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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
Austin Q4 Multifamily Market Insights: Rapid Economic Growth Fueling Transaction Activity
Highlights: Austin’s strengthening economy and elevated renter demand continued to drive down vacancy rates and push rents higher in the final quarter of 2021. Improving conditions carried over to the investment market, where transaction activity gained momentum, prices rose, and cap rates remained low.Vacancy dropped in each of the final three quarters of the year. During the fourth quarter, the rate fell 40 basis points to 5.3 percent. Vacancy tightened by 130 basis points year over year, reaching its lowest point since 2016.The pace of rent growth accelerated in 2021, with the largest annual increase ever recorded for the region. In the past year, asking rents advanced 14.2 percent to $1,450 per month. In the final three months of the year, rents spiked 5.8 percent.The local investment market strengthened at the end of 2021. The pace of apartment sales accelerated from the previous quarter, cap rates remained near 3.5 percent, and prices rose to nearly $208,000 per unit in transactions where pricing was available. Read the report
April 27, 2022
Albuquerque Q4 Multifamily Market Insights: Rapid Rent Growth Recorded in Second Half of 2021
Highlights: The fourth quarter proved to be a strong end to a year of rapid improvement in the Albuquerque multifamily market. Vacancies ended the year near all-time lows, rents continued to trend higher at a rapid clip, and the investment market sustained the momentum that had been building in previous quarters.After reaching a historical low in the third quarter, the local vacancy rate inched higher at the end of 2021. Vacancy rose 20 basis points in the final three months of the year, reaching 3 percent. Despite a slight increase in the final months of the year, area vacancies still posted a 30-basis-point decline in 2021.Asking rents rose 5.8 percent in the fourth quarter, building on steep increases that occurred earlier in the year. For the full year, asking rents spiked 21.8 percent to $1,145 per month.The past year was a consistently active one for sales velocity. Prices spiked, outpacing the rate of rental increases. Cap rates compressed, ending the year below 4 percent. Read the report
April 25, 2022
Northmarq Brokers $8.2 Million Sale of Dental Office in Charleston, South Carolina
Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a 15,030-square-foot healthcare facility leased to Coastal Kids Dental and Braces. The property is located at 996 Tanner Ford Boulevard in Hanahan, South Carolina, a northern suburb of Charleston. Northmarq’s Jeff Enck and Teresa Lovely represented the seller, a locally based private investor. The asset was purchased by a group of 1031 exchange investors from California. The property traded for approximately $8.2 million reflecting a 5.84 percent cap rate.
“We were able to procure multiple offers on the property and ultimately closed with a West Coast 1031 exchange buyer who purchased the asset all-cash,” said Enck, Associate Director in Northmarq’s Atlanta, Georgia office. “Medical net lease properties, particularly those with rental increases, continue to be in favor with investors as inflation rises.”
The two-story property was built in 2017 and is situated on 1.52 acres. The flagship location houses the tenant’s dental and orthodontic practice as well as its office support and executive staff.
April 25, 2022
Margaret Caldwell Recognized Among CRE’s Women of Influence by GlobeSt
We are excited to share that Margaret Caldwell, Senior Vice President & Managing Director, has been recognized as a Woman of Influence by industry news leader, GlobeSt.com. An industry veteran of more than 20 years, Margaret specializes in the acquisition and disposition of multi-tenant retail shopping centers for her clients and has sold more than $15 billion of retail properties nationwide since 2000. Nominated by leaders, colleagues and peers, Margaret has made a lasting impact on those she works with closely. “There’s never been a moment where I didn’t feel fully supported by Margaret,” said a teammate. She drives, empowers and champions everyone around her and puts integrity above all else. Margaret is a shining example of Northmarq’s culture, and we’re honored to congratulate her on being recognized by GlobeSt.com among this year’s Women of Influence.
Honoring CRE's Women of Influence
Excerpt of article originally published by GlobeSt
Since 1983, GlobeSt. Real Estate Forum has recognized a growing number of female industry professionals for their remarkable achievements. Seeking to shine a light on the individuals that have personally impacted the market and significantly driven the industry to new heights via their outstanding successes, GlobeSt. collected nominations across various categories, spanning the entire commercial real estate spectrum.
