Demand response is an energy-saving tool that encourages customers to shift their electricity use to times of day when there is less demand on the power grid or when more renewable energy is abundant.

Karan Gupta at 77 West Wacker's Central Command Center

Karan Gupta at 77 West Wacker’s Central Command Center

This has been at the core of the work of Karan Gupta, a high-performance building consultant and Environmental Defense Fund Climate Corps fellow based in North Carolina. His host company, Jones Lang Lasalle, is the property manager for 77 West Wacker Drive, a 50-story office building in downtown Chicago. Here, his focus is on maximizing the benefits of demand response, which already have been implemented through multiple technologies.

Currently, 77 West Wacker is enrolled in the PJM demand response capacity market through a demand response service provider. There are standby payments for demand response commitments, meaning that the building is paid for simply making itself available to reduce energy demand when called upon to do so. In addition to these standby payments, the building is paid for with actual energy conservation as real demand falls below baseline demand during emergency events. The building also participates in voluntary price-based demand response, whereby energy conservation is performed in non-emergency events to take advantage of opportunities when real-time energy prices exceed the fixed rate that the building pays for energy.

Load-Shifting Makes It Easier To Bear

The software platform provided by the demand response service provider allows engineers to view the building’s baseline demand, real-time action alerts and forecasts for weather and energy prices. When the grid is stressed due to extreme weather or system lapses, the engineers receive notification, usually the day of, to enact demand response protocols. While extreme weather may or may not result in an emergency event, it almost always presents earnings opportunities through economic demand response.

For this reason, the team here is proactive and monitors weather forecasts throughout the Midwest and East Coast, and usually has taken action by the time emergency notification is received. In the summer, the primary form of action is “load shifting,” a process works by pre-cooling the building during early morning off-peak hours and reducing cooling demand during peak hours.


(Credit: Karan Gupta)

A hypothetical demand response event in which load shifting was used. In this snapshot, the red line represents the baseline and the green line represents actual building use. Actual use exceeded the baseline in the morning hours when building equipment ramped up to pre-cool the building (there is no penalty for going above the baseline during non-peak hours), and then around 10 a.m., the equipment ramped down for the rest of the day as it had to work less hard to maintain the lower temperature. During the period where the green line is below the red line, real-time energy prices are paid back to the building for the difference between baseline energy consumption and actual consumption.

BAS + VFD Spells Comfort’

When a non-weather event occurs, load shifting may not be an option, and instead a series of minor operational adjustments must be made to achieve the necessary reductions. Tenant comfort is an important consideration when making these adjustments, as reasonable temperatures and minimum levels of ventilation have to be maintained. Excessive ramping and cycling of equipment also should be avoided to prevent undue stress and shortened life. Where base building equipment adjustments alone are not sufficient, the building may send out notices for tenant involvement. Effective communication is critical for tenant satisfaction, but to that end, building management has performed exceedingly well, making efforts to educate occupants about the value of demand response.

The two primary technologies that have enabled demand response capability at 77 West Wacker are the building automation system and variable frequency drives. The BAS allows for monitoring and control of the various equipment from a central command center. This control is necessary to quickly enact demand response protocols while guarding the health, safety and comfort of the building occupants. In the past, motor-driven equipment such as fans and pumps either would run at full load or not at all, and when at full load, would be modulated by dampers or fans. A common analogy is using the brakes to control the speed of a car while pushing the accelerator to the limit. VFDs basically provide throttle control and allow for the modulation of such equipment.

Aiming Higher

The next step in fully implementing demand response at 77 West Wacker is enrolling into ancillary services, which are used to support the transmission of electric power from seller to purchaser (scheduling and dispatch, electric grid protection, etc.). While BAS and VFDs are a strong first step, further hardware and software investments will be necessary to make frequency regulation possible. To some extent, real-time control will have to be relinquished to the system operator, but the primary objective still will remain to maintain tenant satisfaction. Automated scripts that guide operational parameters within predefined limits occasionally will have to override signals to ramp loads up or down.

Cracking the code for successful implementation hopefully will release a new wave of revenue for property managers around the country while enhancing grid reliability.


Source: GreenBiz

It may be true that all real estate is local. But it is also true that real estate has become a global business.

Yet the way that real estate is measured continues to be based on local practices. This is about to change with the work being done by the International Property Measurement Standards (IPMS) Coalition. The coalition – of which IREM recently became a member – is an international group of professional and not-for-profit organizations working collaboratively to develop and help implement a single global property measurement standard.

