Trends & Insights

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, announced today that Sam Crowe has joined the firm as an Associate Director and will lead the company’s newest regional office in Denver, Colorado. Mr. Crowe specializes in the acquisition and disposition of multi-tenant and single-tenant net lease investment assets throughout the mountain states region.   “I am thrilled to join such a strong national platform,” said Crowe. “The powerful broker partnerships and the best-in-class resources will allow me to deliver the highest level of service for my clients.”  Mr. Crowe previously worked with Avison Young as a Senior Associate in the Denver market for six years. Prior to Avison Young, he was a Junior Associate at Katz Properties Retail in New York City. Before joining the commercial real estate industry, Mr. Crowe spent nine years in modular construction in the development of multifamily and single-family homes.  With the opening of the Denver office, Stan Johnson Company operates 15 regional offices in addition to the Tulsa, Oklahoma headquarters. This is the company’s sixth West Coast office.  “We’re excited to be opening the Denver office with Sam Crowe,” said Curtis Hodges, Senior Vice President. “Sam is a great addition to our firm and aligns perfectly with the values of Stan Johnson Company. He is an advisor to his clients and has an excellent track record in the mountain states. We’re looking forward to Sam providing value to his clients with our platform and team behind him.” 

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a 72,000-square-foot industrial building leased to FedEx Ground. The property is located at 7783 Chattsworth Road in Columbus, Georgia. The seller, a private investor based in Boca Raton, Florida, was represented by Stan Johnson Company’s James Ullrich, Michael Macchia and Joshua Pardue. The asset was purchased by a private investor from Orlando, Florida. The property traded for approximately $6.8 million. The cap rate was not disclosed.  “Despite the short lease term, the property commanded a low cap rate. We feel this is a testament to the strength of the overall industrial market,” said Macchia, Associate Director in Stan Johnson Company’s New York office. “The Columbus, Georgia sale is also an example of national investors migration into tertiary Southeast markets in search of yield, as the usual suspects like Charlotte and Greenville become quite crowded and compressed.”  The property was constructed in 2007 and renovated in 2011. Situated on 15 acres, the asset is approximately eight miles from downtown Columbus and the Columbus Airport. At the time of the sale, there was a short lease term remaining on the tenant’s lease. 

  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 To download a copy of this report, please provide the following information: hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "9f7b0d5c-8cd8-4faa-893e-d67639cf1ee0" });   On the s-curve that is the cyclical commercial real estate market, second quarter 2022’s performance suggests that we’ve passed the peak of the market, especially within the single-tenant net lease sector. With rising interest rates and rampant inflation, net lease investors have been watching the market very closely, keeping note of the following measures. First, cap rates continue to compress, but this could be the last quarter before we start to see a reversal of that trend. Deals being priced today will influence closing cap rates reported for third quarter 2022 and beyond, so investors must keep in mind the lagging nature of this statistic. Next, sales volume is another important indicator of where we are in the market cycle. It’s almost certain that we’ll look back and identify fourth quarter 2021 as the true peak of this cycle. Sales totals across the net lease market were astonishingly high, surpassing $103 billion. Within the individual property sectors, the end of last year saw activity, especially for industrial and retail, reach levels that seem nearly impossible to achieve again. While every record-setting quarter makes us question its repeatability, sales volume during the first half of 2022 was closer to normal or average levels, and we’re likely to see more of that in the foreseeable future, pending a major market event. Despite what might feel like a slow-down in market momentum, buyer demand is still incredibly high. Investors are actively seeking high quality and value-add deals, understanding that even though interest rates are rising, debt is still comparatively inexpensive. This will continue to create opportunities for investors, and there is still time for sellers to take advantage. It’s important to note that even once the market has passed its peak, we are still in positive territory. It remains to be seen how long we’ll stay here, but for now, there’s still a lot to be encouraged about. Yes, the U.S. economy has contracted for two consecutive quarters and consumer confidence has declined sharply in recent months. But on the other hand, unemployment is incredibly low and consumer spending remains high – two very important indicators of economic health. Opportunities abound across the commercial real estate industry, and investors should be able to continue transacting with confidence in the coming months and quarters despite the beginnings of a shifting market.  

