March 2011: Commercial News Round Up

The latest roundup in commercial real estate news for March 2011.

March 1, 2011

Simplifying GSA Leasing

With approximately 184 million square feet under lease, the General Services Administration, which buys and leases space on behalf of the federal government, is one of the nation’s largest tenants. You’d think that landlords would be clamoring for a piece of that pie. Not so much. Extra paper work and the long periods often needed to negotiate government leases lead owners and leasing reps to shy away from federal tenants.

But that’s about to change—at least, that’s the plan. "We’re looking at a huge cultural shift in the way the GSA does business," says Brenda Johnson, CCIM, senior realty specialist with the GSA Center for Realty Policy. "We want to make it easier for the private sector to do GSA leases, and we’re revising our procedures." Among the changes Johnson describes:

  •  An easier-to-use form for posting listings of space available to government agencies on the Federal Business Opportunities Web site makes it easier for owners of leasable space to connect with government needs. "We developed an ad template with the bones of the solicitation—square footage, type of space, etc.—so potential offerers can tell at a glance if they’re interested in pursuing a lease deal, " says Johnson.
  •  A simplified lease model for transactions under $150,000 in net annual rent with a security clearance of 1 or 2. “We realized that the majority of our transactions were small, and that there was no need for a full-blown lease if the procurement falls within the simplified parameters,” says Johnson.
  •  Faster lease approvals to cut down on lease holdovers and extensions. "Lease extensions can be very problematic for landlords since they usually can’t refinance during an extension period, " explains Johnson.
  •  A new format for evaluating tenant improvements that mirrors the way contractors break down proposals.

Ready to start negotiating a lease with the GSA? Johnson offers these words of advice. "Don’t read things into a transaction. Take time to review the solicitation and see how all the elements add up. "


Disability Standards Update Now Applies to Timeshares, Condo Hotels

An update to the Americans with Disabilities Act will require new or renovated time-share units and hotel condominiums that operate like hotels to meet accessibility standards for public accommodation. The revisions apply to all new construction or renovation of commercial, multifamily, and lodging properties after December 2011. ADA standards include wheelchair-accessible entrances, doors and corridors wide enough for wheelchairs, and grab bars in bathrooms. 

Other revisions include:

  •  Standardizing ADA design rules so that they harmonize with those of the federal Architectural Barriers Act and the International Building Code.
  •  Limiting the definition of service animals to dogs (with a few exceptions). Buildings open to the public must allow service animals, which perform tasks or provide emotional support for the disabled.
  •  Requiring that mobile devices such as motorized scooters and Segways, as well as wheelchairs, be permitted in most public facilities.
  •  Requiring buildings of four or more stories to have an evacuation elevator with standby power.

For more information, go to http://www.ada.gov/regs2010/factsheets/title3_factsheet.html.


Commercial Real Estate Dodges Carried Interest Change

When the Tax Relief Act of 2010 (HR 4853) became law, it contained several provisions that benefit commercial real estate, including the 15-year cost recovery for leasehold improvements in 2011 and the 15 percent capital gains rate. Even better was what the bill didn’t contain—a provision to tax the carried interest paid to the general partner in real estate investments as regular income. Currently, carried interest, which is the profit a general partner receives at the time a property is sold, is taxed at the capital-gains rate. Maintaining the status quo represents a legislative victory for NAR and other commercial real estate groups.

Other provisions that affect commercial real estate include:

  •  No new limitations on 1031 like-kind exchanges.
  •  Bonus depreciation of 100 percent for assets with a less than 20-year recovery put into service between Sept. 8, 2010, and Dec. 31, 2011.
  •  Tax credits for energy-efficiency improvements made before 2012.
  •  Expensing of brownfields clean-up costs through 2011.

These stays may be temporary. But they are welcome cost savings for a sluggish commercial real estate industry.

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