The IPMS coalition came together out of a globally recognized need for, and with the goal of creating, a shared international standard for property measurement. Currently, the way real property assets are measured can differ dramatically from one asset class to another and from country to country. This makes it extremely challenging for global investors and occupiers to accurately compare space. Indeed, a property’s floor area measurement can deviate by as much as 24 percent, depending on the method used, according to research findings by the international commercial real estate services and investment management firm JLL. As declared by the trustees of the IPMS coalition, “Our profession and marketplaces deserve better.”

In advancing IREM as a member of this coalition, IREM President Joseph Greenblatt, CPM, asserted that, “Real estate today is playing out on the world stage, underscoring the growing need for internationally uniform industry standards and practices. With members in 39 countries and on six continents, IREM enthusiastically supports the efforts of the IPMSC to establish globally consistent and recognized property measurement standards, confident that they will lead to greater marketplace transparency, stronger investor and public confidence, and increased market stability.”

The IPMS coalition was organized in May 2013, and already is nearing completion of its initial standards for measurement of offices. Work has already begun on IPMS for residential properties; this will be followed by industrial, retail, and other sectors.

IREM is one of 44 organizations that comprise the IPMS coalition, all of which have committed to promoting the implementation of property measurement standards and encouraging world markets to accept and adopt the IMPS as the primary method of property measurement.


Source: NREI

In a 90,000-square-foot warehouse not far from Chicago’s Midway Airport, the future of urban farming has taken root. Welcome to the world of vertical farming.

Long shelves thick with fresh herbs and salad greens sit beneath hundreds of fluorescent grow lights. There are planters of basil, watercress and kale stacked in neat rows reaching the ceiling, afloat in a nutrient-rich stream of water fed by large blue tanks filled with tilapia. It’s an eerily beautiful scene, interrupted only by the occasional worker driving an aerial lift through the aisles, stopping to pluck handfuls of greens ready to be packaged and distributed throughout the city.

As the demand for fresh, locally grown food has increased among urban consumers, businesses like FarmedHere, which runs the Chicago warehouse, have stepped in to compete with conventional farms. Using advanced hydroponic and aquaponic methods, they’re growing fruits and vegetables year-round in facilities that are often in the same neighborhood as the restaurants and retailers they supply. Proponents like to call it ultra-local farming. “We can grow 200 percent more food per square foot than traditional agriculture, and without the use of chemical fertilizers,” said Mark Thomann, chief executive officer of FarmedHere.

The Association for Vertical Farming, an industry trade group, says vertical farms use 98 percent less water and 70 percent less fertilizer on average than outdoor farms. Weather fluctuations aren’t a factor, and neither is soil management. They can harvest crops as often as 20 times a year, and with their stack-it-high layout, occupy a fraction of the land traditional agriculture requires. So efficient is vertical farming that many believe it could move beyond a niche market and become a solution for food insecurity in the United States, which affects nearly 15 percent of households, according to the U.S. Department of Agriculture. Some believe it could even be the future of agriculture altogether, with climate change negatively affecting rural farmland while the global population continues to swell. By 2050, the World Health Organization estimates, there will be 9 billion people on Earth, with 70 percent of them residing in urban areas.

But before vertical farming can conquer the world, it has to prove it can scale up and be as environmentally sound as its backers claim. Of the many questions surrounding these ventures, the most important one may be whether it is a good business model to begin with. Thomann certainly believes so. In the two years FarmedHere has been in business, it has expanded distribution to dozens of supermarkets throughout Chicago, including all of the city’s Whole Foods locations. The company packages its own herbs and salad greens, which are certified organic, and can deliver to stores within 24 hours of the product being harvested.

FarmedHere’s foray into urban agriculture has been so successful, it’s planning to build vertical farms in other cities. “From an economic standpoint, I think we’re well down the pathway to showing that vertical farming can not only be a reality, but that it can be profitable,” Thomann said. From an environmental standpoint, FarmedHere has tremendous upside. In addition to growing food close to stores and without the use of chemical fertilizers and pesticides, the company conserves water — the most intensively used resource in conventional farming — through a closed-loop aquaponic system. The waste produced by the tilapia provides nutrients for the greens to absorb as they clean the water, which then flows back into the tanks.

