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Research Library Thu, 04/27/2023 - 09:48
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 Industrial Single-Tenant Office Single- Tenant Retail Multi-Tenant Retail
Northmarq Hires Vikaas Patni To Join Commercial Investment Sales Team in Cincinnati
Northmarq’s Cincinnati office has announced the addition of Vikaas Patni as senior associate – commercial investment sales. Patni specializes in the disposition and acquisition of both single-tenant net lease properties and multi-tenant shopping centers throughout the United States. Prior to Northmarq, Patni served as vice president of Brokerage Services at Lee & Associates and achieved top producer status in 2021. Before Lee & Associates, Patni held leadership positions at Phillips Edison & Co. and Meridian Realty Capital. “I am very excited to be a part of Northmarq and Daniel Herrold’s team. With Northmarq and Stan Johnson Company combining forces, the new platform is now second to none, and I look forward to leveraging this and bringing value to my clients,” said Patni. “Given the exciting growth in CRE happening in and around Cincinnati and Ohio in general, Northmarq is perfectly positioned to bring these opportunities to its clients nationally.” Patni joins a team of investment sales professionals led by Daniel Herrold, senior vice president. With over 15 years of experience, Patni brings a client-focused approach, consulting and guiding his clients throughout the transaction’s entire lifecycle. “I’m really excited to have Vikaas join my team,” said Herrold. “Vikaas has an extensive background in retail, working both on the development side of the business and investment sales. He will be a key ingredient for our team as we focus on retail investors and developers across the Midwest.”
February 8, 2023
Northmarq Announces a $1.25 Million Sale-Leaseback of Sonic Drive-In in Columbus, Kansas
Northmarq investment sales broker Matt Lipson arranged the $1.25 million sale-leaseback of a Sonic Drive-In, a 1,127 sq. ft. single-tenant retail property. The building sits on 0.33 acres of land and is located at 228 West Maple Street in Columbus, Kansas. The property is leased to a 31-unit franchisee at the time of contract signing. Northmarq represented the Missouri-based seller and Hamman Real Estate represented the California-based individual investor in the sale. “There couldn’t be a better location to place a Sonic. The franchisee understands the market and is able to fully maximize the potential of the site. The buyer felt comfortable with the franchisees track record and award-winning success, and both seller and buyer we’re satisfied with price and terms,” said Lipson. “This is a very solid deal for both sides and will ensure the buyer a dependable rent check for now and the future.” The freestanding restaurant is situated in central Columbus with a population of 3,856 within five miles. In addition to easy access to US Highway 160, the property is near Coffeyville Community College, with an enrollment of 1,772 students and Columbus High School. Surrounding retailers include Dollar General, True Value Hardware, Subway, Napa Auto Parts, and Verizon Wireless.
February 1, 2023
Northmarq’s Atlanta Office Announces $15.2 Million Sale of Westpark Walk in South Atlanta, Georgia
Northmarq’s Jeff Enck, associate vice president, and Emery Shane, senior vice president, have completed the sale of a 73,847-square-foot shopping center located at 400 Commerce Drive in Peachtree City, Georgia. The center is 100 percent leased to 21 tenants. Enck and Shane represented the seller, an individual investor based in Washington, D.C. An Atlanta-based developer acquired the asset for approximately $15.2 million. “The property is an excellent landmark shopping center at the busiest intersection in Peachtree City with a long history of high occupancy by local and national tenants,” said Enck. “Despite the rising interest rate environment, we were able to generate multiple offers from across the country and ultimately close with an investment group based in Atlanta. There was no lack of investor interest in this superb asset.” Approximately 20 miles southwest of Atlanta and at the corner of Highways 54 and 74, Westpark Walk draws a combined 79,000 vehicles per day. The shopping center’s tenants include Tuesday Morning, Verizon Wireless, State Farm, Firehouse Subs, Hotworx, and local service providers and retailers. One tenant, Ranchero Mexican Grill, has been in Westpark Walk for over 33 years, and several tenants have been at the center for over 20 years. The property is situated on 5.41 acres and surrounded by several super regional traffic generators such as The Avenue Peachtree City and The Shoppes at Peachtree City. Neighboring national retailers including Walmart, Home Depot, Best Buy, Aldi, TJ Maxx, HomeGoods, and more. Peachtree City is home to over 62,000 people with an average household income over $134,000 within 5 miles.