GlobeSt. is proud to announce this year’s Women of Influence winners.
The honorees will be profiled in GlobeSt. Real Estate Forum’s July/August issue and will gain recognition on GlobeSt.com. GlobeSt. Real Estate Forum will also honor the chosen 2022 Women of Influence at the annual GlobeSt. Women of Influence awards dinner, which will be held at the Stein Eriksen Lodge Deer Valley in Park City, UT on July 26.
Congratulations to this year’s honorees.
April 22, 2022
CapitalSpring Raises $950M for Restaurant, Foodservice Investment
Originally published by GlobeSt
CapitalSpring this week announced the final closing of CapitalSpring Investment Partners VI, L.P. and parallel funds with $950 million of capital commitments.
Fund VI’s investment strategy focuses on providing structured loans and private equity solutions in support of buyouts, add-on acquisitions, organic growth, recapitalization and other complex financing needs.
Fund VI was substantially oversubscribed and exceeded its target of $750 million. The fund attracted backing from a diverse group of existing and new limited partners in the United States and internationally, including public and private pensions, endowments, foundations, funds of funds and family offices.
The fund will target investments ranging from $10 million to $150 million across the restaurant and foodservice industries as well as in related businesses across the business services, technology and manufacturing sectors.
Since the initial close, CapitalSpring has already completed four investments in Fund VI, representing over $200 million of invested capital.
Schulte Roth & Zabel LLP served as legal advisor to CapitalSpring on this fundraise.
Momentum Maintained by Pent-Up Demand
Mike McKean, founder, Retailsphere, tells GlobeSt.com that as people start spending more money on experiences and going out, especially at restaurants and bars, pent-up demand will almost certainly lead to an increase in openings across the board.
“It isn’t unexpected that a group like CapitalSpring would see such a large raise to invest especially in growing multi-unit groups,” McKean said. “They have the benefit of a model that can be quickly replicated and opened to meet this demand, plus many people are looking for slightly more casual options versus higher end concepts—most likely because of a continuing increase in cost of living as things start to open back up.
“Unlike in the previous few years, it wouldn’t surprise our team to see even larger investments continue into the coming year in the food and beverage industry.”
Indeed, the restaurant and foodservice industry is already experiencing a sudden uptick in hedge fund and private equity investment, according to Marbet Lewis, founding partner and firm CEO of Spiritus Law.
“Demand for hospitality services continues to increase and operators continue to try to stabilize cash flow while they come out of pandemic recovery,” Lewis tells GlobeSt.com. “While the hospitality industry is in full recovery, the pandemic left many operators limited in expansion opportunities as new profit balances out losses from the past two years.
Appetite Grows for Fast Casual, Quick Service
There is strong investor appetite for net lease investments in the quick service retail and fast casual space, particularly with household names like Chick-fil-A, McDonald’s, Taco Bell, Chipotle, and others, Daniel Herrold, senior vice president at Northmarq, reports.
He said emerging concepts such as Fuzzy Taco, Sweetgreen, Blaze Pizza and Slim Chickens, among others, are gaining popularity as well.
“Demand remains high for these assets as many were resilient through the pandemic and are typically located in strong retail locations,” Herrold told GlobeSt.com.
Higher yields are also driving interest in the casual dining sector, Afshan Kabani, vice president at Four Pillars Capital Markets, tells GlobeSt. “With compressed cap rates and interest rates on the rise, demand has really picked up in the past few months, and investors are seeing higher returns in this space,” Kabani said.
© 2022 ALM Global Properties, LLC. All rights reserved.
April 14, 2022
Industrial Operators Cash Out
Originally published by The Real Deal
For 35 years, Universal Warehouse Company, a trucking and logistics firm, owned its own warehouse in the South Los Angeles city of Carson.
The firm did everything out of the facility: yard storage, warehousing, trucking and transloading, where goods are moved from one mode of transportation to another. And the warehouse was in a prime trucking location — four minutes to the 710 Freeway and another 20 minutes to the twin ports of Long Beach and Los Angeles, one of the world’s biggest container shipping hubs.
