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MarketSnapshot
At Northmarq, we are committed to offering our clients the latest trends and expert analysis to power their decision making. Our MarketSnapshot suite of reports contains critical market data covering a variety of commercial real estate property sectors. In each report, you will find: Investment sales volume data Average cap rate information Buyer distribution analysis... and more! Single-Tenant Overall Market Single-Tenant Office Single-Tenant Industrial Single- Tenant Retail Multi-Tenant Retail
Latest Publications
Northmarq Brokers Newly Built 7-Eleven Near Tampa, Florida for $5.4 Million
Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a 7-Eleven convenience store and gas station located at 4230 Land O’Lakes Boulevard in Land O’Lakes, Florida. The 4,088-square-foot property was purchased for approximately $5.4 million by a 1031 exchange buyer represented by Tom Georges of Northmarq. The seller was an Ohio-based developer.
“I worked with a 1031 exchange investor who was attracted to the security of a brand new 7-Eleven in the northern suburbs of Tampa,” said Georges, Director in Northmarq’s New York office. “The lease features 10 percent rent increases every five years and accelerated depreciation.”
The property was constructed in late 2021 on 0.58 acres. The site, which is located 20 miles north of downtown Tampa, fronts U.S. Highway 41 with visibility from more than 59,000 vehicles per day. The property is situated at a signalized intersection, and the area boasts excellent population growth, with more than 3.0 percent annual growth since 2010 and projected population increases of more than 4.0 percent over the next five years.
January 31, 2022
Will capital markets deliver another record year in 2022?
Despite potential rate hikes ahead, lenders have abundant capital and a big appetite for CRE assets. SALT LAKE CITY, UTAH (January 31, 2022) - We’ve experienced dramatic and remarkable events over the past two years that impact the commercial real estate markets. Pandemics, shutdowns, mandates, multi-trillion-dollar stimulus packages, eviction moratoriums, civil unrest, presidential election turmoil, the great resignation, supply chain issues, and more. And through it, total commercial real estate debt increased $213 billion and $238 billion in 2019 and 2020 respectively for a total of $450 billion. And total origination volume was up 60% in 2021 over 2020. Through all the noise our industry produced fantastic results. Total commercial real estate debt now stands at about $4.15 trillion. For context, total commercial real estate debt hovered around $2.5 trillion for five years from the early stages of the great recession in 2008 through late 2013. Since, the U.S. has added a staggering $1.6 trillion in outstanding commercial real estate debt. That data point alone tells the story – that there has been and continues to be a huge demand for commercial real estate assets across the entire capital stack. A continuing trend was the concentrated flow of capital to multi-family and industrial properties driven by housing shortages, and an accelerated changing retail environment towards online merchants. And, a tepid demand for office, retail, and hospitality due to lingering challenges facing those sectors continued. Lenders remain selective on retail as the industry continues to struggle with clicks vs bricks dynamics exacerbated by Covid restrictions. Office is hampered by the slow return-to-work and uncertainty of how hybrid working will impact demand for space. Hospitality was hardest hit in 2020. Although there has been notable recovery, performance remains uneven depending on the market and hotel niche. An emerging trend in 2021 that we expect to continue in 2022 was the surge in higher leverage floating rate full-term, interest-only acquisition bridge loans in the multifamily space. That activity runs contrary to typical patterns where buyers go “long and strong” when very low fixed rates can be locked in for many years. Buyers have preferred the much higher leverage points achieved with very flexible prepayment terms on the floating rate accommodating a greater range of near-term capital options. Lenders view markets throughout the Western U.S. favorably, particularly growth markets such as Phoenix, Denver, Las Vegas, Salt Lake City, and all along the west coast. Lenders are keeping a watchful eye on urban centers, particularly those that have seen thousands of people who have relocated during the pandemic. Markets such as Los Angeles, San Francisco and Seattle remain vibrant with plenty of lender interest notwithstanding some outmigration. As the record-high financing activity suggests, there is still capital available for a variety of property types and locations. As the industry exhibited in 2020 