but there are many nuances that will affect real estate and the after-tax returns of investors.”

Before considering some of the specific provisions, it is worth noting that the simple act of passing tax reform legislation itself could significantly benefit the sector. The clarity on tax reform will reduce the uncertainty that has weighed on the marketplace. As Chang states in a Special Report issued by the company, commercial real estate investors who may have been hesitant to move previously, will now have a much better understanding of the investment real estate landscape and can formulate a plan under the new rules.

“Over the last year, a more cautious outlook pervaded the industry as investors awaited clarity on taxes, fiscal policy and a change in Federal Reserve leadership, causing many investors to move to the sidelines,” says Chang. “That guarded approach to investment planning and underwriting could begin to ease as the implications of the new tax rules are better understood, and investors are able to assess their investment strategies with a new tax perspective.”

(Please click here for the Special Report and details of the tax changes. Highlights follow.)

For the commercial real estate industry, a notable concern over tax reform was the fate of 1031 like-kind exchanges. However, as Marcus & Millichap reports, the final version of the bill passed by Congress is expected to have no major impact on this area of commercial real estate investment. Other risk factors at the top of investors’ minds were the ability to deduct mortgage interest, how investment real estate depreciation would be handled and potential changes to carried interest. Though each of these very important considerations face some change, they were largely maintained in-tact.

From an asset performance standpoint, several changes by the new tax laws will affect specific property types. The elimination of the individual mandate requirement in the Affordable Care Act could hold ripple effects for healthcare real estate. According to Chang, “The elimination of the personal mandate is anticipated to reduce the number of insured by an estimated 13 million people by 2027.” That said, although having fewer insured could reduce demand for medical services by an estimated 5 percent, the actual impact on medical office space and seniors housing over the next decade should not be too impactful. Chang notes that “the direct effect on healthcare real estate performance should be nominal.”

Other changes to the tax laws that could impact asset performance are centered on owner-occupied real estate. The changes will likely bolster long-term demand for multifamily housing, stemming from provisions that increase the standard deduction and cap the deduction of combined property taxes and mortgage interest deductions.

“Increasing the standard deduction to $24,000 for married couples and $12,000 for individuals and capping the deduction on combined property, sales and state income taxes to $10,000 lowers the incentive to itemize deductions,” says Chang. “This shift could diminish some of the allure of homeownership for first-time buyers, and prompt additional demand for apartments.”

Finally, reduced taxes on pass-through entities may also have an enormous impact on commercial real estate investment. For current real estate investors who are not already using an LLC or other pass through business form, the new tax laws could spark an entire portfolio reevaluation as they restructure their business model. For investors who are not already in commercial real estate, the new tax rules offer prospects of higher after-tax yields than other investment options. This change could entice significant additional capital to the CRE marketplace.

In all, the clarity the new tax law provides will position investors to make more informed decisions and leverage new mechanisms to optimize their investment strategy. With the enactment of the law, it is important for investors to reevaluate their strategies now so they are poised to maximize value when the law goes into effect.