Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a retail property located at 4317 Feedwire Road in Centerville, Ohio. The 28,780-square-foot property is leased to Marshalls, the second largest off-price clothing retailer in the U.S. The T.J. Maxx affiliate operates under a long-term triple net lease structure. Stan Johnson Company’s Mark Lovering represented the seller, an individual investor based in Chicago, Illinois. A Vancouver, Washington-based group of investors acquired the asset for approximately $7.3 million.   “Although cap rates for investment-grade net lease assets have remained low, interest rates have risen steeply. This created a rare opportunity for the owner, who had previously been unable to defease a CMBS loan that encumbered the building; however, once rates skyrocketed, their defeasance cost went down, creating the perfect window for the owner to sell this high-quality asset,” said Lovering, Associate Director in Stan Johnson Company’s Chicago, Illinois office. “As the commercial real estate industry continues to adjust to rising interest rates, we expect defeasance requests to continue to trend upwards in the coming months.”  The property is positioned within a 324,000-square-foot power center directly across from a new, 125-acre multi-use development. In addition to its outstanding location, the property benefits from exceptional demographics, with 132,492 residents within a five-mile radius. Neighboring tenants include PetSmart, Target, The Home Depot, Costco Wholesale, Cabela’s and Kroger.

Originally published by GlobeSt In a move that woke up the often “staid” net lease real estate sector, REIT STORE Capital Corp. is being acquired by a partnership between global institutional investor GIC and Oak Street, a division of net lease investor Blue Owl, in an all-cash deal worth $14 billion, GlobeSt.com reported Thursday.  Industry followers said that this represents a “monster” transaction in the net lease sector that provides substantial additional scale to one of the largest existing players in Oak Street and a relatively new net lease investor in GIC.  Jeff Cox, Stan Johnson Company managing partner, tells GlobeSt.com that given the challenges of rising capital costs and potential economic headwinds, “it makes sense that parties involved would pursue this relationship. It also suggests that net lease product remains in high demand and continues to grow as a favored asset class among investors.”  Would Make It Third-Largest REIT  Scott Merkle, managing partner for SLB Capital Advisors, a real estate advisory specializing in sale-leasebacks, tells GlobeSt.com that “in the normally staid net lease real estate world, this is a monster transaction” that, if consummated, will result in the take-private of the third largest publicly traded net lease REIT.  “GIC and Oak Street are acquiring one of the most prolific sale-leaseback investors that regularly deploys well north of $1 billion a year.”  As one of the largest sovereign wealth funds in the world, Singaporean-based GIC has been particularly active in U.S. real estate.  The STORE transaction represents GIC’s second investment in the U.S. net lease sector following the formation in 2021 of a new net lease retail real estate platform with RPT Realty.  Oak Street, which had $16.6 billion in AUM as of June 30, 2022, has continued its rapid growth in the sale-leaseback arena, which has been bolstered by its acquisition by Blue Owl in 2021  This year’s Q2 registered the strongest Q2 period sale-leaseback performance in both deal count (236 discrete transactions) and deal volume ($10.2bn) since SLB Capital Advisors began tracking the market.  “While sale-leasebacks are not immune to broader market choppiness, it continues to be an outstanding time for corporate owners of real estate to consider monetizing owned facilities,” Merkle said.  Deal a Bit ‘Unexpected’  David Auerbach, managing director at Armada ETF Advisors, says that the transaction highlights the demand for net lease properties as investors seek yield in the REIT space.  “With so many net lease players, I would not have expected STORE to be the first one acquired, but the move is significant since STORE is an S&P MidCap 400 constituent and follows on the heels of the O/VER merger back in November of last year.  “The transaction is significant as two of the largest players in private equity/sovereign wealth funds are partnering on the transaction and diversifying both parties’ portfolios into desirable net lease assets.”  Colleague Al Otero, portfolio manager at Armada ETF Advisors, notes that “It’s good to see a large real estate transaction come back into the marketplace as activity has slowed precipitously since the Federal Reserve started raising interest rates earlier in the year.  “The willingness of sophisticated investors to step back into the market at this time is a testament to the operating platform, underwriting prowess and asset quality that has been established at Store Capital since its inception.”  © 2022 ALM Global Properties, LLC. All rights reserved. 

