Vending Of The Future

Many real estate professionals have been approached by one vending company or another during their careers. While most of us have shrugged off these "vendors" as pestering annoyances. However, the future is looking very bright for the vending industry and is bringing more popular and exciting consumer products closer to everyone one. Kiosks such as this iPod vending machine are poping up all over the country.   Here is a demonstration video link from the manufacturer.

http://www.zoomsystems.com/videos/demo/zoom_demo.html

These machines are making the most popular consumer products even easier to purchase. The best part is these machines don't need very much space. In some cases, these machines can be placed inside walls so as to appear like a small store front inside any building or common area. If you can pull phone lines and power to the area, you are equipped to install one of these state-of-the-art retail stations.

Proactiv Solutions has had a successful run operating from common area carts or retail merchandising units (RMUs). National advertising campaigns aligned with Hollywood celebrities has helped with sustainability. However, this product typically is the top seller among mall kiosks and have provided with landlords with some stable income over the years. However, in order to combat the owner / operator issue that many consumer products face, they have developed a vending kiosk that brings the product even closer to the consumer.

Sony has also explored the non-traditional retailing strategies and brought its products closer to the consumer. Again, just as Apple and Proactiv, they decided to enter the vending world to bring their products closer to the consumer while reducing costs to enter the market. While you can't purchase computers or other large electronic equipment from the machines, they do carry mp3 machines, headphones, ear buds and other smaller electronics.

Many other major retailers and consumer products are entering the vending business to shrink the supply chain. This means that more venues will be attractive to vending type facilities whether it be in a major high-rise office building, shopping center, street corner, etc... The sky is the limit to this type of service and provides landlords with another non-traditional revenue stream.  Also, these types of opportunities require very little or no cost to the landlord.  

Who's Pursuing Ancillary Revenue?

Real estate owners or managers are constantly looking at ways to increase the value of their property. Whether the property is your own home, an apartment complex, industrial warehouse, office high rise or multi-level retail destination, everyone wants to make sure that their property is worth more today than it was yesterday. Pursuing ancillary revenue is one way to do that.

Real estate ancillary revenue can be ambiguous. The simple reason being is that there is no clear definition on the subject. I define it as any revenue that is generated from your property that is ancillary to your core business. If your core business is leasing apartment complexes, then any dollar that is generated that is not leasing to a new residential tenant, would be considered ancillary revenue. I've also heard it described as: specialty leasing, new business development, local leasing, etc... Also, the fact remains that there are so many ways to make money from your real estate that don't include your core business, no one specific definition can suffice. Its difficult to some up a job description for something that can easily have thirty different responsibilities.

Therefore, I'm curious to know who in the real estate world is pursuing ancillary revenue. If you are pursuing the opportunity, what areas are you pursuing and why? Perhaps the why is understood but many developers and property managers I've talked to in the past believe ancillary revenue is more of a "thorn in my side" or "more cost than a reward". I would answer any nay-sayers this way. If you spend $1 pursuing ancillary revenue but received $2 for your efforts, is there any reason why you shouldn't consider the opportunity? No. There will always be a cost to pursue new business. However, if you generating more revenue through non-traditional channels while maintaining costs than the answer is clear. Ancillary revenue should always be considered....ALWAYS!!!

I challenge developers, property managers across the globe to see how much money their real estate is really worth. Coming out of a comfort zone to learn new skills can reap huge rewards at little or no cost. As with any new venture, a learning is to be expected. Time and research will pay off in the end. Dialogue also seems to spawn creativity. The creative person will able to see what lies underneath each stone that is turned. I enjoy pursuing ancillary revenue because it seems to me that every day is different. With countless revenue options to pursue, ancillary revenue can spice up even the most boring of days.

"WindCube" Targeted For Urban Commercial Real Estate

Renewable energy is becoming more popular and affordable. The benefits to transferring your energy requirements to a renewable energy source have been well documented. When sourcing energy from the wind, the huge windmill type structures are what come to mind. Yesterday, at the WindPower 2009 industry trade show a new product and design geared toward the commercial real estate industry was unveiled.  