Originally published by GlobeSt After performing admirably in Q1, real estate’s inflation-hedging abilities are being put to the test, according to a new report from LaSalle about what will impact commercial real estate in the second half of the year.   “It would be reckless to conclude that real estate will emerge unscathed from capital market chaos or a slowdown in national economies,” LaSalle wrote.  Falling stock and bond indices will likely lead to less liquidity for all forms of private equity, including real estate, and private real estate’s performance tends to lag equities and public bonds, it wrote.  In addition, it seems likely that both core and non-core strategies will face headwinds and tailwinds in the second half of the year, LaSalle also said.   The less accommodative interest rate environment is a challenge to core investors and an exposure to higher construction costs (materials and labor) “will play a part in determining how exposed various sectors and investment styles are to the higher rate and inflation environment,” LaSalle expressed.  “Given all the liquidity still in the system, it is hard’ to see distress manifesting until later in the cycle. Rather than tilting between risk profiles, more important considerations are underwriting and mitigating the relevant risks to each investment style.”  ‘Reckless is a Dramatic Word’  So says Jeff Cox, managing partner, Stan Johnson Company, who tells GlobeSt.com that “history tells us that real estate performance will be impacted by capital market changes or economic variability.   “But not all capital market or economic changes are alike. Further, not all real estate product types act uniformly to such changes. For example, notwithstanding recent Fed interest rate increases, we remain in a strong job growth market. U.S. jobless claims are the lowest they have been since 1969.   “Additionally, global equity markets gained positive ground in July. So, there are conflicting economic vitality statistics even within our current market conditions. In the net lease sector, we are maintaining a healthy pace of listings and closings, indicating an ongoing demand for net lease product and the stable returns it generates.”  Cox said that real estate, particularly net lease real estate, “has proved very durable during times of market variability. Historically, it has long served as an inflationary hedge. And during times of economic uncertainty, we consistently witness a flight to quality.”  Miranda Dean, senior Associate at Archer.re, tells GlobeSt.com that one way investors navigate the higher inflation and interest rate environment is to shift more of their capital allocation into CRE debt.  “Well-structured debt can give investors greater protection over the principal balance, a long-term inflation hedge, and avoid the potential of negative yields,” Dean said. “Diversification is critical during market uncertainty, and debt can provide greater exposure to a variety of tenants, sectors, geographies, and borrowers, all of which help mitigate risk and support a more balanced income stream.”  RE Not Always the Inflation Hedge  Charles Krawitz, Alliant Credit Union senior vice president, chief capital markets officer and head of commercial lending, tells GlobeSt.com, “Real estate investments may not always serve as the inflation hedge that many are counting on. The stress and strain that consumers are feeling as a result of inflation will, in due time, manifest itself in diminished rents across multiple property types.   “As evidenced by declining savings, higher credit card balances and an uptick in personal term loans, consumers, particularly those making less than $80,000 annually, will be hard pressed to afford increased apartment rents, or be in a position to buy elective merchandise.   “While wages have increased, the impact of inflation on consumer spending is real and there are knock-on effects relating to the demand for industrial space, the viability of retailers, and ultimately the value of the associated real estate.  “Furthermore, raising interest rates have caused borrowing costs to increase and reduced the cash flow potential of underlying properties. The market is currently sorting out the related value consequences associated with these changed prospects.”  ‘Cloudy’ Outlook from Yardi Matrix  Paul Fiorilla, Director of Research, Yardi Matrix, wrote last month that the second half of 2022 presents unique challenges given how rapidly conditions are changing as volatility in the 10-year Treasury yield is likely to persist and that “every piece of news is a mixed blessing.”  Good economic news increases the cost of financing real estate while bad economic news provides relief for rates but deteriorates NOI forecasts, Fiorilla said.   “Growth is sure to slow as the pandemic stimulus windfalls shrink and higher prices erode consumer purchasing power,” according to Fiorilla. “The full extent of the deceleration – whether and when it leads to a recession, and how deep the recession extends – is very much in doubt.   “The impact on debt markets depends to a great deal on how the economy performs in coming quarters and whether the Fed successfully manages to slow inflation without creating a sharp recession. However it plays out, clearly the landscape is growing more difficult for the industry compared to the consistent growth of the last decade.”  Investing Requires a Nuanced Approach  Kevin Fagen, senior director—head of CRE economic analysis, Moody’s, wrote earlier this year, at the start of when the Federal Reserve began raising rates, that those seeking shelter in CRE must take a nuanced approach.   “CRE does have many characteristics that offer strong protection – or even outsized gains – during unexpectedly high inflation, but CRE is very diverse,” Fagan said. “In times like these, investors, particularly on the debt side, must adhere to another, even older adage: caveat emptor.”  Four things Fagan said to consider while investing in CRE in times of high inflation are property demand, price, hold period, and capital stack.  With demand, he said that “not all that glitters is gold. Are you investing in an asset or CRE segment with enough demand to push net property revenue in-line with inflation? Is inflation expected to be driven by macroeconomic demand, or mostly some exogenous or structural constraint on the markets?”  With pricing, he said having no breathing room can choke tightly priced assets. “Is there any cushion in the risk premium of your cap rate or loan coupons to absorb a sustained rise in interest rates? When a much greater value decline is implied for every basis point of cap rate rise for the very low cap rate properties, can you get the higher rent growth needed to maintain your property’s market value?”  Patience is a virtue as applied to the hold period, he said. “Can you carry the asset for an unexpectedly longer hold period to ride out the downward pressure of rising rates? Will a reactionary rise in rates occur gradually enough that revenues can quell the impact to values?  Finally, catch the upside if you can when it comes to the capital stack, he advised. “Are you in a debt position that benefits little from rent growth, while also being exposed to greater maturity default risk, lower recovery rates given default, and lower future value of your principal? Or, are you in an equity position with IRRs bolstered by rent inflation, even if exit values are lower on higher cap rates?”  Changing Markets Lead to Opportunity   Cox said that what has played out historically is that changing market dynamics lead to opportunity.   “Profit-taking opportunities are still available to well-informed buyers and sellers due to the liquidity remaining in the system and pent-up demand created during the pandemic,” Cox said.  © 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 eight-acre horse ranch located at 27106 Old Owen Road in Monroe, Washington. Stan Johnson Company’s Asher Wenig represented the buyer, a Nevada-based private investor, in the 1031 exchange sale and negotiated a new lease with the tenant, Jordán Linstedt Eventing.  “This was a very captivating transaction. The client wanted to exchange into something they could be passionate about. The client, being an avid rider and well connected in the industry, set their eyes on a horse ranch,” said Wenig, Senior Director and Partner in Stan Johnson Company’s New York office. “We found an outstanding property and structured a very clean triple net lease with an experienced operator.”  The facility was built in 1960 and is situated on 8.12 acres about 30 miles northeast of Seattle. The property features indoor and outdoor arenas, pastures and pens for horse training, lessons, judging and clinics. 