Originally published by Commercial Property Executive Industrial outdoor storage has gone from being a niche in the industrial sector often owned by small private investors and mom-and-pop operators to a market estimated at $200 billion. During the past three years, IOS has been growing dramatically and increasingly attracting the attention of—and significant outlays—from institutional investors and private equity firms.  “There is a lot of institutional capital chasing deals right now in the IOS space and it’s happened very quickly. I have two or three new groups calling me every week that I previously didn’t know about,” Zach Harris, a director at Stan Johnson Co. based in Tulsa, Okla., told Commercial Property Executive. “They’ve got committed capital and they’re ready to spend it. There’s definitely a rush to acquire product as quickly as possible.”  The demand for industrial storage space increased during the pandemic as e-commerce exploded and continues to be a significant part of the supply chain as more businesses seek locations for last-mile delivery and also want to be near ports and major industrial corridors. This hot commercial property type is mainly used for truck terminals, trailer storage, container storage, pallet storage and construction or heavy equipment yards. Trucking and truck parking are the heaviest users, particularly by third-party logistics companies.  Some of the biggest players in the IOS subsector include J.P. Morgan Global Alternatives and Zenith IOS, which formed a $700 million joint venture in February to create a national IOS storage platform and are aiming to build a portfolio worth $1 billion within the next two years. They kicked off their joint venture with the acquisition of four facilities in Dallas, including a nearly 27-acre property at 2118 California Crossing about 1 mile from Interstate 35 and 10 miles from Dallas Fort Worth International Airport.  Alterra Property Group closed its Alterra IOS Venture II LP fund in March with $524 million in total commitments, well beyond its original fundraising goal of $400 million. Limited partners in the fund included public and private pensions, endowments and foundations, asset managers, family offices and high-net-worth individuals. Alterra was an early entrant in the IOS market, launching its strategy in 2016.  Also in March, investor and developer Criterion Group and Columbia Pacific Advisors formed a joint venture aimed at deploying more than $2 billion in capital in IOS properties across the U.S. by late 2023. The joint venture’s first acquisition was a 41-property portfolio covering 520 acres across 11 states valued at $360 million. In June, Criterion Group announced the acquisition of eight IOS properties totaling 151 acres for an aggregate purchase price of $45.3 million. Criterion’s IOS portfolio now has 50 properties in 13 states valued at $550 million, including its first purchases in North Carolina and Virginia.  In June, Iconic Equities, a Miami-based real estate investment and development firm focused on industrial assets, and Leste Real Estate U.S., the real estate investment strategy of alternative investment manager Leste Group, formed a programmatic joint venture backed by about $150 million in institutional capital to acquire $400 million of industrial outdoor storage facilities across the U.S.  Iconic Equities—formed about 18 months ago—made IOS investments a core focus within the last six to nine months after focusing initially on more traditional industrial acquisitions and development in markets like Charleston, S.C., and Phoenix, according to Founder & CEO Tim Bishop. In Phoenix, the firm is set to break ground on approximately 1.2 million square feet and acquiring an additional 110,000 square feet in a forward takeout structure.  The joint venture partners are looking for sites ranging from 5 to 15 acres in top U.S. logistics markets including New Jersey; Atlanta, Dallas, Los Angeles; the Bay Area; the Inland Empire; Nashville, Tenn.; Columbus, Ohio; Savannah, Ga., and South and Central Florida.  Their first acquisition was the $9.5 million acquisition of Garnett Storage, a 5-acre storage site in Coral Springs, Fla., which is leased to nearly 300 tenants seeking outdoor storage for boats, trailers, motor homes and commercial vehicles. The joint venture recently acquired a 6-acre IOS site in Fontana, Calif., in the Inland Empire and has deals in contract in the Inland Empire, Los Angeles and Columbus.  Warehouse development in super infill locations near ports and in the major MSAs that typically sacrifice parking spark demand for IOS sites that can provide parking for trucks as well as storage for containers and pallets, Bishop told CPE.  The Iconic team uncovers the opportunities for the joint venture, establishes the deal flow and structures the deal flow while Leste focuses on the capital market side of the transactions.  “From an institutional capital perspective, the reason this has become such an interesting niche over the last six months and really the last several years is it’s under penetrated by the institutions.” Leste Managing Director Josh Patinkin told CPE. “That coupled with really strong fundamentals in rent growth and tenant demand for these types of assets has come together to create a growing niche.”  Chasing Yield  There’s another important reason IOS has become increasingly popular with institutional investors. They are chasing higher yield.  “This strategy affords institutional capital the opportunity for higher yielding investments when their two biggest apprehensions right now are cap rate expansion and interest rate risk,” Bishop said. “When you get higher yield, you’re kind of insulated from that.”  