January 31, 2023
MarketSnapshot: Q4 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 The overall single-tenant net lease market posted its third strongest year in history, with approximately $77.6 billion in sales volume. A strong start to the year, as 2021’s momentum carried over to first quarter 2022, allowed the market to perform as well as it did annually, but recent quarterly activity tells a different story. Influencing factors, like inflation and rising interest rates, have seemingly caught up with investors and sales volume has slowed considerably. In fact, the single-tenant net lease market has now reported four consecutive quarters of declining activity and quarterly totals are down 66 percent year-over-year. The fourth quarter comparison is perhaps overly dramatic due to last year’s record-setting final quarter, but looking forward, it’s likely that we’ll continue to see lower levels of sales volume in the coming quarters rather than a return to near-record highs. There is currently enough uncertainty in the market that some investors may choose to observe from the sidelines, taking a more cautious approach. Alternatively, as pricing trends shake out, investors seeking higher yields may find new opportunities. There is no expectation that investment activity across the single-tenant net lease market will grind to a halt, but the market should be prepared to see conservative activity levels in at least the first half of 2023. Past the mid-year point, demand will be influenced by economic conditions – especially if we enter a recession – interest rate levels, supply/demand dynamics, and the willingness of sellers to correctly price new-to-market assets. An imbalance with any one of these influences could impact overall demand levels for 2023 and beyond. The multi-tenant retail sector has also witnessed a reduction in activity levels, particularly during the second half of 2022. After a strong fourth quarter 2021, and a second quarter 2022 that was recorded as the third strongest period in history, the sector began seeing a pullback in transaction volume that mirrored the rest of the market. In fact, despite being on pace to have a record-setting year, fourth quarter activity slowed so significantly that we ended 2022 as only the fourth strongest year in history, instead of potentially the first. Multi-tenant retail cap rates jumped by 10 basis points in the final quarter of the year, sitting now at 6.78 percent. This is the highest average cap rate reported in a year, and while it’s likely the start of additional upward movement, cap rate increases are not expected to be dramatic in the next few quarters.
January 31, 2023
The High Bar Is Coming Down for Life Sciences Growth
Originally published by GlobeSt The past two years set the bar quite high for growth in the life sciences sector, according to Matt Gardner, CBRE’s Americas Life Sciences Leader. “It’s natural for a red-hot market to cool a bit after such a strong run,” he said in prepared remarks. A new CBRE report said metrics gauging the sector varied in the fourth quarter as the industry normalized after robust growth. “Life sciences employment growth slowed from earlier rates but still progressed at a 4% year-over-year pace. Venture capital funding rebounded in the fourth quarter after three consecutive quarterly declines” it said, and “the market has normalized.” CBRE puts Boston, Chicago, Denver, Houston, and Los Angeles as the top-performing life sciences markets in Q4, based on their combined market size, vacancy, square footage under development, and current tenant demand. Life Science Relies on ‘Different’ Financing Sources Kevin Kinigstein, partner, Cox Castle, tells GlobeSt.com that he anticipates 2023 to be slower, especially at the outset. “External factors such as uncertain interest rates, the debt market generally, and inflation are already proving to have an undesirable impact on all commercial real estate, even in the hottest of asset classes,” according to Kinigstein. That said, the life science sector is influenced by certain differentiating factors that are likely to make the industry experience less of a slow-down than many other asset classes, he tells GlobeSt.com. “One primary differentiator is that the life science industry relies in large part on different financing sources than conventional commercial real estate,” Kinigstein said. “Between increased government funds which are coming in 2023, and the continued industry reliance on venture capital, it is likely that life science will outperform other asset classes,” he said. Additionally, the tie between life sciences and other external driving factors will also continue to differentiate this space. “The often-cited aging population will continue to drive demand, but there are other outside factors such as the expected continued explosion of artificial intelligence in 2023, and the fact that executives have another year under their belt when it comes to navigating supply chain issues – both of which may prove to be more impactful for life sciences than for other conventional real estate classes. “While it is fair to expect the market for life science transactions in 2023 to be significantly less hot than we saw in 2021-2022, we believe life science will be among the leading asset classes in terms of demand and growth, and that the slow-down may be less than expected.” Pandemic-Caused Therapies Drove