The warehouse itself covers a small fraction of the property’s overall land, making it good for storing trucks and shipping containers on site. The 206,700-square-foot building is located across almost 20 acres, or 435,600 square feet.
All of those factors — the location, the low land coverage, the capacity for yard storage or parking — drew a buyer with a heavy purse.
In June, industrial real estate investor CenterPoint Properties bought the complex for $125.8 million — $100 million more than Los Angeles County’s assessed value for the property.
The deal was an “extremely rare opportunity to acquire a low-coverage industrial asset on one of the best-located parcels of scale in the South Bay, relative to the ports,” JLL’s Nick Foster, who brokered the deal for the seller, said at the time. CenterPoint declined to comment for this story.
Across Southern California, warehouse, logistics and manufacturing firms that have operated out of their own properties for decades are now selling them, taking advantage of soaring industrial land prices and a seemingly unquenchable appetite from industrial real estate investors and developers.
In Los Angeles, according to Kidder Mathews, industrial properties have been trading at an average of more than $250 per square foot — a 177 percent increase from the average price of $90 per square foot in 2011. In December, a warehouse near the Long Beach Airport sold for $581 per square foot.
Often, longtime owners are leasing the properties back, cashing in on the spike in demand but guaranteeing themselves continued use for a certain period.
“Owner-operators are monetizing their real estate,” said David Wirgler, who works with Los Angeles-based brokerage and lender Northmarq. “These business owners are not real estate experts.”
Sale-leaseback arrangements can give industrial firms capital to invest in their core operations, or they could simply be a cashout for owners.
“The main reason for a sale-leaseback is access to capital,” said Patrick Schlehuber, Rexford Industrial Realty’s head of acquisitions. “It allows these businesses to keep operating and invest in somewhere new or at current facilities.”
Cashing out
Northeast of Carson, in the industrial city of Santa Fe Springs, Crown Fence Supply owned its own warehouse for at least three decades before Rexford bought the property in April of last year.
The 22,718-square-foot warehouse was built in 1956. In 2015, the company spent an estimated $17,000 to replace a roof on the property, according to permits granted by the Los Angeles County Department of Public Works. The property was old and aging — and Crown Fence wasn’t going to put in the money to renovate it.
Given rising industrial rents, it could not afford to move elsewhere — until Rexford came in with a $16.7 million offer to buy the building.
“They’ve operated out of the site for a long time, and it’s not very efficient anymore,” Schlehuber said. Crown Fence will invest the money in a new facility in the area, he added.
In the meantime, the company will lease the facility back for a couple of years. Once the lease expires, Rexford can redevelop the site — it plans to build a two-building logistics facility with high ceilings and then sign a new tenant at market rates.
Barbara Perrier, an industrial broker at CBRE, called these types of deals “a win-win.”
A similar deal was in place with CenterPoint Properties and Universal Warehouse in Carson. By selling, Universal Warehouse is saving hundreds of thousands of dollars on property taxes and renovations — money that could be used to grow its business.
Taxes at the property from 2021 to 2022 — before CenterPoint purchased the site — were estimated to be about $270,800 a year, according to county valuations.
In 2016, Universal Warehouse spent an estimated $490,000 to renovate interior office space, L.A. Public Works documents show. The company spent an estimated $880,000 a year later to add an extra 15,000-square-foot truck dock and mezzanine level.
Refinancing pains
By selling, longtime industrial owners also don’t have to deal with obtaining loans and refinancing for their real estate.
Ducommun, an aerospace and defense company based out of Santa Ana, has owned its 307,000-square-foot warehouse in Gardena since 1998, when it bought the site’s 17 acres of land for $541,272, records show.
Over the ensuing years, Ducommun obtained more than $500 million in revolving credit lines and loans from multiple banks, including Bank of America, Wells Fargo and UBS, in connection with the Gardena warehouse and other properties, records and financial filings show.
Industrial owner-operators aren’t able to pull out 100 percent of a property’s value in a refinancing with a bank. And industrial developers and investors, including Rexford and CenterPoint, often don’t obtain loans to buy the properties, relying instead on 1031-exchanges or cash.
Ducommun got 100 percent of the Gardena warehouse’s value when CenterPoint Properties stepped up with a $143.1 million sale-leaseback offer in December, records show.