and 2021, it is very capable of assessing each asset on its individual merits. It is true that retail, office, and hospitality in are harder to get done. But assets with a great location, strong sponsor, with demonstrable supply and demand elements can find attractive capital notwithstanding. It may require your full-service capital advisor to look harder and to comb through the life companies, banks, credit unions, CMBS lenders, agencies, and debt funds. If the deal makes sense, they should be able to find the right solution. For example, Northmarq was recently engaged by a long-term client to find permanent debt options to refinance two office buildings in the San Diego area. The buildings were leased to about 80%, with some short-term rollover risk and low occupancies related to COVID restrictions. Northmarq took the deal to 36 lenders with most saying no pretty quickly. But, with hard work on the phones, we were able to tell the asset and sponsor story well enough to find three very good quotes. The combination of a good asset, sponsor, and a hard-working mortgage banker found the outliers and a competitive capital solution. So, what surprises are ahead for 2022? More of the same with several potential headwinds. The biggest uncertainty is interest rates. The 10-year treasury has already moved up 40 bps from its recent low. With actual inflation occurring, the Federal Reserve has indicated that it will raise short term interest rates during 2022. Borrowers have enjoyed artificially low interest rates over the past few, which has fueled transaction activity and cap rate compression. In many cases, borrowers have been securing rates in the 2.25 -3.50% range as compared to 3.75-4.50% that has been more the norm in recent history. The question is how much of an increase the real estate market can absorb before it slows down transaction activity. Another headwind is the potential changes to tax law. President Biden’s Build Back Better plan included a proposal to eliminate or cap 1031 Exchanges and substantially increase capital gains taxes as a way to help finance the plan. Both would be significant hits to commercial real estate. For now, BBB isn’t politically viable. But, with only one to two US. Senate votes, things could change very quickly. Considering what the country has endured over the past two years, and the uncertainties ahead, it is amazing that the commercial real estate market has shown such strength through it all. Despite the potential challenges, capital markets will once again prove to be incredibly resilient. Capital sources across the board have abundant capital to lend. That capacity coupled with forecasts for steady economic growth postures 2022 to be another robust year of lending.
January 31, 2022
Northmarq Announces Sale of BMO Harris Bank Branch in Kenosha, Wisconsin
Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a BMO Harris Bank located at 7535 Pershing Boulevard in Kenosha, Wisconsin. The 4,755-square-foot retail bank branch sold for approximately $2.2 million reflecting a 4.75 percent cap rate. Asher Wenig of Northmarq represented the seller, a private investor based in New York. The property was acquired by a California-based individual investor, and both parties executed 1031 exchanges.
“The lease features a 1.0 percent + CPI annual increase structure, making this asset a highly sought-after investment opportunity, and it’s why it traded at a good 100 basis points below the average BMO Harris net lease bank,” said Wenig, Senior Director and Partner in Northmarq’s New York office. “It’s a changing retail bank market, but strong locations with drive-thru windows along heavily trafficked thoroughfares continue to garner top dollar in the net lease space.”
The property was originally built in 1969 on a 1.0-acre corner lot. The property features outstanding ingress and egress, with three drive-thru lanes and a stand-alone ATM. At the time of sale, there were more than 12.5 years of lease term remaining.
January 28, 2022
Northmarq Brokers Sale of CVS Pharmacy in Tulsa, Oklahoma Setting New Cap Rate Record
Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a single-tenant net lease CVS Pharmacy located at 2110 South Harvard Avenue in Tulsa, Oklahoma. The 13,225-square-foot freestanding property sold for $7.3 million reflecting a 5.25 percent cap rate. BJ Feller of locally based Northmarq represented the seller in the 1031 exchange sale. The property was acquired by a California-based institutional investor.
“This CVS sale represented a recognition of the strength of the Tulsa market and the high caliber nature of the property and the trade area,” said Feller, Managing Director and Partner. “In conjunction with the long duration lease term, the asset commanded a very aggressive cap rate which set a new record for CVS sales in Oklahoma.”
