We are thrilled to celebrate the remarkable achievement of Professor Emeritus Dr. Jeffrey D. Fisher, whose seminal textbook, Real Estate Finance and Investments, co-authored with William Brueggeman, has recently been named as one of “The 50 Greatest Commercial Real Estate Books of All Time” by Propmodo, a leading blog in the PropTech space. This prestigious list includes books such as Ayn Rand’s The Fountainhead, Donald Trump’s The Art of the Deal, and esteemed works of fiction by Tom Wolfe, underscoring the significance of Dr. Fisher’s contribution to the field. Positioned at an impressive #31, Real Estate Finance and Investments stands out as the sole textbook among its celebrated peers. Propmodo aptly describes it as “a cornerstone of real estate education,” providing readers with a profound understanding of finance and investment strategies essential for success in the commercial real estate sector. To explore the full list and discover other influential works, click here.

The IU Center for Real Estate Studies hosted a panel discussion titled Changes Ahead: Industrial Outlook and Trends at their fall luncheon, which took place in September at the Embassy Suites Plainfield. Sara Coers, Associate Director of the IU Center for Real Estate Studies and Lecturer in Real Estate at Kelley-Indianapolis curated and moderated the panel.

In the last few years, the rise in e-commerce and supply chain issues triggered by COVID-created market conditions led to a boom in industrial development, along with a flooding of capital into the industrial market.

As life has normalized post-pandemic, another re-shaping of the industrial market has begun. There are new product types, re-shoring and near-shoring efforts, and technological advances changing the industrial landscape, while persistent labor shortages, turmoil in the logistics industry, and shifts in user functionality needs have risen as barriers to success.

The panelists shed light on what’s trending in the industrial market both nationally and locally, as well as the changes and challenges that lie ahead.

Panelists were (pictured from left to right):

• Ian Nicolini, Vice President of Development, Pure Development
• Alex Cantu, Vice Chair Capital Markets Midwest, Colliers International
• Angie Wethington, Senior Director, Scannell Properties
• Danny Scheidler, Executive Vice President, Industrial Real Estate Solutions, JLL
• David Dunbar, Market Officer, Ambrose Property Group

Recent market reports indicate that industrial vacancies are high and net absorptions are anemic due to the exuberant development pipeline of 2021-2022. But planned construction slowed down substantially with the rise of interest rates. Panelists shared their thoughts on what the situation is today with absorbing this abundance of recently developed space and what is happening with users and their space needs and choices.

Panelists discussed what they are seeing on the development side of things and discussed new product types, like advanced manufacturing, which seem to be heating up as a result of the CHIPS Act and government initiatives.

With a more negative outlook for industrial being issued from Green Street and others, particularly in areas like Indianapolis, the panel examined how perceptions of the Midwest differ from what is actually happening in the Midwest. In addition to labor issues and supply chain issues being mentioned as persistent obstacles impacting industrial development, construction, and tenant businesses, the interest rate situation has also not helped. That said, industrial debt origination is up, and coming debt maturities do not show signs of atypical distress for the industrial sector.

The Center for Real Estate Studies is excited to announce that Indiana University Bloomington will be expanding its real estate course offerings in 2025. A new undergraduate Certificate in Real Estate has recently been approved on the Bloomington campus with a target start date of fall 2025. The certificate will allow non-Kelley students access to our real estate courses, and Kelley’s Computer in Business, Fundamentals of Corporate Finance, and Fundamentals of Investment courses. The introduction of a new real estate certificate marks another significant milestone in the ongoing expansion and enhancement of the IU real estate program

Sample Gates Management (SGM), the investment entity for the IU Real Estate Private Equity (REPE) Program, a student-run private equity fund, has now deployed $2.2 million across six total projects, amounting to about 52.4% of Sample Gates Real Estate Fund I capital.

The first of the four deals is ALTO Apartments, which closed in late September 2023. ALTO Apartments is a Class A development in Lenexa, KS and will consist of 274 garden-style apartments. Sample Gates Management invested $500k into the project, and it marked the first development deal in the Fund’s portfolio.

Shortly before the holiday break, SGM made its second deployment of the school year with an investment of $350k into Storie Co’s value-add assets within True North’s Phase II portfolio. The investment offers the Fund exposure to two spectacular resorts in a fast-growing tourist market. The Four Seasons Island Resort in Pembine, WI and the Pine Mountain Resort in Iron Mountain, MI will both benefit from a room count expansion and improved amenities.

Earlier this Spring, SGM invested in another multifamily development deal with a $350k deployment into Tempo at Truepoint. The 359-unit, Class A apartment complex is located just outside of Columbus, Ohio and is part of a much larger Planned Unit Development, containing retail, hospitality, office, and medical office.

Closing out the year strong, Sample Gates Management made an investment of $350k with Matheson Capital for the acquisition of Residences at St. George. The property is a 248-unit, class-B market rate apartment community located in Savannah, GA. This investment marks the second partnership with Matheson Capital and follows a similar business to the previous investment with them, Summer’s Run.