Sale-leaseback benefits
Sale-leasebacks are critical to the trend because they give longtime owner-operators such as Ducommun and Universal Warehouse more leverage to negotiate favorable lease terms once they sell. Given how quickly rents across Los Angeles are increasing, industrial tenants often look to sale-leaseback deals to secure better rental rates, according to brokers interviewed by TRD.
Average industrial rents in Los Angeles rose to $1.10 per square foot a month in the fourth quarter of 2021, according to Newmark — a 22 percent increase compared to the fourth quarter of 2020. In highly coveted markets, like the South Bay, monthly rents are up to $1.60 per square foot.
In the last nine years, industrial rents have risen by 123 percent, according to Avison Young.
“If the property is suddenly worth $50 million, the company is not used to paying that [corresponding] rental rate,” CBRE’s Perrier said, adding that the firm will either counter and offer to pay a lower rent, or won’t sell.
Brokers, developers and investors all agree: There have been more sale-leaseback deals during the pandemic. Most anticipate more to come.
“Owner-operators find [sale-leaseback deals] a successful alternative to selling their occupied industrial properties,” given the lack of inventory in a market with a vacancy rate of 1 percent, said David Harding, a broker at Colliers.
Not always a done deal
Though more industrial properties are now owned by real estate investors and developers, some will remain in the hands of their operators. Even with high industrial prices, some owners refuse to sell.
An example would be a defense company that has a highly classified facility it has spent millions on, according to Rexford’s Schlehuber. In Southern California, if a company has a property with state permits that allow it to release pollutants into the air, those permits are difficult to transfer to a different facility.
“The user may keep the property for 10 years, but what happens in 10 years?” Schlehuber said.
“They don’t want to lose any control.”
Last year, Rexford bought a highly specialized facility in Rancho Dominguez — an 80-acre oil tank site — for $217 million. The seller was Zenith Energy, which operated the facility as a crude oil storage site. According to Zenith’s website, about 4 million barrels are stored there, with each tank holding up to 21 million gallons of oil.
Zenith Energy wanted to maintain control of the property for as long as it could, according to Rexford. With options, it will be able to stay there for more than 30 years.
Rexford isn’t in a rush to redevelop the property.
“For us, we’re a public REIT, our purpose is to deliver cash flow to shareholders,” Schlehuber said. “By renting it, that’s delivering cash flow.”
The onus is on brokerages and investment firms to help persuade longtime owner-operators to put their property on the market.
“We make a lot of offers,” Rexford’s Schlehuber said. “Most of the time, it’s a no.”
Longtime warehouse and industrial owners are getting a “lot of unsolicited offers,” said CBRE’s Perrier, who represents sellers in sale-leaseback deals. Companies then reach out to CBRE, asking whether the offers are fair or whether they can get more.
Boats and retirement
In March of last year, Stan Johnson’s Wirgler brokered a sale-leaseback deal in Simi Valley on behalf of Milodon, a company that makes engine components. Milodon, run by Steve Morrison, sold the property for about $5.5 million, records show.
Morrison wanted to cash out on the real estate, but keep the business there for up to 25 more years — a provision Wirgler was able to secure in the new lease.
But Morrison wasn’t focused on moving into a modern manufacturing facility with high-tech dock doors. He didn’t want to open up a new complex or invest the money into researching new engine parts. The motivation was straightforward and reflective of the ongoing generational shift in the industrial market.
The veteran manufacturer was ready to buy “boats and vacation homes with the money,” Wirgler said.
April 12, 2022
Jeffrey Ketron joins Northmarq to lead Fannie Mae Production, coordinate agency lending growth
MINNEAPOLIS (April 11, 2022) -- Northmarq has hired Jeffrey Ketron as senior vice president, National Multifamily Production - Fannie Mae. Ketron, based in Northmarq’s Washington DC office, previously served for 14 years at Fannie Mae. In this new role, he will lead Northmarq’s Fannie Mae production and will chair the company’s Agency Committee to coordinate collaboration across agency platforms and with the debt, equity, and investment sales network. “We are excited to utilize Jeffrey’s decades of agency experience, deep industry relationships, and multifamily expertise to drive Northmarq’s growth of Fannie Mae DUS production volumes, portfolio, and profitability,” said Donaldson. “Not only does he bring technical expertise, but he also brings an amazing sense of collaboration, innovation, and industry contacts.” Most recently, Jeffrey was leading Fannie Mae’s Multifamily Customer Engagement in the conventional loan space, where he supported the lender’s variety of products and flexible financing solutions to provide certainty of execution and a seamless experience for DUS lender partners. Prior to Fannie, Ketron spent seven years with Credit Suisse and seven years with Wachovia Bank, all in the banks’ commercial real estate finance sectors.