The IOS market is not quite as mature as other real estate asset classes. Many of the properties are still owned by mom-and-pop operators and deals can be off-market or represented by local brokers rather than national brokerage platforms, Patinkin said.  “It’s not a very liquid market,” Bishop added. “There’s a lot of inefficiency in pricing and in evaluating risk and return and it’s especially extenuated in IOS because they’re smaller opportunities, they tend to have less institutional ownership and less of a national brokerage presence.”  Bishop and Patinkin also noted there are high barriers to entry in IOS due to a limited supply and many municipalities frown on these kinds of properties and are not likely to approve new uses in their communities.  “It’s one of the very few strategies where you can say supply is decreasing because a lot of these sites are very infill and tend to get redeveloped into other uses like traditional warehouse and there’s only so many of these permits that are out there,” Bishop said.  The IOS submarket in the Denver region has been growing organically over the past three years with a focus on infill sites close to the city, according to Cushman & Wakefield director Joey Trinkle.  “It’s harder to find buildings with outside storage and lower coverage in a strategic location close to the urban core that is also close to major interstate access,” said Trinkle. “There is higher demand from both the end user and investor sides to finding locations closer in.”  Rising Rents  Similar to the industrial sector as a whole, rents have also been rising in the IOS space, where leasing is priced by the acre rather than square footage.  “A few years ago, we were seeing deals done for outside storage without a building on site for about $5,000 an acre,” Trinkle told CPE. “Now we see $6,000 per acre triple net, which really speaks to the value.”  “Outside storage properties bring a unique mix of users, some are local trucking and transportation companies that are local to Denver. But we also see national credit corporations looking for strategic sites. That’s really who these investors are targeting,” Trinkle said.  Trinkle and Managing Director Matt Trone are currently marketing a 27-acre industrial storage yard/trailer site at 409 W 66th Ave. in central Denver recently acquired by IG Logistics, Imperium Capital’s industrial platform than owns and operates properties with large outdoor storage or transportation components, and Meadow Partners, an institutional middle-market real estate investor, for $19 million. IG Logistics launched last year with plans to invest $250 million in IOS properties and specializes in acquiring and developing infill assets in high barrier to entry, urban growth markets where demand for logistics real estate is driven by e-commerce, with a focus on last-mile facilities.  The central Denver property is a vacant lot that is zoned for outdoor storage and includes a 10,000-square-foot industrial building with about 6,500 square feet of office space, two drive-through service bays and 14 feet of clear height. It’s also situated near the confluences of I-76, I-25, I-270 and US 36 and near the BNSF Intermodal Facility and UP Intermodal Facility.  Trone described the former auto auction site as a “rare and very attractive piece of property” that can be divided down to three or four tenants, with options to share the building and office space, or some can just use the property for pure yard space.  In June, Trone and Trinkle and colleague Steve Hager represented a partnership of Biynah Industrial Partners and Platform Ventures in the $9.5 million acquisition of a 12.2-acre IOS property in central Denver from Prime Inc., in an off-market transaction. BIP, a Minneapolis-based private equity firm that invests in industrial real estate, and Platform, a Kansas City, Mo.,-based real estate investor and asset manager, plan to invest at least $150 million in IOS assets over the next two years.  The Cushman & Wakefield brokers are also marketing the property that has access to the major Denver highways and the two intermodal facilities. The previous owner was only using about 4 acres, Trone said, while the new owners plan to pave the unused land to maximize the space for interested tenants. They expect strong demand since development of infill locations over the past several years has displaced companies that need parking for trailers and heavy equipment.  The renewal rate for tenants in the IOS sector is greater than traditional industrial properties. Harris told CPE. But they also tend to sign shorter leases, generally in the five- to seven-year range, which is attractive to institutional owners looking for value-add assets that will potentially see more frequent rent increases. With demand outpacing supply, owners also don’t need to worry about replacing tenants who leave. Triple net leases can often be found at IOS properties, where operating expenses in general are lower than traditional industrial properties.  Despite the increased investments in IOS in recent months, Leste’s Patinkin says the market is big enough to accommodate all the interested investors—at least for the next two or so years.  But he has advice for those considering investments in IOS: “You have to have really good access to capital because the credit markets are very young in IOS and there’s not a lot of participation yet. So, you have to navigate that. You have to be fairly deep pocketed and have support. You’re not going to get competitive individual small loans on an asset-by-asset basis. You have to know how to access the broader capital markets to navigate this strategy.”   

