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Research Library Wed, 04/27/2022 - 09:21
MarketSnapshot: Q1 2022
Market data, charts & graphs: current and historical trends for single-tenant office, industrial and retail properties, as well as multi-tenant retail Overall market trends Market summary & analysis Economic data points hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "d5cea127-0985-4756-8591-d452dc67de3a" }); Following a record-setting 2021 with unprecedented levels of investment sales activity in the final quarter of the year, there was no expectation that the single-tenant net lease market was positioned for back-to-back quarters of such volume. Instead, predictions called...
Latest Publications

Press
Stan Johnson Company Arranges Sale Leaseback of Texas Industrial Portfolio
Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale leaseback of a two-location portfolio occupied by Oryx Oilfield Services. The facilities are located at 900 East Highway 11 in Kermit, Texas and 922 Farm to Market 81 in Goliad, Texas. Together, the transaction included 13 buildings totaling more than 118,000 square feet. Stan Johnson Company’s John Rotunno represented the tenant, who executed a long-term lease at the time of sale. The portfolio was acquired for an undisclosed price by Real Capital Solutions, a private equity group based in Colorado.
“The impact of COVID-19 on sectors outside of non-essential retail was substantial in some cases, and Oryx’s oil field service business faced challenges including a decline in revenue,” said Rotunno, Associate Director in Stan Johnson Company’s New York office. “By executing a sale leaseback of their real estate, Oryx can now consolidate debt and focus company resources on the business’s future growth, providing critical working capital.”
With roots in the oil and gas industry, Oryx has a solid history of service to key customers, providing facility maintenance and construction, pipeline construction and fabrication facilities for facility components. The portfolio properties serve as mission critical locations for Oryx’s service operations, and the properties feature office and warehouse space, manufacturing and fabrication facilities, as well as an abundance of fenced acreage totaling approximately 95 acres.
March 14, 2022

Press
Stan Johnson Company Announces Sale of Barrett Court Office Building in Metro Atlanta
Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of Barrett Court, an office building located at 1925 Vaughn Road in Kennesaw, Georgia. The 32,378-square-foot property sold for approximately $4.2 million. Stan Johnson Company’s Craig Tomlinson represented the buyer, an individual investor based in Louisiana. The property was sold by a group of Atlanta, Georgia-based investors.
“The report of office’s demise is greatly exaggerated,” said Tomlinson, Senior Director and Partner in Stan Johnson Company’s Tulsa, Oklahoma headquarters. “There is strong demand for suburban and garden office, typically occupied by the decision makers. Not everyone can or wants to work from home. Buildings with strong fundamentals and reasonable basis are one of the few places an investor can find yield today.”
The two-story Class B property was built in 1998 and is situated on 4.6 acres. The site is conveniently located near Interstates 75 and 575 in northwest suburban Atlanta. At the time of sale, it was 85 percent occupied by tenants including The Adaptive Learning Center, Byram Healthcare, Edward Jones and Farmers Insurance.
March 14, 2022

News & Insights
Wheeler REIT to Acquire Cedar Realty Trust in Nod to Grocery Stores' Strength
Originally published by GlobeSt
Cedar Realty Trust this week announced it has entered into definitive agreements for the sale of the company and its assets in a series of related all-cash transactions to Wheeler Real Estate Investment Trust.
The deal includes an agreement to sell a portfolio of 33 grocery-anchored shopping centers to a joint venture between a fund managed by DRA Advisors LLC and KPR Centers for $840 million.
Also as part of the agreement, Cedar Realty will sell the Revelry redevelopment project for $34 million. The REIT is negotiating the sale of the Northeast Heights redevelopment project for $46.5 million.
In the event the sale of the redevelopment projects is not completed prior to closing of the grocery-anchored shopping center portfolio sale, the DRA-KPR joint venture has agreed to acquire these two projects at the aggregate price of $80.5 million.
Cedar Realty is selling its remaining assets to Wheeler Real Estate Investment Trust once these transactions complete, in an all-cash merger transaction that values the assets at $291.3 million.
Sale Reflects $29 Per Share
The transactions, which were unanimously approved by Cedar’s Board of Directors, are estimated to generate total net proceeds, after all transaction expenses, of more than $29 per share in cash, which will be distributed to shareholders upon completion.
The $29 per share of estimated net proceeds represent a 16.6% premium to Cedar’s closing share price on March 2, 2022, and a 70.6% premium to the company’s closing share price on September 9, 2021, the last day of trading prior to the announcement of its dual-track review of strategic alternatives.