April 11, 2022
Industrial Strengthens its Hold as a Favorite Among Net Lease Investors
Originally published by Wealth Management
The net lease property sectors that experienced the biggest increase in sales volume in 2021 were industrial and retail. Industrial sales increased 75 percent over 2019 activity with $37.3 billion in transactions. Net-leased retail volume totaled $18.3 billion in 2021, a 65 percent increase over 2019, according to JLL.
Investor sentiment in WMRE's annual net lease investment research, is tracking with sales activity. More than half of respondents (54 percent) said industrial was the sector in greatest demand from investors, followed by medical office/healthcare at 38 percent and restaurants/fast food at 24 percent. (Respondents were able to select up to three property types.) Those property types least in favor were office and fitness, each at 6 percent, and auto at 7 percent. When looking at the history of survey results, demand for industrial has seen the biggest improvement, jumping from 24 percent in 2016 to its current level. In comparison, drugstores have dropped from a high of 40 percent in 2016 to 20 percent. That decline in sentiment for drug stores could be influenced by the 2021 announcement that CVS would be closing some 900 stores over the next three years.
Coming out of COVID, investors have a strong appetite for “essential” properties, such as grocery stores, convenience stores, quick-service restaurants and auto. What is out-of-favor is anything that is non-essential, such as entertainment venues, movie theaters and gyms. Those businesses are coming back, but they are less desirable to investors, notes Mark E. West, a senior managing director in the Dallas office of JLL Capital Markets, Americas and co-leader of the firm’s national Corporate Finance & Net Lease group.
Following a strategic decision in 2019 to increase its exposure to industrial, Spirit Realty has been an active buyer in both industrial and retail. Although a majority of its portfolio, roughly 70 percent, is retail, acquisitions the company has made over the past 12+ months have been fairly evenly split between industrial and retail. “Not all retail is equal, but we’re still happy with certain parts of retail,” says Ken Heimlich, chief investment officer at Spirit Realty Capital Inc. For example, gyms and fitness centers is a sector that struggled during the pandemic. “We still like fitness, it just has to be the right operator,” he says.
It’s no surprise that industrial topped the list when respondents were asked to rate the 12-month outlook on property sectors. Based on a rating scale of 1 to 5 with 5 being “excellent” and 1 being “poor” industrial rated a 4.1, followed by medical office/healthcare at 4.0 and grocery at 3.8. Those sectors that rated the lowest were office at 2.8, fitness at 3.0 and bank/financial and government each at 3.2.
“Based on structural trends, people believe the future is exceedingly bright for industrial. Industrial throughout the pandemic saw incredible inflows of equity capital into that asset class, and that continues today, which is pushing yields on an unleveraged basis to all-time lows, sometimes into the 3 percent cap rate range, which is really unheard of,” says BJ Feller, a senior vice president and managing director at Northmarq.
It also is notable that respondents are more bullish on the outlook for net lease property sectors almost across the board. Views on the 12-month outlook remained the same or moved higher in all but two sectors as compared to the 2021 survey. The two sectors that declined were government leased assets, which dropped from 3.8 to 3.2 and bank/financials, which dipped slightly from 3.3 to 3.2.
Buyer demand for government-leased assets is dependent on the use and branch of government. Essential government uses such as a VA hospital is going to be more in demand than a generic government office or a post office in a small town, notes West. In addition, there is still good demand for bank branches that have a good credit tenant, such as JPMorgan, Chase and Bank of America. “Buyers want really good locations and they’re going to drill down to the deposit base at that location,” he says. “If those factors are strong, then the asset will trade very strong.”
April 8, 2022