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a 59,160-square-foot retail center anchored by Planet Fitness. The north Florida property is located at 1925 North Monroe Street in Tallahassee, Florida. Stan Johnson Company’s Brett Puckett represented the seller, an individual investor based in Tennessee. A private 1031 exchange buyer acquired the property for $7.6 million.  “This is our team’s sixth Planet Fitness-related transaction in the past year and speaks to the strength of the Planet Fitness name and our timing in the market,” said Puckett, Associate Director in Stan Johnson Company’s Cincinnati, Ohio office. “We achieved our win/win objective by exceeding our seller’s pricing expectations and having a buyer walk away satisfied with a fantastic investment property.”  The property, minutes from Interstate 10 in north central Tallahassee, is situated on 4.93 acres and was built in 1977. In addition to Planet Fitness, the retail center includes two additional tenants and neighboring tenants include Publix, Starbucks, Walgreens and more national retailers. The tenants operate on long-term triple net leases. 

Originally published by Commercial Property Executive Stan Johnson Co. has negotiated the $48.7 million sale of 5731 Bickett St., a 56,000-square-foot retail project located in Huntington Park, Calif.  The property’s former owner is Gryphon Capital, according to CommercialEdge data.  Jason Maier of Stan Johnson represented the 1031 Exchange buyer, a New York-based private investor. Funds for the acquisition were provided by Principal Life.  Developer Shane Cos. is expected to complete the property in January 2023. Construction on the space began in June 2022  Upon completion, Target will fully occupy the space as part of a long-term triple net lease. The store itself will host a Starbucks café, in addition Tesla charging stations. The property will be situated within 5 miles of downtown Los Angeles and the Long Beach Freeway, offering convenient access for consumers citywide.  The sale of the future Target location takes place as the nation’s retail property sector experiences an unprecedented series of transformations that have resulted in an oversupply of space, brought on in no small part by the onset of the COVID-19 pandemic and the rise of e-commerce.  To make the most profitable and effective use of their spaces, developers have taken to leasing their spaces following their announcement, making them move-in ready as soon as construction is completed, as well as placing them in the context of their surroundings and the communities they serve. 1031 Exchanges are also on the rise, as investors seek less management and revenue-intensive properties, opting for single tenant net leases, according to a second quarter 2022 report from Marcus & Millichap.  LA's uneven recovery Still, Los Angeles County unevenly recovers, seeing both gains in its employment and retail construction pipeline and losses in its absorption rates, according to recent data from NAI Capital. The market’s net absorption rate turned negative as of the first quarter of 2022. The city only had 955,000 square feet of space in its construction pipeline as of the second quarter, while vacancy fell by 10 basis points, Marcus & Millichap data shows. 