Growth Jon Needham, vice president, investment management at BentallGreenOak (an investor in area life sciences real estate), tells GlobeSt.com, “The supply boom that took place in recent quarters certainly alters the calculus when making investments, but in general, a more balanced supply/demand dynamic is important for the health of the sector moving forward. “While the US Life Science market was down in 2022 compared to the historic high of 2021, removing 2021 outlier data and comparing 2022 with previous years tells a story of health, sustainability, and growth. “The pandemic fast forwarded approvals and implementation of novel therapies which will prove to be the foundation for growth over the next cycle. As the sector matures and adapts to the integration of new technologies, a continued emphasis will be placed on high quality, robust, and flexible real estate to assist in the advancement of the life science ecosystem.” Leasing Activity Dropped 62% Leasing activity across Boston, San Diego, Bay Area, Philadelphia, Greater D.C., Seattle, and Raleigh-Durham are normalizing, according to JLL data. On an aggregated basis, it dropped 62% from an industry high in Q4 2021 to Q4 2022, and, currently, leasing activity is on par with pre-COVID averages. Tenant demand activity has slowed, as companies take a more conservative approach regarding space needs. Demand today is just about half it was at its peak in Q4 2021 across markets Boston, San Diego, Bay Area, Philadelphia, Greater D.C., Seattle, and Raleigh-Durham. Maddie Holmes, senior research analyst, Industry Insight & Advisory, JLL, tells GlobeSt.com that direct asking rents, which had been gradually increasing quarter-over-quarter since the onset of the pandemic, took a discount across those markets. Kevin Wayer, President – Government, Education, Infrastructure and Life Sciences Industries, JLL, tells GlobeSt.com, “We are witnessing M&A and joint manufacturing activity continues to pick up, but an intense cost-reduction focus continues.” Expect Slowdown Through Mid-Year Craig Tomlinson, senior vice president at Northmarq, tells GlobeSt.com that after three high-profile sales (exceeding $250 million) of life science properties in 3Q 2022, RCM data reported none in the last quarter. “These are very high basis properties, typically +$1,000 per foot,” Tomlinson said. “That, plus the lack of sale comps, explained lenders’ reluctance to fund such transactions. “The slowdown is expected to continue through mid-year, with the exceptional sale-leaseback possible. Those are typically higher yield as compared to third-party transactions.” After the Big Run, Normalization is ‘Healthy’ Nick Iselin, executive general manager of development for Lendlease, tells GlobeSt.com that few people presumed that the enormous trajectory in life sciences would continue unabated and ultimately, “this normalization is not only expected but healthy. We are happy to see that activity is still going strong in the top markets, such as Boston where we are co-developing FORUM, a 350,000-square-foot, best-in-class life science project.” Boston is Still a Leader Kristen O’Gorman, an associate principal at SCB’s Boston office leading its life science practice, tells GlobeSt.com that the Boston area continues to be a life sciences leader full of resounding innovation, with startups raising over $1.5 billion last year. “Although tenants may have more options in today’s market, the evolutionary nature of young companies remains true,” she said. “From a design and real estate perspective, this means a balance of prioritizing high-performing buildings that also offer maximum flexibility that can appeal both to startups and more established companies. “Now that the marketplace has become more competitive after sustained growth, we see the life science market normalizing, with growing consideration of amenity programming as a way to differentiate. “A few quarters ago, a potential tenant might have been less focused on this aspect, but now they have an opportunity to be more selective – we see tailoring this amenity programming as a key to adding value and a market edge.” © 2022 ALM Global Properties, LLC. All rights reserved.
January 30, 2023
Northmarq Announces $3.1 Million Sale of Brand New, Build-To-Suit Popeyes in Grand Haven, Michigan
Northmarq’s Isaiah Harf, managing director, arranged the sale of a built-to-suit property leased to Popeyes located at 320 North Beacon Boulevard in Grand Haven, Michigan. Harf represented the seller and owner based in Illinois. A New York-based private investor acquired the asset for approximately $3.1 million. “Along Beacon Boulevard, just south of Home Depot in downtown Grand Haven (a wonderful city along the western coastline of Michigan) sits a new construction Popeyes, which we marketed and sold very quickly relative to the current marketplace,” said Harf. “Driven by a purchaser’s 1031 exchange, we were able to strike while the iron kettle was hot and serve up a few spicy chicken sandwiches.” The property features Popeyes’ newest prototype design and high-quality construction standards. Located in a dense retail corridor, the building has outstanding access and visibility from Highway 104 and 31 and Muskegon, Grand Rapids, and other surrounding areas. Neighboring tenants include The Home Depot, Walgreens, Dollar Tree, Starbucks, and more. The tenant operates on a long-term absolute net lease.