Vertical farming also makes efficient use of urban spaces, occupying previously neglected warehouses, underutilized rooftops and other vacant areas. In New York, Gotham Greens grows everything from butterhead lettuce to bok choy in rooftop greenhouses, including a 20,000 square foot one atop a Whole Foods in Brooklyn. Green Spirit Farms in New Buffalo, Michigan, meanwhile, operates out of a former plastics molding factory. “Buildings like this are available throughout the United States,” said Milan Kluko, president of Green Spirit Farms. “Usually, they just need a power wash and a paint to get up and running again.”

Worldwide, vertical farm models range from rotating plant towers in Singapore to portable aquaponic crates in Germany. A former semiconductor factory in Japan is now a large-scale lettuce farm, growing 10,000 heads per day. In London, a company called Growing Underground went viral earlier this year after it revealed plans to build a hydroponic farm 100 feet under the city, in an abandoned World War II bomb shelter. “We wanted to build a vertical farm, but the financials of building in central London didn’t stack up,” said Steven Dring, co-founder of Growing Underground, which raised $1.4 million in seed funding and will open for business next year.

Originally conceived as skyscrapers filled with produce farms and livestock — an idea that quickly proved prohibitively expensive — vertical farming has come to encompass all sorts of green-tech operations in places as varied as parking garages, shopping malls and office buildings. There’s even a small aeroponic farm in Chicago’s O’Hare Airport.

But for all the novelty of indoor farming, there are hurdles that even the most eager start-ups struggle to clear. For starters, there’s the large upfront cost, typically in the millions of dollars, required to outfit a growing space. Recouping all that capital in the low-margin food industry can be a daunting task, and a reason many investors shy away. “A controlled environment like that requires a lot of technology that your typical outdoor field doesn’t have,” said J. Michael Gould, director of Texas A&M’s AgriLife Research and Extension Center in Dallas, which studies urban agriculture. “You get benefits from that technology, but right now the cost-benefit ratio is not particularly favorable.”

There’s also, for all vertical farming’s efficiencies, one very inefficient component: keeping all those lights on when the growing is done indoors. Without sunlight, plants require intense lighting for 16 to 18 hours a day, said Blake Davis, a vertical farming expert and professor at Illinois Institute of Technology. That adds up to sky-high energy bills. Improvements to indoor farming technology, including cheaper, more efficient lights, as well as monitoring equipment that measures and adjusts growing conditions, have brought down costs in the past few years, and further innovations are on the horizon.

A recent report from sustainable energy consulting firm Clean Edge noted companies like Philips are developing red- and blue-spectrum LED lights specifically for growing plants while others are testing sensors that detect optimal lighting levels for various crops. “Energy for lighting is one of vertical farming’s greatest expenses, making it a financial challenge if not carefully and properly designed,” the report stated. Gould, for one, thinks innovation will eventually bring down costs enough to make large-scale expansion a reality. There’s even room to make the plants themselves better, he said. “Every plant that’s grown indoors was originally developed and selected to grow outdoors,” Gould explained. “What needs to happen is the breeding programs need to begin to breed plants for indoor environments.”

Even with improvements, though, many vertical farms still draw energy from the grid, making them less of a green alternative than their ultra-local image suggests. There are also limits to the types of food that can be grown indoors. Staple crops like corn and wheat, for instance, are optimized for outdoor agriculture.      “Urban agriculture will never be able to replace rural agriculture, though I think there are opportunities for them to work together,” said Danielle Nieremberg, president of Food Tank, a nonprofit organization focused on sustainable agriculture issues.

At Green Spirit Farms, Kluko, an engineer by trade, is constantly tinkering with lighting and other parts of his farming system. He currently uses grow lights that last 100,000 hours and are, he claims, as efficient as anything on the market. Still, he finds that in some cases technical innovations don’t match natural remedies. To control pests, he recently released 27,000 ladybugs inside the Michigan warehouse.        “You really have to know what works best in these environments and use your resources wisely,” Kluko said.

Other operations are similarly trying to lessen their impact through natural as well as high-tech solutions. The Plant, a business incubator in a former meatpacking plant in Chicago, houses several start-up businesses, including a brewery, a kombucha maker, a bakery and three vertical farms. To cut down on waste, tenants utilize byproducts produced by other tenants. The kombucha maker produces CO2 that’s used in the vertical farms while leftover barley from the brewery feeds the fish used in one of the farm’s aquaponic growing systems.

The Plant is also in the process of installing an anaerobic digester, which will provide renewable energy for the entire operation by turning organic waste into methane gas. The price tag: $2 million, offset by a $1.5 million grant from the state of Illinois.  “It’s basically like a big stomach,” said Davis, who is a board member with The Plant.