We are excited to announce that industry news leader, GlobeSt.com, has named Ryan Butler, Managing Director and Partner, as a Net Lease Influencer for 2022. Ryan has a deep track record across the net lease sector, and with more than two decades of experience, he has made a consistent impact and significant contributions to the industry. Please join us in congratulating Ryan on this outstanding nomination!  Net Lease Influencers 2022 Excerpt of article originally published by GlobeSt Net lease has always been a stable asset class, attracting investors intrigued by its regular cash flow and strong fundamentals. Now it is wobbling a bit as the economic uncertainty clouds pricing but few believe that will last long. Still, it is times like these that require the best of the best to navigate the space and we are confident we have picked that crew in our 2022 net lease influencers. We hope you enjoy their stories as much as we did as we made our selections.   Ryan Butler Known for finding deals and solving problems, Ryan Butler is focused on helping clients acquire and divest net lease assets across the retail, industrial, office and healthcare sectors as managing director and partner at Stan Johnson Co. Butler’s 22 years of experience have helped him develop deep relationships in the net lease arena. During his career, he has closed $2.55 billion in sales, and in the past three years, he has sold more than $1.1 billion of investment properties across nearly 200 individual transactions. In recent months, Butler notably achieved record-low cap rates for a BJ’s Wholesale Club in Massachusetts and a McDonald’s restaurant that sold in Texas. In addition, he brokered the sale of three single-tenant retail portfolios for a combined $75.5 million. Butler’s production volume made him eligible to be inducted into the firm’s inaugural class of partners in 2020, an opportunity offered to SJC’s top sales producers that recognizes outstanding contributions and commitment to providing extraordinary service to clients. Butler serves as a thought-leader in the industry by frequently contributing to whitepapers and providing expertise on net lease for media outlets.  Reprinted and excerpted with permission © 2022 ALM Global Properties, LLC. All rights reserved. 

We are excited to share that Zach Harris, Director, as been recognized as an Industrial Influencer by industry news leader, GlobeSt.com. Zach’s ability to build deep, lasting relationships and his unwavering commitment to client service are just a few characteristics that make him qualified for this exceptional recognition!  Industrial Influencers 2022 Excerpt of article originally published by GlobeSt The industrial asset class shows little sign of wear and tear, although it is equally true that the category is not surging as it did last year. That, though, is a function of the economy and not necessarily industrial’s fundamentals. Change, however, is underway in the category as we have discussed elsewhere in this issue, and it will require the top men and women to continue to navigate these new trends. We believe we have picked that top talent with this year’s industrial influencers.  Zach Harris Colleagues say Zach Harris has an incredible drive to succeed both in his personal and professional life, and that he balances this ambition with humility, kindness and a deep sense of fairness that he offers to both his clients and co-workers. Harris began his industry career at Stan Johnson Co. 11 years ago, and he now serves as a director at the firm, where he specializes in the disposition, acquisition and capitalization of net lease assets for clients nationwide. With a strong track record in the industrial space, he has made a name for himself in the industrial outdoor storage sector by participating on panels and authoring numerous thought-leadership pieces that explore trends in the growing niche. During his tenure at the firm, Harris has contributed to the closing of more than 240 transactions, totaling more than $3.75 billion in transaction volume. Some of his more recent industrial transactions include an IOS property in St. Louis that traded in a 1031 exchange, the sale of a Texas IOS facility leased to Herc Rentals, a Midwest warehouse that sold to a REIT for $12.5 million, and a multi-tenant industrial property that closed for $14 million. Harris previously received a Stan Johnson Co. core value award for integrity – a peer-nominated recognition that is awarded annually. During the pandemic, his production volume increased, and he was elected president and board member of NAIOP’s Oklahoma chapter.  Reprinted and excerpted with permission © 2022 ALM Global Properties, LLC. All rights reserved. 