January 30, 2023
Northmarq Brokers 1031 Exchange of Absolute Triple Net Leased Burger King in Pennsylvania
Matt Lipson, associate vice president in Northmarq’s Oregon office, completed the $2.4 million sale of a freestanding retail property located at 1008 East Main Street in Bradford, Pennsylvania. The property totals 2,860 sq. ft. and is leased to Carrols Restaurant Group, which owns and operates over 1,000 Burger Kings. Lipson represented the seller, a New York-based private investor. The 1031 exchange buyer was an individual located in New York. “This was a great deal for both buyer and seller. Pre-marketing, the tenant extended its lease 20 years due to its excellent performance at the site. The seller received a great cap rate in a challenging interest rate market and are thrilled with the lifespan of their investment,” said Lipson. “The strength of the tenant, combined with the extraordinary store performance kept the lender engaged, even as interest rates were rising 75 bps each federal reserve session.” Conveniently located on Bradford’s Main Street, the quick service restaurant benefits from the rapid development in the last 10 years. Neighboring tenants include a brand-new ALDI, Taco Bell, and freestanding Verizon, in addition to a shopping center with tenants such as Tractor Supply Company, Dollar Tree, Anytime Fitness, and Big Lots. The tenant operates on an absolute triple net lease guaranteed by the world’s largest Burger King franchisee.
January 27, 2023
Office Demand Unlikely to 'Ever Revert in Full'
Originally published by GlobeSt Holidays and extreme weather conditions prompted a typical seasonal office demand slowdown in December, according to the VTS Office Demand Index (VODI). However, the year-over-year decline for the month was slightly larger than in previous years. New demand for office space ended the year 31.3 percent below its May 2022 peak and fell 20.7 percent year-over-year to a VODI of 46 in December. The report said that a tight labor market, layoffs, threats of another COVID-19 variant, and interest rate hikes have “given pause” to prospective office tenants. Nick Romito, CEO of VTS, said in prepared remarks, “The reality is that the outlook for the U.S. economy is still unknown, and expectations of a recession continue to loom large in 2023. Where the economy heads will be the through-thread for office demand decisions as we head into the new year.” Romito said a silver lining is a significant momentum in return-to-office trends. “Continued momentum in return-to-office will undoubtedly provide a tailwind for office demand in 2023 and beyond,” he said while acknowledging that “realistically, it seems unlikely to ever revert in full.” A weekly report from Kastle that measures office worker occupancy showed the national average of 49.5% of workers were in the office compared to pre-pandemic. The Kastle measurement has not exceeded 50% since COVID-19 set in. Tech Layoffs and Potential Recession Won’t Help Doug Ressler, business manager, Yardi’s Commercial Edge, tells GlobeSt.com that office-using sectors of the labor market lost 6,000 jobs in December, according to the Bureau of Labor Statistics, only the second monthly decrease since the onset of the pandemic in early 2020. Financial activities gained 5,000 jobs in the month, but information lost 5,000, and professional and business services lost 6,000. Year-over-year growth for office-using sectors has rapidly decelerated in recent months. Office-using employment growth will further decelerate as tech layoffs bleed into 2023 and a potential recession loom. Between January 2021 and July 2022, office sectors added an average of 117,000 jobs a month. In the last five months, they have averaged only 25,000 jobs per month. “Even as some firms become more forceful in bringing workers back into the office, many have fully committed to hybrid and remote work policies,” Ressler said. “This will be another year of uncertainty and change in the office sector as it moves toward a post-pandemic status quo. Significant change will depend on the duration of the recession, rising interest rate stabilization, and the acceptance of a hybrid or pre-pandemic work model.” Remote Work Makes Office Leasing Picture is ‘Hazy’ Lanie Beck, Northmarq Senior Director, Content & Marketing Research, tells GlobeSt.com that the outlook for office leasing is a bit hazy right now, with many factors influencing tenant demand. “Merger and acquisition activity, and the resulting consolidation of physical space that often occurs, can impact office demand,” she said. “Layoffs too can alter a tenant’s need for space. “But the remote work trend has been one of the primary drivers in recent years, and for employers who haven’t mandated a return-to-office, they’re undoubtedly evaluating