Once these transactions close, Cedar will be wholly owned by Wheeler Real Estate Investment Trust, and Cedar’s common stock will no longer be publicly traded.
BofA Securities and JLL Securities are acting as financial advisors to Cedar, and Goodwin Procter LLP is acting as legal counsel to Cedar. JLL is acting as the Company’s real estate advisor with respect to the sale of the grocery-anchored shopping center portfolio and CBRE is acting as real estate advisor to Cedar with respect to the sale of the redevelopment projects.
Strength in Grocery Sector ‘Here to Stay’
Margaret Caldwell, Stan Johnson Company Managing Director & Partner whose focus is multi-tenant retail investment sales, tells GlobeSt.com that grocery-anchored retail centers, as well as shadow-anchored centers, continue to be in very high demand with investors.
“As we saw during COVID, investment sales activity for this asset class was incredibly strong given the essential nature of the tenants,” Caldwell said. “While online shopping and curbside pickup can be convenient, the honeymoon is over for many consumers. Shipping delays, supply chain issues and technology glitches are giving customers a poor experience, which is driving them back to brick-and-mortar stores. The grocery sector is strong, and it’s here to stay.”
The grocery anchored-assets are the absolute preferred product class in retail, agrees Richard W. Chichester, board member, X Team Retail Advisors.
“Investor demand is at an all-time high, cap rates continue to remain compressed, and co-tenancy and shop leasing for grocery anchored assets remains robust,” he tells GlobeSt.com. “The only mild dislocation is in the capital markets as there is still caution in their underwriting (this is both an economic issue as well as an asset segment retail concern).
“As for the grocery tenancy/user landscape, the industry is running on all cylinders as grocers are flush with capital from excellent operating performance, in many cases, due to the pandemic.
“Virtually all grocers are aggressively playing offense to expand and build market share, as well as defense, to maintain relevancy and customer share. Regional grocers are also aggressively expanding, offering a shopping experience and product diversity that competes well against the larger, national grocers. Also, in many instances, regional grocers are not constrained by the same supply chain challenges of the national grocers.”
March 11, 2022

News & Insights
Longpoint, Brookfield Recapitalize National Logistics Portfolio
Originally published by GlobeSt
Longpoint Partners has closed its joint venture with Brookfield through its Real Estate Secondaries business and has recapitalized a $700-million, 3.8-million-square-foot national logistics portfolio that was held in one of Longpoint’s closed-end funds.
Longpoint, a Boston-based real estate investment company, will maintain an interest in the portfolio and continue to manage the day-to-day operations.
The portfolio comprises 31 logistics assets located in infill locations in high-growth markets including New Jersey, Washington, D.C., Dallas, South Florida, and Boston. The assets are approximately 97% leased to a diversified roster of over 200 tenants.
“Demographic shifts, technological advances, and supply chain disruptions are creating significant long-term value creation opportunities for well-located real estate assets,” Marcus Day, managing director at Brookfield Real Estate Secondaries, said in prepared remarks.
“We are seeing increasing demand for secondary capital solutions that give GPs and LPs additional runway to execute longer-term business plans, allowing them to participate in future upside.”
Paying a Premium for Existing Facilities Will Continue
Maggie Holmes, director, Stan Johnson Company, tells GlobeSt.com that industrial continues to be a highly desirable asset class for investors, especially newly constructed, institutional-quality facilities located in top tier markets.
“New industrial development is happening at an incredibly rapid pace,” she said, “but well-located available land is getting more and more scarce. We’re seeing the boundaries of some of the major metro areas expand as industrial construction pushes farther out, and there’s also been an uptick in secondary and tertiary market development.
“While new construction will always be desirable, I expect we’ll see investors willing to pay a similar premium for existing facilities in the core industrial markets.”
March 10, 2022

News & Insights
Industrial Supply Not Likely to Catch Up with Demand This Year
Originally published by GlobeSt
Any hope, faint as it might have been, that industrial supply would start to catch up with demand this year should be already dashed by now. The National Association of Realtors reported data through March 4, finding that industrial supply continues to lag demand. Namely, as of the beginning of this month, the vacancy rate fell to 4.1% from 6.8% at the close of Q4 2021. Specialized space, manufacturing and all other properties that are neither logistics nor flex space (such as telecom and data housing centers) saw availability rates decline to a low of 4.5%. Logistic space and flex space fell to 7.3% and 8.4%, respectively.