The WindCube, is a 22-foot-tall footprint intended to be installed on rooftops that can supply energy to a single commercial or industrial site.  The initial objective of the "Cube" is to create wind power in an urban setting. The standard towering turbines we've seen on TV or at "wind farms", can't be utilized in an urban setting. Typically, there isn't enough room for the turbines to rotate to generate adequate energy.  Northeast Ohio based, Green Energy Technologies will manufacture the state-of-the-art turbines.

The cost for these units can range up to $300,000 for one cube. However, through tax tax credits and incentives, about 70% of the set-up costs would be returned. Therefore, it is estimated that the balance of the purchase would be paid back in approximately, 2-3 years. Since the initial target market is urban buildings, the commercial real estate industry will need to take notice.

Here is an animation link on how the "Cube" works:  

http://greenenergytv.com/Watch.aspx?v=e2db816bdb430fe6

Entering the energy business is already an income source for some landlords.  As the costs for infrastructure continue to decline, renewable energy for commercial buildings and their tenants will become more mainstream.  While the environmental benefits are acknowledged, the revenue streams from this opportunity are significant.  Depending on the application and location, ancillary revenue generated can equal into the millions of found revenue.  

I am not affiliated with Green Energy Technologies in any way.  I am a proponent of new technology that can help commercial real estate owners drive revenue to their bottom-lines.  I believe this footprint could be the wave of the future as costs decrease and infrastructure shrinks.  One thing is clear.  This technology will make Wind Energy more affordable to a larger audience and can be a huge ancillary revenue source for commercial property owners across the world.  

Grocery shopping in 25 square feet or less!

Convenience store shopping not a new concept.  Its actually been around for over 80 years.  The basic art of vending has been around for nearly thousands of years.  However, the 24-hour, vending grocery store is an innovative concept that has been experienced in Europe for several years.  In the US for much less.  

A company based in Belgium, called Shop 24 is rolling out these grocery store vending machines across the US.  The photo to the right is one of a proposed 150 that will be installed at Kroger Grocery stores across the US.  

Basically, these vending machines have approximately 150 products available from milk, lunch meat, soda and pain relievers.  Each location can accept credit cards, coins or bills as payment methods for the items you choose.  The items can be selected in the same manner as you would any other traditional vending machine.  Push different buttons for the corresponding item codes and your items are selected by a robotic arm inside the machine and placed in the "selection bin" for retrieval.

This concept can be used in a number of locations from office buildings, stand along sidewalk stores, malls and in remote outparcels of shop power shopping centers.  Obviously Kroger has bought into the concept as they are going to roll them out across their North American grocery stores.  Consumer convenience will always be important not matter your industry.  What I like about this is that the presentation is clean, professional and can be used in so many applications.  

This machine was placed on a college campus in upstate New York.  I don't believe the machines are capable of holding alcohol, nor do I believe this is legal.  However, students and residents are impressed with the convenience of the concept and the variety of the product offerings.  No word on what income potential is available from these machines as its an new concept to market.  However, in a era where retailing is extremely stale, this variation on the traditional staple is impressive and won't have too many barriers to entry in appropriate settings.

The vending world is changing with consumers habits and needs.  Are your properties receptive to these units?  What would you want to see at your properties if you could have or want one?

What are your exterior walls worth?

Real Estate Ancillary Revenue can take the forms of mulitple different streams.  One lucrative revenue stream is advertising.  Yes, I've discussed this topic before.  However, does anyone know what their walls are actually worth?  Property managers are challenged with tenant signs, vendor signs, etc... on a daily basis.  

What if a media company approaches you about placing a wallscape (billboard on a building wall) on the side of your building.  Wallscapes can be interactive, static or digital projections. If a wall can be seen by thousands of people per day, odds are that it has appeared on the radar screen of a billboard or out-of-home media company.  

  

      

Take a look at this interactive wallscape that was done in Columbus, Ohio for Nationwide Insurance.  Not only were the building walls used, but the parking lot was incorporated into the message as well.  This is one of the best wallscapes I've seen as it conveys a strong message and is undoubtedly memorable.  