Finding renewable sources of energy is critical for vertical farms, Gould said. With climate change already causing extreme weather such as droughts, severe storms and flooding, “the last thing we want to do is pump more carbon dioxide into the air,” he said. A recent study in the journal Environmental Research Letters noted staple crops such as corn and wheat are seeing decreased yields as a result of climate change, with yield losses expected to as much as double from current levels by the year 2080.

But to survive and expand as a business, vertical farms may have to look beyond food sales alone to generate revenue. Davis said The Plant offers weekly tours along with classes like a “Do It Yourself Aquaponics Workshop.” Other companies offer consulting services or sell growing kits to hobbyist farmers. FarmedHere has received local producer grants from the USDA and from Whole Foods while Bright Farms, a New York vertical farming company, signs long-term contracts with supermarkets before it builds a facility.

Ben Greene said he thinks he has just the formula for adding value. Growing up on a small organic farm in North Carolina, he experienced the joys, as well as the frustrations, of food farming. After serving as a combat engineer in Iraq for several years, he returned to his home state and is currently raising money for a hybrid business that will combine farm and supermarket under one roof. The Farmery will grow fruits and vegetables in a second-story hydroponic farm, then cart them downstairs to be sold in the grocery store.

Greene said produce grown on-site will comprise 15 percent of The Farmery’s retail sales while locally sourced products, including meat, beer and grocery items, will make up the rest. There will be a café on the first floor, he said, as well as a growing wall filled with herbs. If a customer wants to add a sprig of mint to her tea, she can pluck it right off the wall.       “It’s designed to have the high margins of a restaurant with the high foot traffic of a grocery store and the unique experience of being able to see where your food is grown,” Greene said.

And even though construction has not yet begun — that is expected to happen in December, near Raleigh-Durham — he envisions The Farmery as a successful model for cities across the country. Aside from food sales, he said the space will rely on savings coming from reduced inventory loss. In researching his business model, Greene said he discovered that as much as a third of fresh inventory is spoiled or damaged on the way from the farm to the grocery store. “That’s where we see a big opportunity, is bringing that number down to next to nothing,” he said.

Less food waste, fresher product, year-round availability — these are some of the advantages vertical farming offers. And while the industry has numerous kinks to work out, many experts believe it will adapt out of necessity.

At the extension center in Dallas, Gould and his team are studying ways to tailor low-cost, high-volume vertical farms to inner-city neighborhoods. All of the growth and technology currently resides in the niche markets — the FarmedHeres and Green Spirit Farms that supply to retailers serving mostly affluent customers. But he hopes eventually to see models scale up and become economically feasible for consumers of all income levels. “We’re going to have 7 billion people living in cities in the next few decades, and there isn’t enough countryside to grow all the food we’re going to need to keep people fed,” Gould said. “Agriculture today is pretty much a two dimensional operation. We need to figure out how to do it in the third dimension.”


Source: International Business Times

On any given day, many of facilities management tasks are focused on conserving energy.

Whether it’s scrutinizing utility bills, making adjustments in the BAS, or championing for efficient retrofits, saving kilowatts never falls off the to-do list. But one that may been overlooked is one of the most important factors for energy performance – occupants.

The relationship facility managers have with tenants can be a wary one at best, fraught with skirmishes over space heaters, thermostat settings, and light levels. But with the growing impact of plug loads, building owners need to recognize that human behavior can make or break an efficiency program.

Consider how the vast majority of a building’s energy use is determined by occupant needs, from operating hours and lighting to heating and cooling. You might also have little to no control over the proliferation of computers, printers, desk lamps, and mobile devices that have become standard in any office or classroom setting.

“Plug loads can represent anywhere from 15 to 50% of a building’s energy use and are one of the fastest growing end uses of energy,” says Jaxon Love, sustainability program manager for Shorenstein Properties. “If you’re not looking at plug loads and developing a strategy to manage them, you’ve got a major blind spot in your overall energy efficiency program.”

Energy competitions unite occupants and facilities management as they work toward a common goal. Not only will plug loads become more manageable, but the nature of these challenges will engender a positive experience that can infect all aspects of your business model.

“Successfully engaging occupants as part of a performance team offers many advantages to the building owner,” says Alison Liaboe, director of communications and research for Ecova, an energy and sustainability management firm. “This includes reducing turnover, minimizing the cost of building operations, and increasing tenant referrals. A better performing building also benefits workers by improving their health and productivity.”

Nagging occupants to turn off equipment has never resulted in sustained energy savings – make them an extension of your FM team instead. By engaging tenants with fun and creative programs, property managers can turn passive employees into energy champions. The only loser is your utility bill.