The situation has become untenable for occupiers, says Rob Gemerchak, director, Stan Johnson Company.
“Distribution and warehouse facilities play such an important role for tenants in the distribution of goods and products to stores as well as directly to customers,” he tells GlobeSt.com. “In today’s market, retailers cannot be successful, nor can they expect to grow market share and win customer loyalty, if they don’t have a streamlined logistics process—and their real estate plays a critical role.
There was more than 500 million square feet of industrial product under construction at the end of 2021, but developers can’t build fast enough to satisfy tenant or investor demand, Germerchak said.
“And as available land in premium locations becomes scarce, tenants are getting stickier and more committed to staying in their existing facilities, which is keeping the availability and vacancy rates low in many top tier markets like Los Angeles, Chicago and Atlanta, among others.”
Land Scarcity, Expense, Delivery Times are Factors
The reasons for the scarcity are well known: the scarcity and expense of land coupled with construction delays. “In the past five years industrial land prices have more than doubled, but fortunately for developers, so have rents,” By Cartmell, senior director, Walker & Dunlop, tells GlobeSt.com. “As a result, in many cases, we are seeing values nearly double as well.
“Normally this would lead to an immediate increase in supply, but construction material delays have also more than doubled. For instance, if you want to order roof trusses for an industrial building, delivery times are now 12 to 15 months in the future. Vacancy rates for industrial properties nationwide have been in the single digits for at least 10 years and they are now in the very low single digits. In LA county, the vacancy rate is two percent or less.”
David Welch, CEO at Robinson Weeks Partners, a developer of master-planned industrial parks, tells GlobeSt.com that he doesn’t believe supply will be able to match demand through the rest of this year and into 2023. “The key issue is that the manufacturing of key construction materials—mainly steel and roofing materials—can’t catch up to the rate of new industrial construction.
“The ‘easy’ sites have already been developed. New industrial sites have development challenges that take time to figure out. A lot of potential sites require permitted work to mitigate wetlands and streams before construction can begin. These approvals often take between 12 and 15 months.
“Potential industrial sites often need to be rezoned and re-entitled to allow for industrial development, which again, can take up to 12 months or longer to receive approvals.”
Not everyone believes the situation is so grim. Jeff Small, co-founder and CEO of MDH Partners, tells GlobeSt.com that with over half a billion square feet of industrial space under construction today, this historic amount should be more than adequate to meet current demand.
“If we begin to see a tapering of absorption from the large e-commerce users, who took so much space over the past two years, as e-commerce penetration slows in a post-COVID-19 economy, we could start to see rising vacancies in 2023.”
Indeed, the industrial construction pipeline increased to 522 msf in Q4 2021, a record high for the industrial market. In the first quarter square footage under construction reached more than 500 msf, according to NAR.
The industrial supply coming on market should start picking up as pandemic-related supply chain issues are alleviated, NAR says. But it also notes that though the amount of industrial space under construction is increasing, the robust demand for new industrial space may keep industrial space availability at a low throughout 2022.
Too Many Dollars Chasing Too Few Deals
Investors are also frustrated by the status quo. David Lari, Partner, Cox, Castle & Nicholson, tells GlobeSt.com that the amount of dollars chasing industrial deals far exceeds the number deals available today.
He said that due to the current lack of industrial supply, he is seeing three trends emerging amongst industrial owners, investors, and developers. Industrial players are actively seeking ground up development opportunities, looking to redevelop or repurpose retail assets such as old shopping malls into light industrial, or trying to acquire existing industrial assets in off-market transactions whereby there is opportunity to make the assets more efficient in terms of how they operate, Lari added.
“The move toward e-commerce is only growing and is here to stay,” he said. “There will always be a place for brick-and-mortar retail assets but it’s becoming more of an experience-oriented industry rather than just a shopping experience.
“I believe the movement toward consumers buying more products online will only increase, and that will in turn increase the demand for localized industrial across the country to deliver those products quickly.”
Lari said that it seems likely that the Southern California ports will continue to lead the way in terms of volume, “but there will need to be more localized storage and delivery systems put in place to keep up with the e-commerce demand.”
March 10, 2022

Press
Stan Johnson Company Brokers $2.4 Million Sale of Maryland Healthcare Property
Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a medical facility located at 195 Thomas Johnson Drive in Frederick, Maryland. The 10,000-square-foot property is leased to Maryland Vision Institute. Stan Johnson Company’s Asher Wenig represented the buyer, an individual investor based in New York. The seller was a local partnership, and the property traded for approximately $2.4 million.