We are excited to share that Stan Johnson Company has been recognized as a Net Lease Influencer by industry news leader, GlobeSt.com. With more than four decades of experience, you can count on our team of professionals to help you navigate the nuances of the net lease sector.  Net Lease Influencers 2022 Excerpt of article originally published by GlobeSt Net lease has always been a stable asset class, attracting investors intrigued by its regular cash flow and strong fundamentals. Now it is wobbling a bit as the economic uncertainty clouds pricing but few believe that will last long. Still, it is times like these that require the best of the best to navigate the space and we are confident we have picked that crew in our 2022 net lease influencers. We hope you enjoy their stories as much as we did as we made our selections.  STAN JOHNSON CO. With a historical focus on the single-tenant net lease sector, Stan Johnson Co. is in its fourth decade of operation and has expanded its service platform. Founded in 1985, the firm, led by president and CEO Stan Johnson, provides acquisition, disposition, sale-leaseback, capital markets and advisory services for institutions, developers, investment funds, corporate occupiers and private investors across the US. The firm’s expertise includes single-asset and portfolio sales, as well as sale-leaseback transactions, 1031 exchanges and zero cash flow transactions that span all types of commercial assets including retail, office, industrial, healthcare and specialty properties. The firm has closed more than 6,700 net lease transactions totaling more than $42 billion in sales activity. In the past three years, Stan Johnson Co. closed more than $11.5 billion in net lease transactions, including a two-location portfolio of Midwest grocery stores for $18.7 million, a $12 million Home Depot ground lease in Ohio, a newly-built freestanding restaurant in Nashville that set a new cap rate record for the metro area, and a three-transaction portfolio that included 40 net lease properties across seven states that sold for $75.5 million. In 2021, the firm also launched an affiliate company, Four Pillars Capital Markets  — a real estate capital markets brokerage firm that provides debt and equity financing to commercial real estate investors as they acquire or refinance assets.  Reprinted and excerpted with permission © 2022 ALM Global Properties, LLC. All rights reserved. 

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of an 817-unit self-storage facility in the Mountain West region of the U.S. Dana Summers of Stan Johnson Company represented the seller, a Mesa, Arizona-based developer. The property was sold to Public Storage, a publicly traded REIT, for an undisclosed price.    “The execution by both seller and buyer was flawless, coupled with a relatively quick closing,” said Summers, Senior Director in Stan Johnson Company’s Tempe, Arizona office. “The acquisition was a perfect match between buyer and seller, and we were very pleased to broker such a seamless execution between the two parties.”  The property was constructed in 2008 and is situated on 5.62 acres. The facility is located in a growing area, with dense residential population and strong projections for future growth.

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a brand new freestanding retail property located at 401 South Main Street in Cleveland, Georgia. The 2,800-square-foot property is fully leased to T-Mobile. The asset sold for $1.8 million to a private investor based in Suwanee, Georgia represented by Doug Clyburn and Julie Clyburn of Stan Johnson Company. The seller was an Alabama-based developer.  “We were happy to represent one of our repeat clients in the purchase of this newly constructed property,” said Doug Clyburn, Associate Director in Stan Johnson Company’s Alpharetta, Georgia office. “The buyer was looking for a solid investment with little or no management responsibilities, and this new T-Mobile location checked all the boxes.”  Located on the city’s main retail corridor, the store neighbors national retailers including Walmart, Taco Bell, McDonald’s, Tractor Supply, AutoZone, and many more. Additionally, the brand new property is located just across the street from the proposed 37,000-square-foot City of Cleveland Municipal Complex which will soon house city hall, fire, police and a community center. 

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a freestanding retail property located at 5731 Bickett Street in Huntington Park, California. The 56,000-square-foot property is expected to be completed by developer Shane Companies in January 2023 and is fully leased to Target under a long-term triple net lease. Jason Maier of Stan Johnson Company represented the 1031 exchange buyer, a New York-based private investor, who acquired the asset for $48.7 million. Financing was provided by Principal Life.  “We know Target is extremely excited to get this site open, and we are proud to have been part of such a dynamic acquisition,” said Maier, Senior Director in Stan Johnson Company’s New York office. “Target searched long and hard to find a site suitable to serve the community of Huntington Park.”  Shane Companies started construction on the property in June 2022. Situated on 4.1 acres south of Los Angeles, this site will boast a brand new Starbucks, Tesla charging stations and the urban format needed for Target.  “We are excited to announce this acquisition on behalf of our client. This was a very challenging transaction from the beginning, and we are sincerely appreciative of the entire development team at Shane Companies, our lender Principal Life, the mortgage broker, David Horowitz, at Cooper Horowitz, and Jonathan Margolis, the buyer’s attorney, at Morrison Cohen LLP,” added Maier. “I would also like to give a special mention to my colleague Ashley Wilhide and the entire team at Stan Johnson Company. This was the kind of transaction that required extra attention and focus from start to finish. I want to personally thank each and every person involved in this transaction for their unwavering dedication and problem solving ability.” 