both their short and long-term needs for traditional office space.” Desired Space Shrinks by One-Fourth Creighton Armstrong, National Director, Government Services, JLL, tells GlobeSt.com tenants committed to leases in 2022 leased space that was, on average, 27% smaller than their prior lease. However, despite the smaller average, the overall volume of space leased held steady between 2021 and 2022 due to a slightly higher number of deals closed. Seattle Office Demand in Hibernation Bret Jordan, president of the Northwest region at Ryan Companies US, tells GlobeSt.com that office demand in Seattle went to sleep in July of 2021 and hasn’t yet awoken from its slumber. “We’re seeing the large layoff announcements oxygenating the smaller scale and start-up companies’ labor choices, so we are expecting office demand to awaken mid-year,” Jordan said. “The caveat is that demand will be smaller in nature given the past cycle was full of giant demand deals. This is a reversion to our norm and not a fundamental shift in the underpinnings of our region. One data point supporting this is the net new demand for residential, he said. “While again lower in total than the heady pandemic years it remains resilient and in excess of the foreseeable supply,” Jordan said. Minneapolis to Seek New, Amenity-Rich Assets Peter Fitzgerald, vice president of real estate development at Ryan Companies US, tells GlobeSt.com that despite the downward trend of office demand, he expects an unprecedented flight to the newest and amenity-rich assets in the Minneapolis-St. Paul market. He said that new construction is leading the market with several buildings 90%+ leased. One example is 10 West End. Ryan Companies sold the Class A office building in St. Louis Park, Minn. to Bridge Investment Group. “The building opened in January 2021, in the thick of the pandemic, and experienced nearly 300,000 square feet of leasing activity until it was sold in November 2022,” Fitzgerald said. Office Tours Increasing Significantly Chicago-based developer Bob Wislow, Parkside Realty, tells GlobeSt.com that while winter months can sometimes put a damper on real estate tours, especially in colder climates like Chicago, he hasn’t seen a decrease in activity this year. “Tour requests at all five of our office buildings have significantly increased this month, with one seeing the highest level of activity in years,” Wislow said. “Companies that need new space because they are expanding operations or have a lease expiring are looking at all options available to them because they know their office space represents more than just a place to do work. “With hybrid schedules becoming the norm, it’s more important than ever to offer a dynamic environment that promotes collaboration and engagement and provides the amenities and conveniences workers want in exchange for their commute. It also helps to be in an area that is buzzing with activity, as that energy and vitality can’t be recreated in a remote setting.” South Florida Worker Office Occupancy 60% to 70% Tere Blanca, founder, chairman, and CEO of Blanca Commercial Real Estate, tells GlobeSt.com that across South Florida, there is a “tremendous” return to the office, especially across the finance sector and it seems that three to four days a week has become prevalent in many industries. “Because Miami, Fort Lauderdale, and Palm Beach (South Florida in general) is experiencing such constant, amazing migration, with the demographics very strong, many companies are moving here and whatever contraction we might see is mitigated by new buildings being created,” Blanca said. “There is quite a bit of new product in the pipeline to deliver over the next three to seven years; whatever is available right now is getting leased.” She said buildings are seeing employee occupancy at 60% to 70% in most cases. “The reality is, even before COVID, when a building was leased out, you still never had full occupancy, Blanca said. “This was from people traveling, being out for meetings, having a family situation, etc. This is why parking garages can oversell by 15% to 20%.” Offices Need Tech Modernization Katie Klein, North America Country director at WiredScore, tells GlobeSt.com that what people look for in an office has changed. “To bring employees out of their homes and back into the office, office landlords must provide appealing properties and spaces. One way to do this is to provide the technology platform that modern office tenants require,” she said. According to WiredScore North American Office report, only 38% of offices are considered advanced ‘smart offices,’ yet 80% of employees state they would be more inclined to go to the office if their building had smart technology. © 2022 ALM Global Properties, LLC. All rights reserved.
January 26, 2023