The property was originally built in 2011 and is situated on a 1.19-acre corner parcel. At the intersection of East 21st Street and South Harvard Avenue, the site is just 4.4 miles southeast of downtown Tulsa. Neighboring tenants include QuikTrip, Arby’s, Utica Park Clinic and local favorite, Brownie’s Hamburger Stand. The retail pharmacy is in close proximity to the University of Tulsa, Ascension St. John Medical Center, Hillcrest Medical Center and the upscale retail shopping center, Utica Square Mall.
January 28, 2022
Northmarq Announces Ground Lease Sale of Toledo, Ohio Home Depot for $12.0 Million
Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the ground lease sale of a Home Depot located at 1035 West Alexis Road in Toledo, Ohio. The single-tenant big box home improvement warehouse totaled 141,610 square feet situated on 13.3 acres. Northmarq’s Chad Byerly represented the seller, a local developer. The property was acquired by a private 1031 exchange investor for $12.0 million.
“This particular Home Depot ground lease asset was in a good, established area,” said Byerly, Director and Partner in Northmarq’s Tulsa, Oklahoma headquarters. “Even though the tenant had just exercised a lease option and only five years remained on the lease, we received lots of activity from the market. The seller ultimately decided to go with a California trade buyer, and it ended up trading very close to list price.”
The property is located six miles northwest of downtown Toledo and serves a customer base of approximately 192,000 residents in a five-mile radius. Strategically located in a dense retail corridor, neighboring tenants include Lowe’s, Ollie’s Bargain Outlet, Kroger, Target and many other national retailers.
January 25, 2022
Capital Corner: Equity ramps up CRE investor buying power
Equity is playing an increasingly pivotal role in the multifamily capital stack as institutional groups partner on acquisitions and development, with an abundance of equity capital available. New equity sources include new life company programs and foreign capital increasing their allocations in the U.S. All equity sources are intensely focused on value-add, core-plus, build-to-rent (BTR), and opportunity zones niches with multifamily properties. In addition, some equity players are shifting strategies from struggling asset classes like office and hotels and allocating capital to the resilient apartment market. “Clearly, the equity side of the multifamily business remains heavily favored by a wide range of investors,” says Jeff Erxleben, Northmarq’s executive vice president/executive managing director - debt & equity. Life companies have a ferocious appetite for multifamily mortgages as part of their investment allocation. They are widening their offerings and looking for new, creative ways to generate yield. Additionally, international investors are chasing yield and eager to enter the U.S. apartment market, creating new sources of capital. “There's pent-up demand by foreign capital to come here,” says Joel Heikenfeld, senior vice president, Debt & Equity in Dallas. “COVID-19 has hampered international capital because people couldn’t travel. Europe and Asia, for the most part, have been shut down, and they prefer to do face-to-face deals. We expect activity to pick up in 2022.” Equity trends: -- Larger investment size. Most players are attracted to equity deals of $10 million-plus. “At a minimum, we’re seeing roughly $10 million for equity investments all the way up to north of $200 million for portfolios, so larger investments are definitely a trend,” Erxleben notes. -- Strong activity across all product lines. Products include conventional financing options as well as value-add. Multifamily value-add deals are becoming increasingly larger, resulting in a need to find new and bigger sources of equity. -- Specialty products expand. Equity capital is pouring into specialty product lines including manufactured housing and single-family Build-to-Rent properties. “For build-to-rent, there are some really creative equity structures,” Erxleben explains. “For example, some are providing the full capital stack on day one with a pre-buy takeout.” Several large institutional investors have announced plans to move tens of billions of dollars into single-family rentals. -- Demographic shift occurring. Investors have shifted capital away from coastal and gateway markets and into the Sun Belt states, seeking high-quality assets in high-growth secondary and tertiary markets like Phoenix and Dallas. Is an equity partner the right fit? “While there continues to be an influx of equity looking to enter the multifamily space, the challenge is how do borrowers get into that space and make sure they align their programs with the deals in the market?” says Pat Minea, executive vice president -- Debt & Equity at Northmarq. “Our role is helping them navigate all the capital sources,” Minea continues. “We help them figure out the best path. We coach our borrowers