“In a 1031 exchange, my client purchased this asset at a healthy yield with strong escalations, below market rent and with a value-add component, as 5,000 square feet is currently not being utilized by the tenant,” said Wenig, Senior Director and Partner in Stan Johnson Company’s New York office. “Medical retail/office is a high-demand sector and will continue to garner interest from investors due to community demand and e-commerce resistance.”
The property is situated on nearly 1.1 acres and underwent a major renovation in 2016 to accommodate the medical practice. Maryland Vision Institute is part of the Vision Innovation Partners network, a leading provider of ophthalmology services in the Mid-Atlantic region. The business will continue to benefit from its superb location just off the primary north/south thoroughfare in the area.
March 9, 2022

News & Insights
Scarcity Drives Unprecedented Industrial Space Demand
Originally published by GlobeSt
Just when the industrial market seemed like it could not get any stronger, the new year has seen demand for space far outpace the supply of new product, according to a new report by NAIOP.
Rents have correspondingly increased rapidly, and many firms simply cannot find space to lease.
“The scarcity is so great that firms are getting creative by renting properties that can be adapted to serve their purposes, locating facilities further away from their final destinations and building vertically,” according to the report.
“Concerns over access to future space needs have even resulted in larger firms occupying extra space today to avoid problems in the future and signing leases on buildings long before they are built. This, of course, lowers current vacancy rates and worsens the problem in the short run.
“Smaller firms often do not have this ability. Because of this, they are finding it difficult to expand. In more densely populated areas, land is physically constrained and/or zoning prohibits the ability to add supply, leaving a true shortage with no obvious solution.”
Given these trends, report authors Dr. Hany Guirguis and Dr. Michael Seiler forecast that the total net absorption of industrial space in 2022 will be 401.4 million square feet with a quarterly average of 100.4 million square feet.
In 2023, the projected net absorption is 334.1 million square feet with a quarterly average of 83.5 million square feet.
The solid upward revision of the 2022 forecast can be attributed to retailers and manufacturers expanding their inventories to avoid future supply shortages and the expected good performance of the economy in 2022 and 2023. The economy’s transition from recovery to expansion supports higher employment and a rising growth rate for real gross domestic product (GDP).
Last-Mile Servicers Continue Increase in Leasing
Much of this demand is focused on infill locations, not only because of rising transportation costs but also because tenant footprints are changing, according to Brett Turner, Senior Managing Director, Acquisitions & Dispositions at BKM Capital Partners.
“Technological innovations have reduced the footprint of many of our tenants,” Turner tells GlobeSt.com. “That widget maker who used to be in 50,000 square feet now only needs 5,000 square feet by utilizing ecommerce, same day delivery and additive manufacturing.”
“Small- to mid-size industrial users are dominating the leasing market as industries servicing the last mile continue to see an increase in leasing. From Q1 to Q3 2021, 2,500 leases were executed below 50,000 sf compared to approximately 800 in the 50,000 to 100,000 sf range.”
Hitting the $100-per-square-foot Mark
One sign of investors’ love affair with industrial has been the rapid rise in quarterly sales. In the seven quarters since COVID-19 impacts hit, these have been rising at a fast clip, Craig Tomlinson, Stan Johnson Company Senior Director & Partner, observes.
“We’ve seen tremendous growth not only in sales volume, but also in the total amount of square footage transacted, as well as an increasing average deal size,” he tells GlobeSt.com.
It’s also worth noting, Tomlinson said, that in Q2 2020, the average price per square foot for single-tenant industrial product surpassed the $100-per-square-foot mark for the first time in history and has been increasing since then.
“In support of NAIOP’s research, we’ve seen unprecedented levels of buyer demand with an interesting trend of seeing strong investment volume in tier 2 and tier 3 markets,” he said.
“Big cities are still holding their own, but when smaller markets make up a sizable percentage of overall sales, it suggests that institutional investors aren’t able to find what they need and may be relaxing their geographic criteria.”
SoCal and Phoenix Markets Stay Hot
Chad Jacobson, COO, DAUM Commercial, tells GlobeSt.com that NAIOP’s projections are aligned with the significant increase in demand he is seeing, especially within the key Southern California and Phoenix industrial markets.