To read about the energy conservation program developed by Shorenstein Properties that has resulted in up to 45% energy savings click here.



A CBRE study has found that a variety of different work spaces in an office can stimulate its workers and improve their productivity.

When a company offers multiple types of work spaces, the study found, satisfaction levels increase 10 to 15 percent.

As a result, companies are creating more thoughtful workplace strategies and are implementing open and private work spaces to cater to how employees are actually working.

The CBRE also concluded that in an increasingly virtual world, employees have a stronger sense of community and value the opportunity to connect face to face. Companies are therefore trying to create more transparent environments where people can see each other work.

According to the study, employees also prefer a mix of work environments. About 52 percent wants a mix of working at home and in an office. About 41 percent prefers to work mainly from one office. Only 7 percent of Millennials prefers to mostly work from home.


Source: The Real Deal

What criteria do companies use in choosing office locations?

Many are obvious, as they have been important since high-rises first began to dot the U.S. landscape: centralized location, convenient highway or public transit access, adequate office space, ample parking, and amenities like in-building or nearby food vendors.

Increasingly, though, facility managers and the executive teams they work with are assessing a latter-day criterion that is becoming as important as any: Is the building “cloud-ready”? Companies are ever more reliant on high-speed network connectivity to the Internet and other essential services, including access to public or private clouds—which are a popular alternative to on-site servers by providing secure storage of, and access to, data and software programs.

Buildings that are not “cloud-ready” are (in the minds of many decision makers) about as useful as offices without electricity or bathrooms. Consider these statistics: Global IT traffic has increased more than fourfold in the past five years, and will increase threefold over the next five years. And, the number of devices connected to IP networks will be nearly three times as high as the global population in 2017.

As Candace London, senior vice president for Spectrum Commercial Real Estate Solutions concurred, the question from those seeking office space used to be: “does the building have high-speed Internet?” but in the near future, the question will be “is it cloud-ready?” So, yes, the ability to connect seamlessly to the cloud, via the Internet, is a 21st century essential.

While many service providers offer high-speed, broad-bandwidth network access, and others offer a full complement of cloud services, very few offer both. And those that do are finding growing numbers of customers, ready to sign up for their services.

Another important consideration is that today’s facilities don’t have to be physically located on a fiber optic network to access cloud services–as long as they are close. Many fiber providers are now extending their networks to “near-net” buildings that are a short distance (within 1,500 feet) of their fiber rings.

What exactly is a cloud-ready building? It has one or more providers who have installed high-speed connectivity to the building’s basement equipment room (on-net) or who, in a matter of days/weeks, can complete a build-out to connect the building to its nearby fiber-optic network ring (near-net).

As network connectivity to the building is being established, it is a relatively simple process of running the chosen fiber-optic network cables into the particular floor or suite requesting it. Then, the right network provider can optimize use of the network to take advantage of one or more cloud services—such as data storage, security and redundancy—that not only protect a company’s vital data, but enable fast access to it.

The reasons why so many companies are choosing cloud services are numerous. But most are directly or indirectly tied to the one factor that impacts most business decisions: money.

Cloud-readiness is increasingly viewed by many as a growth enabler for their organizations—both from an IT perspective because critical IT staff can shift from systems management functions to business process enhancement; and from an operations standpoint as business functions and workforce can grow quickly and efficiently.

Cloud computing reduces costs in a number of ways:

  • Lower Capital Costs. Companies that build and manage their own data rooms incur sizable upfront costs in purchasing the requisite equipment, along with the expense of ongoing maintenance fees. Those costs are almost eliminated by using the cloud.
  • Lower Utility Costs. Plenty of electricity and air conditioning is required to power and cool server rooms, and those fees can be reduced drastically if all or most IT assets are shifted to the cloud.
  • Real Estate Savings. Businesses can free up office space by moving the location of servers and other equipment typically needed when most IT management occurs on-site to an off-site location instead.
  • Personnel Savings. Whether using public cloud services, private cloud services, or a hybrid cloud solution, businesses require less headcount to monitor and manage the network.
  • Agility. Companies who contract for cloud services only pay for what they need on demand, and can usually, depending on the provider, quickly scale their IT infrastructure needs up or down based on seasonal growth patterns or other marketplace factors.