and help them find deals and help the equity find deals. There's plenty of capital for equity; it's just making the deals fit with the right source.” Jake Leibsohn, Vice President at Northmarq’s Seattle office, agrees: “Oftentimes, equity can be very helpful in growing a portfolio because it offers access to huge amounts of capital,” he says. However, there can be some disadvantages to bringing in a large partner including extensive reporting requirements and shorter investment horizons. After ensuring that equity is a good fit for the sponsor, the next step is confirming the deal is a good fit for the equity. “Typically, large groups look at whether the sponsor has experience, the size of the deal, and obviously, they’re seeking good, risk-adjusted returns,” Leibsohn explains. “If a deal doesn't hit those metrics, it's tough to find an equity partner.” Equity transaction examples In spring 2021, a sponsor approached Northmarq about its new core-plus strategy and was looking to raise equity. The opportunity was a 1999-built multifamily asset in North Dallas that was well-priced at under $200,000 a unit. “It was a slam dunk. Anyone would do that deal today,” says Heikenfeld. However, challenges at the time included an unprecedented Texas freeze resulting in property damage, the impacts of COVID, and soaring multifamily pricing. “At the time, many core-plus institutional groups were either putting their capital together or hadn't figured out their strategy in Texas,” Heikenfeld explains. Still, Northmarq had very good response from equity groups. The group they brought in was pivoting from a commercial strategy and raised $700 million of capital to deploy into core-plus properties. “This was their first venture, so it was a new relationship and new strategy for the equity group, and it helped fulfill the sponsor’s ability to launch their core-plus strategy,” Heikenfeld adds. Opportunity zone transactions Leibsohn and the Seattle office have raised more than $160 million of equity for multifamily OZ projects. The primary difference when seeking capital for an OZ development vs. a traditional development is targeting groups that understand and have experience raising and deploying OZ equity. “There are fewer groups in the opportunity zone space than in general equity investing,” notes Leibsohn. “However, there are a couple of groups that have raised billions of dollars of opportunity zone equity, and we've worked with them on numerous transactions.” Learn more about those transactions: https://www.northmarq.com/transactions/two-multifamily-oz-developments/ https://www.northmarq.com/transactions/622-rainier/ Leibsohn anticipates that opportunity zone equity will continue to flow into the market. “The hardest part will be finding good deals in good locations in which to invest that capital,” he adds.
January 25, 2022
Northmarq’s San Diego office announces the promotion of Aaron Beck to role of co-managing director
SAN DIEGO, CALIFORNIA (January 25, 2022) — Aaron Beck will join long-time managing director Eric Flyckt as co-managing director of Northmarq’s San Diego debt and equity team. In his new role, Beck will co-lead the team’s production in continuing the office’s expansion of market share and providing creative capital solutions for our commercial and multifamily clients. “It’s an exciting time for Northmarq, and I’m honored to be a part of the company’s significant growth and innovation initiatives,” said Beck. “A major part of accomplishing these goals involves partnering with our multifamily investment sales platform. Our local investment sales expertise, along with 19 other investment sales teams across the nation, enables us to provide a full range of services to our multifamily clients.” Beck started his career in commercial real estate in 2003 and is an active member in a number of real estate organizations, including the Burnham-Moores Center for Real Estate, NAIOP and ULI. During his tenure with Northmarq, he has played a key role in arranging more than $1.3 billion in debt and equity financing. “Aaron has been an extremely valuable member of our team since joining Northmarq 11 years ago as an analyst and progressing onto associate producer, producer and now managing director. Aaron is a skilled mortgage banker possessing strong relationships with insurance companies, Fannie Mae, Freddie Mac and other prominent capital sources. He is a team player and has established the confidence and respect of our borrowers and lenders alike. I’m exceptionally pleased to have Aaron working with me in furthering the successful history of our office,” said Flyckt. Recent Transactions Include: The Residences Apartments - $24,000,000; Insurance Co.; Phoenix, AZVia Frontera (flex property) - $16,130,000; Regional Bank; San Diego, CAPatio Gardens Apartments - $24,600,000; Fannie Mae; Long Beach, CAOcotillo Business Center - $10,000,000; Insurance Co.; Tempe, AZThe Broadway Apartments - $14,100,000; Fannie Mae; Chula Vista, CAHUE 97 Apartments - 32,060,000; Freddie Mac; Mesa, AZ