“This hunger for space has driven up pricing dramatically in the second half of 2021 and into this year,” Jacobson said. “We’re experiencing clients selling industrial properties for upwards of 30% more than they acquired them for, after simply holding the assets for a few months.
“This has created challenges as some users are requiring as much as three-times the industrial warehouse space they did less than two years ago, purely due to ramped-up e-commerce demand.”
He said that in some cases, DAUM is able to demonstrate the benefits of moving further east into Inland Empire submarkets. For other clients, such as those in the food and beverage industry, infill locations near population hubs remain critical.
“Unlocking opportunities for owner-users and tenants that range in size and breadth of resources is still very possible,” Jacobson said. “It often requires identifying assets that might not seem an ideal fit, but can be retrofitted to fit client needs, as well as drawing upon deep and long-standing relationships in the subject markets, including those with local municipalities.”
March 9, 2022

Research Library
What ALDI’s Rapid Expansion Means for Net Lease Investors
The pandemic put a spotlight on essential retailers, and despite a resurgence across nearly all retail categories, the grocery sector remains top of mind for investors. Here, we discuss current trends impacting the single- and multi-tenant grocery industry and explore why European discount grocer ALDI has emerged as a growth leader.
Lanie Beck: How strong is demand for grocery retailers in today’s market? Why?
Tom Georges: Over the past two years, several retail categories have proven themselves to be pandemic resistant, and the essential nature of grocery stores puts them right at the top of that list. With today’s sparsely stocked shelves, labor shortages at food processing companies and increased freight costs, however, grocery stores are faced with their fair share of challenges. But for investors, the grocery sector is driving significant demand.
Grocery leased assets are highly sought-after properties for commercial real estate investors – not only do most customers still prefer to shop in person or have their online orders fulfilled by curbside pick-up, but grocery anchors help drive foot traffic to other inline retailers. Across the country, we’ve seen freestanding, single-tenant grocery stores as well as grocery-anchored shopping centers become very desirable portfolio additions. And within the single-tenant net lease sector, one of the most in-demand brands is discount grocery retailer, ALDI.
LB: What’s driving ALDI’s rapid expansion and what regions are they targeting for growth?
TG: With over 2,150 stores in 38 states, ALDI is one of America’s fastest growing retailers across any sector. Within the grocery sector, the company’s current plans for expansion put it among the largest brands by store count, already exceeding Ahold Delhaize’s (Food Lion, Stop & Shop and Hannaford) 1,029 U.S. locations, and quickly approaching Albertsons Cos. Inc. and The Kroger Company store counts, which are 2,260 and 2,800 respectively.
The German-based ALDI, with U.S. headquarters in Batavia, Illinois, is a price-driven brand which attracts the value conscious consumer. Furthermore, with their unique brands and quirky characteristics, they’ve amassed a loyal following, with consumers in underserved markets hoping for a grand opening announcement. In addition to wanting to serve their customer base, another driving factor in ALDI’s rapid expansion is looming competition from Lidl, another European grocer who’s announced expansion plans for U.S. markets. While Lidl’s ramp up hasn’t been as fast as originally predicted, ALDI hasn’t slowed down. Currently, 20 states have planned store openings in the near future with Chicago, Illinois and the Gulf Coast region seeing the most robust activity.
LB: How is ALDI’s expansion creating opportunities for net lease investors?
TG: With its long-term leases in the 15- to 20-year range, zero landlord responsibilities, typical 5.0 percent rent increases every five years, and well-located real estate, ALDI has become extremely attractive to net lease investors. With its rapid expansion, there are significant opportunities for investors to acquire newly built ALDI-tenanted properties. Just as a dollar store can enter a market that a Walmart or other big-box retailer cannot, due to lower population density, ALDI can be successful because of its smaller format and low-cost business model. With floorplates typically under 20,000 square feet, or roughly the size of a drugstore, ALDI is able to effectively serve markets that its competitors cannot and adequately staff their stores with fewer employees. Combined with their quarter-for-a-cart and no bagging policies, ALDI-exclusive brand items and shorter hours, ALDI’s cost-conscious business model has been a recipe for success.
This freestanding ALDI grocery store is currently under construction in Navarre, Florida and will be the first location in Northwest Florida. Navarre is a small community of approximately 40,000 people situated on the Gulf Coast. The local population includes active and retired military personnel, budget-conscious civilian families and seasonal tourists, all of which are viable consumer groups of the discount grocer. ALDI announced the grand opening of this store is scheduled for March 10, 2022.
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March 8, 2022