Another exciting milestone for SGM this past year was the completion of the first capital call, as $1.1 million was called from investors in January 2024. The investments completed prior were contributed and financed by our subscription line of credit with Horizon Bank.

Looking ahead to the upcoming school year, SGM is striving to bolster its outreach efforts in hopes of gaining access to an expanded variety of opportunities. Additionally, SGM has begun plans for a second fund in which capital raising will begin as early as the upcoming spring 2025 semester.

In an ongoing effort to strengthen real estate research at Indiana University, the Center for Real Estate Studies teamed up with the Federal Reserve Bank of Chicago to co-host the Conference on Housing Affordability, Office Real Estate, and Remote Work on May 17th at Newfields in Indianapolis. The conference brought together researchers from different disciplines to present and discuss papers on topics ranging from partial home ownership and rent guarantee insurance, to the implications of telecommuting and zoning restrictions. Full details on the papers presented, along with authors and discussants, can be found here.

The keynote speaker Stijn Van Nieuwerburgh, Earle W. Kazis and Benjamin Schore Professor of Real Estate and Professor of Finance at Columbia University’s Graduate School of Business. gave a presentation titled: The Remote Work Revolution: Implications for Real Estate Values, the Urban Environment, and Beyond.

We are pleased to announce that Seohee Kim will join the Finance department faculty as acting Assistant Professor starting July 1, 2024. Kim will conduct real estate related research in alignment with the IU Center for Real Estate Studies’ research goals.

Kim will graduate with a PhD in Economics from Duke University. She received her B.A. from Rice University in Mathematical Economics and Mathematics -Magna Cum Laude. Her primary research interests include Real Estate Finance, Urban Economics, and Industrial Organization.

Indiana University-Indianapolis brought home the win at the 2023 NAIOP Indiana University Challenge. Teams from Ball State, Butler, IU-Bloomington, IU-Indianapolis, Notre Dame, and Purdue competed in the competition, which was held at Holliday Farms Clubhouse on November 2nd and sponsored by Holladay Properties and the Opus Foundation.

Teams were asked to propose the most profitable, yet feasible, solution for the redevelopment of a prominent gateway to Zionsville consisting of 26 acres located just south of town. The winning team of Will Herndon, Shane Mahuron, Carter Piper, and Triniti Spurgeon proposed Green Gate Village, a mixed use development featuring activated retail and specialized office designed to create a community center and southern gateway to the town. The development centered around three principles: Good Health & Well-being, Sustainable Cities & Community, and Climate Action. These principles, designed to reflect the identity of Zionsville, inspired amenities within the development, including extensive green spaces, birdhouses, mason bee houses, rain gardens, 3D art installations, a community rooftop garden, a dog park, and walking and biking trails.

As the winners, IU-Indianapolis’ team received the Wally F. Holladay Entrepreneurial Excellence Award and a $5,000 Scholarship provided by the Opus Foundation.

The IU Center for Real Estate Studies hosted a panel discussion titled “Paradigm Shift: The Future of the Office Market” at their fall luncheon, which took place in September at the Embassy Suites Plainfield.

Sara Coers, Associate Director of the IU Center for Real Estate Studies and Lecturer in Real Estate at Kelley -Indianapolis, curated and moderated the panel. Panelists, covering a wide range of expertise in the field of office real estate from lending to research, included:

• Jeff Cartwright, SVP & Regional Manager, Commercial Real Estate, First Financial Bank
• Joshua Graham, Director, Cushman & Wakefield
• Samantha Julka, President & Founder, DORIS Research
• Bradley Metzger, Managing Principal, CRESA
• Jon R. Owens, SIOR, Managing Director, Brokerage Services, Cushman & Wakefield

Coers set the stage for the panel with a general overview of where things stand for the office market:

“For many of us, ‘the office’ has been considered the sole or primary place of work for most of our lives. Until recently, business professionals spent, on average, 90,000 hours of their lives in an office. But office real estate has the most challenging fundamentals of any property type in today’s market. The office market represents almost $109 billion of value, or 16% of the commercial real estate market in the US, across many owners. Trepp recently opined that office values have declined 50-60%, posing a multi-billion-dollar problem for our capital markets.

Prior to the COVID-19 pandemic, only about 7% of people with tele-workable jobs worked from home full-time, while that number is approximately 35% today. The pandemic may have accelerated remote work trends and exacerbated office vacancy issues, but office has been impacted for the last decade or more by dropping birth rates, H1B visa issuances, and workforce participation. Today, while executives are contemplating the impact of remote work on corporate culture and innovation, employees are increasingly seeking fully remote positions in a tight labor market. Even the President of the United States has office on his mind – he recently ordered Federal agencies to aggressively bring employees back to the office, due to only 25% of federal office space being in use. We are at an inflection point for office – how we use it, how we make leasing/occupancy decisions, how we make ownership decisions, and the impact of office on our capital markets.”