Wallscapes or spectaculars (as known in the media world) can take many forms as you can see.  Solid walls aren't the only canvasses available.  Messages can be incorporated into windows, furniture, staircases, etc...  If you have a creative mind you can propose placing messages on any surface.  Also, because this advertising type can generate significant media attention, the revenue potential is also significant.  In some cases, annual rents can equate to several long-term tenant leases.  While this gets some attention to your building, there is little or no impact to the building itself.  Any windows that would be covered, are still usable by tenants.  Most of the time, tenant employees won't be able to tell that a sign is "pasted" on their window.  

Therefore, I ask the question.  What are your exterior walls worth?

Tenant Storage: What are your options?

In my experience, tenant storage has been a major issue for property managers,  leasing personnel and risk managers.  When tenants seek out additional storage on a permanent or temporary basis, odds are they are considering their own interests in their decision.  In reality, tenants taking additional storage in a facility where they operate, can be a major headache for those running the property.

Unless specifically acknowledged in a lease, taking additional storage space is trespassing.  While the majority of us would never accuse a tenant of “trespassing” for taking storage, there are significant risks to the property manager / owners if  not handled correctly.

Storage spaces can take the form of a number of uses.  

•        Storage Trailers placed behind stores or in parking garages
  
•        Use of unrented space in or around a building
  
•        Dedicated storage area used for property management
  

The use of these spaces can put property managers / owners in very difficult positions.  The most importantis that lessees are using the real estate for purposes other than what their lease dictates.  What if an employee or worse a customer was hurt working inside the unapproved storage space?  I can tell you (from experience) the injured person will not seek damages from the employer or business.  They will come after the landlord or property management company responsible maintaining the common area facilities.  Lawsuits, court dates, damage control, public relations remedies would be necessary to correct the situation. 

The situation could have been avoided had the tenant simply leased / licensed space from the landlord.  The agreement doesn’t need to take the form of an existing lease nor are you going to charge “commercial market rent” when quoting.  You also need to obtain a separate certificate of insurance protecting ALL parties involved.   This reduces the risk to the managing party.  You may also ask, what do I charge the prospect interested in storage space.  I simply contacted a few area off site storage providers for rates and then made a determination.   Be prepared that tenants are not going take kindly to your solution of the situation.   Some tenants will say they can seek storage off site.  If so, that’s fine too as they won’t use your space illegally anymore.  You can present your solution as a cost-effective way to avoid a very expensive problem in the future.  Speaking in terms your tenants’ attorneys are going to understand should end the conversation.

Landlords are not looking to squeeze every dime from their tenants.  In reality, they are trying to provide the safest environment possible to conduct business.  Leasing storage space is no different than leasing commercial space.  You need have to document to protect all parties involved in the transaction.  

Wind Power

On my recent trip to Houston , I picked up a copy of the Houston Press.  What caught my attention was the cover of magazine with an artists rendering of T.Boone Pickens in front of several wind turbines.  More and more companies are jumping on to the alternative energy bandwagon as it relates to promoting their "green initiatives".  However, to break into the pursuit of wind energy will require time, persistence and capital.  The time and determination needed can come from our industry.  The capital can be federally subsidized if approached correctly.  Our properties can benefit and generate some additional revenue from these resources.

T.Boone Pickens, an oil tycoon that lives in the panhandle of Texas is single-handedly financing a national energy policy.  He is working building a wind farm across 200,000 acres in Texas that will provide landowners a two-pronged revenue source.  Who would have thought that an oil tycoon would get into the wind business.  He is a businessman after all and he realizes there is significant money to be made by pursuing these alternatives.  Land owners can lease their land for the right to place a wind turbine.  As the wind farm begins producing power, the landowner will receive royalty payments as power is generated and distributed to the market. This is very similar to the transaction that is made between and landowner and an oil and gas company that want the resources below the ground.  The benefits of these new alternative energy sources are well documented.  

The problem we all face is convincing our political leaders that focusing on energy sources closer to home must be a priority.  Regardless of your political affiliation, putting more money in the pockets of real estate owners is a good thing.  While open wind farms are the wave of the future, those in commercial real estate must also take action on pursuing these alternatives. Many companies would be excited to enter buildings powered by energy alternatives.  The public relations benefits would be extreme.  Most commercial properties are in areas where wind is prevalent and the potential to transfer that wind into energy is a possibility.   The revenue potential is available and can make a major direct impact to your bottom line.