January 25, 2022
National Multifamily 2022 Outlook: Sector Emerges from the Pandemic as a Standout, Boasting Relentless Demand
Report identifies demand-supply imbalance fueling staggering rent growth, tight vacancies, and robust investment opportunities. MINNEAPOLIS, MINNESOTA (January 21, 2022) – Multifamily properties across the U.S. posted record-setting performances in 2021, with the momentum forecast to carry over into 2022, according to a special Multifamily National Outlook released by Northmarq and authored by Research Director Pete O’Neil. Multifamily market fundamentals quickly rebounded from the pandemic, with investors attracted to the sector’s explosive rent growth, tight vacancies, spiking absorption, and strong migration trends. These dynamic improvements in property performance led to a surge in investment capital flooding into the red-hot sector. Investors are recognizing attractive yields in multifamily that may be difficult to achieve elsewhere. The standout sector is experiencing more demand than supply, giving rental operators added pricing power. The demand-supply imbalance is driven by several factors including sticker shock from would-be homebuyers priced out of the housing market; labor shortages, supply chain deficiencies and escalating material costs postponing construction of new multifamily product; and robust migration growth. “Our report shows that supply continues to lag demand for rental units, leading to rent increases and a continued robust appetite for investments, which we anticipate will continue in 2022,” said Trevor Koskovich, Northmarq’s President-Investment Sales. The special report identifies five additional trends: The Economy - A full economic recovery is anticipated in 2022, which should continue to drive strong demand for rental units. Some uncertainty surrounding the Delta and Omicron variants, however, could disrupt economic growth, at least in the short term.Rent Trends - Healthy rent gains are likely to continue in 2022 but will not be a repeat of the double-digit gains throughout much of the country in 2021.Investment Market - As rents have soared, so have property sales. Nationally, investment volume jumped approximately 70 percent from 2020 levels and more than 40 percent from previous peaks. Investors around the globe have increased allocations to multifamily housing. Vigorous investor competition should continue to push pricing higher as cap rates compress.Financing Climate - Multifamily’s lending market remains robust, which is expected to continue in 2022. Increases in multifamily originations will likely start with Freddie Mac and Fannie Mae, which each have caps of $78 billion this year. Even concerns around rising interest rates, inflation and increasing construction costs are not lessening outlooks. “There is continued liquidity and likely spread compression due to lender demand,” said Jeff Erxleben, Northmarq’s Executive Vice President/Executive Managing Director. “I don’t see a slowdown in the momentum in the lending market at all.” Additionally, the number of bridge loans spiked in 2021, particularly for value-add acquisitions, which were increasingly popular due to the rapid rent growth. “We saw clients across the country acquire value-add properties where they were looking to make improvements for renters and also increase the value of the property,” says Erxleben. “In our experience, bridge lending was off the charts in 2021, and we expect it to remain prevalent throughout 2022.”Looking ahead to this year, the cost of capital is likely the greatest uncertainty in the capital markets, however, volume is expected to remain strong.Single-Family Build-to-Rent - Changing renter demographics are driving unprecedented growth in the single-family build-to-rent (SF BTR) sector, emerging as an alternative to traditional apartments. Developers are ramping up activity on thousands of new units, particularly in the high-growth Southern U.S. markets. Dozens of projects totaling more than $1.5 billion sold in 2021. Meanwhile, billions of dollars of debt and equity capital continue to move into this increasingly attractive investment class. Conditions for multifamily look to remain favorable in 2022, building on the substantial strengthening in 2021. Demand for units should be buoyed by additional recovery in the labor market, particularly in some of the country’s dense urban areas where post-COVID reopening measures took longer to take hold. The pace of development is likely to accelerate, but most major markets are expected to remain undersupplied throughout 2022, keeping vacancy rates near cyclical lows. These tight conditions will allow room for additional rent increases, but the pace of gains should trail the spikes recorded in 2021. While a few potential challenges lie ahead, it is hard to overstate the current health of the multifamily market. See Northmarq’s full report here.
January 21, 2022