Given these challenges, Coers and the panelists set out to help the audience make sense of the current office market and what the future holds.

The discussion started with the current challenges facing the office market. Aside from the obvious impact of the pandemic on how people work, the impact of high construction costs, interest rates, and current economic conditions on property values were also noted. Julka illustrated one of the primary issues in the office market by surveying the students in the audience about their desire to work in the office as young professionals, which elicited a large positive response, and their desire to work in a beige cubicle with no office amenities, which resulted in no raised hands. It was clear that the change in how people work is a fundamental issue that has yet to play out fully across various sectors of office users.

When asked about which sectors are being hit the hardest, Metzger pointed out that geography and the size of a company play a large role in determining who is seeing the greatest disruption, noting that many legal firms are primarily in the office, as are much of the general workforce in the Midwest and Southern U.S., but that those in the Northwest tend to be working more at home.

Graham said that those in financial services, food and beverage, engineering, and architecture are returning to the office in larger numbers than those in other fields, particularly the life sciences and healthcare sectors, which are more remote-centric.

At the heart of the discussion, use and design issues and the interplay between these issues and how people want to work were discussed. According to Graham, proximity to the office and decreasing the commute is a big issue for many tenants. Metzger added that many larger companies are now breaking up their headquarters into multiple smaller offices, using a hub and spoke model to allow employees to decide where they want to work based on location and the amenities offered at each location.

Julka said that a diversified workforce will require new office designs with separate spaces for social connections, meetings, and recovery. She pointed out, though, that each person has a different idea of what will make going into the office “worth it” and each employer will need to keep their unique employees’ needs and goals in mind when thinking about how to attract employees back to the office.

The panelists all agreed that more amenities and newer, redesigned facilities will be required to attract and retain tenants. Metzger stated that more amenities are required now than in pre-Covid times, particularly in the Chicago area where he lives and works, saying that the “fun factor” needs to be addressed and that the “pre-Covid” office is not the same as the “post-Covid” office.

As the discussion turned to landlords and the issues they face from a leasing standpoint, Cartwright noted that the current lending market in office is extremely difficult. Tenants want more lease flexibility while landlords want long-term leases. He emphasized that communication is key to solving this problem and encouraged owners to communicate with their lenders. In addition, high interest rates are reducing loan origination and putting pressure on owners in terms of debt coverage requirements and liquidity.

The velocity of office sales has slowed dramatically, and this trend won’t reverse until the current uncertainty in the market ends and tenants are able to sign longer term leases, according to Owens. This stability will not happen right away, Graham pointed out, saying that hybrid work will become the norm, but the impact on occupancies and space utilization will not fully be seen until lease expirations and restructuring work their way through the market over the next several years.

To wrap up the discussion, Coers asked what will happen to the older office stock when owners are faced with high capital expenditures to cure obsolescence or dramatically reduced rents and occupancies. The consensus on the panel was that many office buildings too old or unable to be renovated will need to be demolished, with Metzger already seeing this trend in Chicago. A reckoning is occurring within the office market, and the panel foresaw continued uncertainty and upheaval as office as we have known it changes, with a movement towards modern, highly-amenitized offices and away from the old standard, as the world adapts to a new way of working.

A team from the Indiana University Kelley School of Business -Bloomington won first place in the ICSC & UNC Retail Real Estate Case Competition last week at ICSC Las Vegas. The team of Michelle Lin, Joe Luebker, Max Northrop, and Drake Wang walked away with $10,000 in prize money, out-competing ten other teams including UNC Kenan-Flagler Business School, which took home the second place prize, and Villanova University, which placed third.

Other universities competing included the University of Alabama, University of British Columbia, California State University, University of Colorado, University of Texas at Austin, Indiana University-Indianapolis, University of Mississippi, and Tulane University.

The case was based off of Stiring Properties’ Pemier Centre, an approximately 270,000 square foot stabilized retail center in Mandeville, Louisiana. Students were asked to come up with a plan that maximized the long-term value of the center, including financial analyses of each option considered.

The competition was judged by fifteen real estate industry professionals from such companies as JLL, Citi, Brixmor, Starwood, Rite Aid, the Sterling Organization, T. Dallas Smith & Company, and others.

Thank you to ICSC and the University of North Carolina at Chapel Hill’s Leonard W. Wood Center for Real Estate Studies for their organization of this competition and for providing this learning opportunity for our students.

We are pleased to announce the endowment of the Shiley Real Estate Development Case Competition at Kelley-Indianapolis. The inaugural competition will take place in the Spring 2024 semester as part of the program’s required R440 real estate appraisal course. Through the generosity of Ralph Shiley and his family, the Indianapolis real estate program will now have a case competition affiliated with its R440 course, giving Kelley-Indianapolis students the same opportunity Kelley-Bloomington students currently have with the Stanley E. Hunt Real Estate Development Case Competition.

Thank you to the Shiley family for this tremendous opportunity and support.