Stan Johnson Company, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of an industrial warehouse occupied by two tenants, DXP Enterprises and Advanced Industrial Devices. The facility is located at 4411 South Elwood Avenue in Tulsa, Oklahoma. Stan Johnson Company’s James Ullrich and Michael Macchia in New York City teamed up with Josh Love of Price Edwards and Company in Tulsa to arrange the sale. A Tulsa-based individual investor sold the asset to a private buyer based in Montana for $5.6 million reflecting a 7.56 percent cap rate.  “By partnering with Josh Love, we were able to source an off-market deal for a great client,” said Ullrich, Director in Stan Johnson Company’s New York office. “The buyer is very impressed with Tulsa’s industrial market and prospects for future population growth, and therefore, this represents the buyer’s third acquisition in Tulsa.”  The property is situated on 6.5 acres and consists of seven buildings originally constructed in 1980. Located along the Arkansas River in west Tulsa, the asset is conveniently located just five minutes from Interstate 44. The 60,000-square-foot facility supports the diverse global distributor, DXP Enterprises, and the high-performance electric motor supplier, Advanced Industrial Devices. 

Originally published by GlobeSt Restaurant visits in the second quarter were down year over year as inflation and rising prices saw consumers cut back on spending.  Physical and online traffic to restaurants slumped by 2% over a year ago and remain 6% below pre-pandemic levels in Q2 2019, according to data from The NPD Group. Consumer restaurant spending increased 2% year over year and by 3% over pre-pandemic Q2 2019 levels, reflecting increased costs to restaurant-goers.  In addition, visits to quick service restaurants, which represent 82% of total restaurant traffic, declined by 2% year over year and are 3% below pre-pandemic levels for the same period in 2019. Data from Placer.ai underscores the current reality for QSRs as inflation tempers spending: while year-over-year visits to burger leaders like McDonald’s, Wendy’s, and Burger King are up, for example, year-over-three-year visits are down. Meanwhile, smaller regional burger chains are posting impressive numbers. Monthly Yo3Y visits to In-N-Out Burger, Whataburger, SONIC Drive-In, and White Castle in May 2022 grew by 38.5%, 14.0%, 20.8%, and 8.5%, respectively.  “This may indicate that the burger leaders’ subdued foot traffic numbers do not necessarily reflect a waning demand for QSR,” said Placer.ai’s Shira Petrack. “Rather, as more and more people look to reign in unnecessary spending, consumers may be limiting their overall spending and this category is able to take advantage of a wider percentage of overall QSR visits.”  Investor demand has nonetheless remained strong for net lease and QSRs despite waning traffic, however. According to Lanie Beck, Director of Corporate Research, Marketing & Communications, Stan Johnson Company, tenants are actively expanding in the space, with Sonic leading the way. Beck says the chain plans to open 1,000 new locations over the next 10 years, while other established brands, including Chipotle, Jack In The Box, Starbucks and Taco Bell, have similarly communicated plans to open new locations by the hundreds.  Full-service restaurant visits, which account for 18% of restaurant visits, were down 3% year over year and by 20% compared to the second quarter of 2019.  “Consumers continue to deal with rising inflation and higher prices. We see three ways consumers respond to higher menu prices. They trade down to lower-priced items, cut back on the number of items ordered, or reduce restaurant visits altogether,” said David Portalatin, NPD Food Industry Advisor and author of Eating Patterns in America. “Operators and manufacturers can win in this environment by differentiating value, understanding that value doesn’t always translate to the lowest price. Quality and value become a critical differentiator when consumers spend on a restaurant meal during these challenging times.”  © 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 a medical office property located at 330 Brandon Town Center Drive in the east Tampa, Florida suburb of Brandon. The 45,000-square-foot medical office property sold for $14.0 million. The property is currently leased to Rasmussen University, the largest national nursing and health sciences educator. James Ullrich and Michael J. Macchia of Stan Johnson Company represented the seller, a Florida-based developer. The buyer, a private investor from California, was represented by David Tower of Coastal Commercial Real Estate. “Tenant strength carried this transaction as the nation is suffering from a shortage of nurses, and Rasmussen endeavors to solve that problem,” said Ullrich, Director in Stan Johnson Company’s New York office. “Rasmussen’s extensive history portends a long future but possesses feel good ESG elements to be long-lasting.”  The education facility was built in 1994 and extensively built-out in 2021. The regionally accredited private university operates on a double net lease with 10 years remaining and is one of 24 campuses across the country.