Across the single-tenant marketplace, office and industrial are currently the dominant property sectors in terms of sales volume contribution. With healthcare – a subset of the office sector – playing such an essential role in recent years, along with continued red-hot demand for industrial and logistics space, these sectors have combined to contribute approximately 80 percent of single-tenant property sales volume each quarter for the past four years. This percentage is up from 67 percent just a decade ago. Within the industrial market alone, we’ve seen transaction volume increase from 35 percent of the overall market in 2012 to 52 percent year-to-date 2022, illustrating a significant shift in buyer demand. Single-Tenant Office Sees Spotty Rejuvenation Post-Pandemic The single-tenant office sector had an impressive start to the year in 2022. The sector posted more than $8.0 billion in investment sales activity, securing first quarter 2022’s place as the fourth strongest quarter on record. In fact, post-pandemic activity for the office market has led to three of the top-five performing quarters in history. Despite the recent momentum, it wasn’t able to carry over into second quarter 2022, when just $3.8 billion in transactions were logged. Quarter-to-quarter, this represents a 53.1 percent drop in activity, and it’s also the lowest level of sales volume reported since the height of the pandemic. As is typical, the quarter was dotted with several higher priced transactions including the $205.5 million sale of the former Xerox facility in El Segundo, California, as well as AT&T’s corporate office in the Buckhead submarket of Atlanta that sold for $137 million. However, the highest profile transaction of the quarter was the four-property Meta campus in Silicon Valley that traded for nearly $707 million. Overall transaction count was down, but the vast majority of activity for the quarter involved smaller transactions, primarily under $25 million, with numerous sales falling below the $10-million mark. While this trend isn’t necessarily unusual, especially in the single-tenant sector where many office properties are of smaller size and price point, there was a noticeable absence of larger portfolio closings that have been prevalent in recent quarters.  Without these substantial transactions, overall sales activity naturally falls, but it doesn’t necessarily indicate a reduction in buyer demand for the sector. In just the first half of this year, private investors have taken market share away from REITs and institutional investors by being very active in the small deal space. If we study the historic dominant players for single-tenant office properties along the spectrum – from small freestanding facilities to massive corporate offices and campuses – the reduction in sales volume doesn’t feel so surprising. Could Second Quarter Activity Indicate an Industrial Slow Down? Industry experts have been suggesting for months that a slowdown is looming for the industrial sector. A number of headwinds continue to impact the market, and investment sales activity in the first half of 2022 has indeed witnessed a decline from recent record-setting periods. In second quarter 2022, the single-tenant industrial sector reported $8.4 billion in transaction volume. This was down 32.2 percent from first quarter 2022, when approximately $12.4 billion in sales were reported. When compared to the astronomically high activity reported at year-end 2021, and studying the $52-billion year as a whole, the industrial sector looks to be significantly off-pace midway through 2022. However, strip out just fourth quarter 2021, and the market is actually performing equal to the five-year trailing quarterly average and outpacing the 10-year average. Current activity appears to be right-sizing, returning to levels more in-line with a hot, but not overly frothy, market. Additionally, if investment activity doesn’t decline further in the second half of the year, 2022 could easily become the second strongest year on record. As tenants grapple with increasing rents and low vacancy, investors are watching interest rates and inflation, trying to make deals make sense. Part of today’s pullback in sales volume is likely influenced by the repricing of deals as buyers are no longer able to lock in debt at yesterday’s costs. However, with demand still very high and new supply lagging, there is no shortage of bidders on most of today’s offerings. To download a copy of this report, please provide the following information: hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "e0a86c38-f147-4bd4-8dba-8b92e71fa857" });