Cloud-readiness offers direct benefits to facilities managers, as management-specific applications to configure, monitor, and control building systems such as access security and energy management. Computerized maintenance and management applications (CMMS) have also moved to the cloud. These solutions help track repairs and preventive maintenance work orders as well as managing inventory and tracking building assets. There are also cloud based solutions for incident management, space planning, and visitor registration.

One of the biggest benefits of running building management applications in the cloud is anytime access to the application and to the alerts, analyses, and status reports they deliver. Managing buildings from the cloud also allows a facilities management team to manage multiple locations in real time from the central office.

Facility managers who embrace the importance of both high-speed networks and cloud based availability will find they have more time for forward thinking, because they can spend less time staying on top of management and maintenance issues.


Source: Today’s Facility Manager

Homeowner-association board members throughout Florida will have more leeway to raise fees and make contracts with new emergency powers granted by the Legislature.

When the governor declares a state of emergency, such as during a hurricane, board members will be able to borrow money and contract for services without a vote of the full board. They also will be able to carry out government evacuation orders. In addition, the state has given them the ability to charge homeowners new fees to repair common areas — such as a clubhouse — without sending notices to owners, scheduling a meeting or getting a quorum of board members.

“Having to have a certain amount of advance notice to call meetings and a quorum of board members and money you can’t touch in reserves and, meanwhile, the building is exposed to the elements … well, it just didn’t make sense,” said South Florida attorney Donna Berger, who worked on the legislation with sponsors Sen. Jeremy Ring, D-Margate, and Rep. George Moraitis, R-Fort Lauderdale. Berger said the changes, which took effect Tuesday, grew out of the chaos that gripped associations a decade ago when three hurricanes hit the state. She relayed stories of condominium boards that were powerless when residents disobeyed mandatory evacuation orders and threw hurricane parties at the condo pool. The association could have been liable for any injuries, she said. Efforts to amend existing laws only began this year.

The changes give homeowner associations many of the same emergency powers that the state affords condominium associations during emergencies. Board members can designate “assistant officers” who can make business decisions about association assets. Without a vote from homeowners, board members can levy “special assessments,” which are one-time charges to cover emergency-related expenses. In addition, they can borrow money, pledging homeowner-association property as collateral. The one thing condo boards can do that homeowner boards cannot: enter the homes of residents.

Not everyone sees the logic of granting more leeway to the chiefs of Florida’s subdivisions. Jan Bergemann, president of Cyber Citizens for Justice, said the new provisions are unnecessary and dangerous. The group is the state’s largest advocacy group for homeowners. “If all that damage occurs, you don’t need to sign a contract the next day to build a clubhouse,” said Bergemann, who has written to his members objecting to the new measures. “If there is a pipe busted, that’s OK. But you don’t need to sign big contracts.”

During the hurricanes of 2004, he added, local governments and the Federal Emergency Management Agency covered compromised buildings with blue tarps and otherwise protected hurricane-affected properties from further damage. The new regulations allow board members greater latitude to hire contractors without oversight, and that could invite abuses, Bergemann said. Berger emphasized that homeowner-association board members will be limited to using their new powers during state-declared emergencies.

In southwest Orange County, Lake Willis Homeowner Association Board member Jerry Aldrich said he couldn’t foresee his association ever using the new powers granted by the state. During the hurricanes that came through Central Florida a decade ago, he said, Orange County helped collect debris from more than 40 trees that fell or were damaged in high winds. The homeowner board never had to make any contracts. “We’re just a small association,” he said. “I don’t see how it would affect us.”


Source: SunSentinel

Primary commercial property insurance is a buyers’ market with rate decreases of up to 20% for many U.S. accounts that renewed at midyear, with the exception being those with high catastrophe exposures.

Limited catastrophe losses and an influx of insurance capacity exerted considerable pressure on prices, brokers and market experts say. “The market is very insurance buyer-friendly right now,” said Duncan Ellis, U.S property practice leader at Marsh USA Inc. “Purchasers of property insurance are finding a very favorable environment toward pricing, toward capacity and toward interest in their risks.”

Premium decreases should be “on an average basis, probably high single digits to low double-digit percentage decreases,” Mr. Ellis said. Some accounts could see rates fall up to 20% “based upon good solid competition in the marketplace.”

“For 2014, we are definitely in a rate decrease environment,” said David Finnis, Atlanta-based national property practice leader at Willis North America Inc. Willis clients saw property rates fall 7.5% to 12% through June 30, he said.

However, catastrophe-exposed accounts will find a somewhat “less friendly” market than those without catastrophe exposure, Mr. Finnis said. “As one would expect, premiums are still higher in high-catastrophe areas like Florida and California vs. noncatastrophe areas like the Midwest,” he said.

Stewart Ellenberg, risk manager for the city of Boulder, Colorado said the city was fortunate to renew with a “slight” rate increase despite a large property insurance claim related to the September 2013 flood in the region. Likewise, Union County, North Carolina renewed its commercial property coverage for a 2% price increase, but deductibles for flooding and earthquake each doubled to $50,000, said Tiffany Allen, the county’s risk manager.

Looking ahead, about the only thing that could turn the market would be a major hurricane or other disaster. “If there are no catastrophe events, we predict that you’re going to be looking at double-digit decreases for the remainder of the year,” said Al Tobin, New York-based managing principal of Aon Risk Solutions’ property practice. “Double-digit decreases will continue,” approaching 20% for some accounts, he said.

“There’s just so much capacity in the property market right now, between incumbent insurers wanting to increase their lines or new underwriters trying to get on to the accounts,” Mr. Finnis said.

Mr. Tobin said, “What’s driving the market as much as anything is increased appetite among the top 10 catastrophe property carriers.”

“The absence of major losses … would be the No. 1 market driver, because that’s starting to attract capital,” Mr. Ellis said. “When looking at the results for 2013 combined with what we have seen in 2014 thus far, property is looking like a solid bet right now and is thus why we are seeing a lot of money or capital flowing into the property space.”

Analysts Agreed

“If you take a step back, it’s how financial markets work,” said Cliff Gallant, an analyst at Nomura Securities International Inc. in San Francisco. “There’s been an area where profits have been pretty good in recent years relatively speaking and so capital is flowing there in different forms.”

“I think where there’s underwriting success, that attracts capital to those lines,” said James Auden, managing director at Fitch Ratings Inc. in Chicago. “So if you have large underwriting gains in a segment, existing players put more capital into those lines.”

Alternative capital flowing into the reinsurance space may reduce reinsurance pricing for primary insurers, but it has not significantly affected primary insurance prices. “Reinsurance is just one ingredient in the makeup of (primary insurance) costs,” Mr. Tobin said.

Also, there is no broad lingering effect from Superstorm Sandy on property pricing this year, Mr. Tobin said. “Insurance companies are more acutely aware of deductibles and limits, but price has not been affected,” he said.

“There is no Sandy hangover on pricing,” Mr. Finnis said. “The only lingering result is that individual insurers are no longer providing $100 million in limits in the areas that were affected.” Those policy limits now vary by account but usually range from $25 million to $50 million.

What’s more, the uncertainty of congressional renewal of the federal terrorism insurance backstop thus far has not caused property pricing movement. The backstop will expire at the end of the year unless Congress renews it. Renewal legislation has been introduced in the House and Senate.

“There has not been any effect on (property) pricing and there is not likely to be because there is more supply,” Mr. Tobin said of the federal terrorism program.


Souce: Business Insurance

As traffic congestion worsens in South Florida, a plan to restore passenger service to the Florida East Coast Railway corridor that dates back to industrialist Henry Flagler’s first train service to Miami in 1896 is generating a buzz in the local real estate development community.

Opportunity-minded investors are closely monitoring a two-tiered process that could ultimately result in regular daily train service from Miami to Orlando with multiple stops in between in various downtowns in Miami-Dade, Broward and Palm Beach counties. To accommodate the proposed new passenger commuter service, plans call for the creation of nearly 30 train stations to be built east of Interstate 95 along the South Florida coast.

The creation of train stations for the planned passenger service is expected to trigger a wide array of indirect investment in the surrounding areas to develop everything from residential towers to retail centers, hotels to office buildings. Under a pair of separate but interconnected plans, All Aboard Florida — an entity that is privately controlled by the owner of the Florida East Coast tracks — wants to launch a high-speed passenger rail service from downtown Miami to Orlando with stops in the downtowns of Fort Lauderdale and West Palm Beach. This service is scheduled to begin by 2016.

Just this month, All Aboard Florida issued $405 million of debt to help finance the creation of the high-speed rail service that is expected to cost at least $2 billion. Complementing the All Aboard Florida private-sector initiative, the South Florida Regional Transportation Authority — a public entity that oversees the Tri-Rail passenger service on tracks west of Interstate 95 — plans to introduce a new commuter line that is to travel on the Florida East Coast line on the east side of Interstate 95 with stops in various downtowns from Miami to West Palm Beach.

Under the Tri-Rail plan, Miami-Dade County would have eight stations stretching from Aventura to the Miami Design District to a newly proposed Grand Central Station to be built in downtown Miami. Plans call for the east of Interstate 95 commuter service — dubbed the TriRail Coastal Link — to be “implemented” within seven years for a launch in or before the year 2020, according to the organization’s website.

Ironically, the same train tracks that have historically meant lower prices and constant complaints about noise and traffic delays from nearby residents are expected to trigger a wave of new residential developments for individuals seeking easy access to planned passenger rail service.

Anyone who has ever relied on public transportation knows that train service is much more predictable than that of buses. Many commuters in cities around the world generally attempt to live and work close to train stations to improve the efficiency of using public transportation. As a result of this phenomenon, the introduction of passenger rail service in Miami-Dade County has the potential to stimulate real estate development in areas that are far removed from the water.

It is not surprising that developers who focus on the South Florida mainland have typically tried to build condo towers on sites that front Biscayne Bay or the Intracoastal Waterway. If waterfront land is not available at acceptable prices, the next best alternatives are usually development sites in popular neighborhoods such as Midtown Miami or on iconic streets such as Brickell Avenue.

Generally, the interest level in land near the railroad tracks — which are west of Biscayne Boulevard and east of Interstate 95 — is not the first choice for developers or buyers in South Florida, especially in Miami-Dade County. For example, fewer than 385 condos between west of Biscayne Boulevard and east of Interstate 95 from Flagler Street in downtown Miami north to Aventura were sold, at an average price of about $187 per square foot, between January and May of this year, according to the Southeast Florida MLXchange. By comparison, nearly 1,025 condo units east of Biscayne Boulevard from Flagler Street in downtown Miami north to Aventura were sold, at an average price of $250 per square foot, during the first five months of the year.

Some quick arithmetic suggests condo units east of Biscayne Boulevard traded at an average premium of 34 percent over the units on the west side of the street, according to the data. As for the supply of available condos, about 800 units are currently on the resale market west of Biscayne Boulevard from downtown Miami to Aventura.

Based on the 2014 sales pace of about 77 transactions monthly, there is more than 10 months of available inventory on the market west of Biscayne Boulevard, according to the data. The condo market east of Biscayne Boulevard from downtown Miami to Aventura has nearly 1,800 units available for resale. Despite having more units up for resale than the area west of Biscayne Boulevard, the condo market east of Biscayne Boulevard has less than nine months of supply available, according to the data.

For the rental market, there is less of a difference between east and west of Biscayne Boulevard in Miami-Dade County from downtown Miami north to Aventura when it comes to price and transactions. Tenants leased more than 1,025 residential properties west of Biscayne Boulevard at an average price of $1.63 per square foot monthly between January and May of this year, according to the data.

For the same five-month period, tenants leased nearly 1,200 residential properties east of Biscayne Boulevard at an average price of nearly $1.62 per square foot month. Currently, about two months of rental-property supply are available for lease west and east of Biscayne Boulevard, according to the data.

Given the market trends, developers could become more open to the idea of building residential towers in the area located west of Biscayne Boulevard and east of Interstate 95 especially since land costs are generally cheaper and rents are comparable to those rates being achieved on the east side of Biscayne Boulevard.

The unanswered question going forward is whether developers and residents will ultimately embrace a lifestyle in South Florida that revolves more around public transportation than the current dependence on cars. If this were to happen as the government planners are hoping, the future of real estate development in Miami-Dade County could increasingly focus on the land west of Biscayne Boulevard in the coming years.


Source: Miami Herald

Three homeowners associations at Quantum on the Bay are suing a company tied to Terra Group, claiming the developer cut corners during construction of the Miami condo project.

The associations accuse the Terra company and seven other defendants of 17 counts of negligence, professional negligence, breach of common-law implied warranties and building code violations. According to the Miami-Dade Circuit Court lawsuits, defects at the 698-unit development ranged from jammed doorknobs to crumbling stucco. The purpose of the litigation is to get Terra and the codefendants to cover the cost of repairs.

“The unit owners want to have the property that should have been delivered to them,” attorney Jeffrey Respler, who represents the Quantum residents, told the Daily Business Review. “At the end of the day, we’re not looking for a windfall. We’re only looking to be made whole.”

Terra’s David Martin told the Review the dispute would be “expeditiously and responsibly resolved in the appropriate forum.”

Unit prices at the 1900 North Bayshore Drive condo range from $229,000 to about $1.2 million. Monthly rents vary from $1,750 to $5,500.


Source: The Real Deal