CarterBlog

Net Leased Investment Sales Volume May Be Poised to Surge

By: Michael R. Koch, Net Lease Specialist, Sales and Dispositions, Carter

It’s been a long time coming, but it appears that deal activity in the net lease sector may be poised to surge.

The market for net leased properties has shown clear improvement throughout 2010. In the first eight months of 2010, investment in retail properties amounted to $22 billion, according to the Bethesda, Md.-based research firm CoStar Group. In contrast, the full year figure for 2009 was $12 billion.

There are signs that deal volume may jump by an even greater degree through the end of 2010 and into 2011. Firstly, after waiting for more than a year to start dealing with the distressed assets on their books, lenders are feeling healthy enough to begin disposing of some of their troubled real estate, industry sources say. Moreover, institutional and private investors that have amassed war chests are ready to pounce on the deals that may come to light.

A large majority of investment sales brokers say they are seeing a clear rise in activity. This is attributed to an increase of greater financing availability and a more optimistic outlook on leasing activity, as well as attractive pricing.

According to Real Capital Analytics, a New York City-based research firm, several large portfolio sales are projected to trade by year end. This is a sign of health in that it shows buyers are finally able to secure the large loans necessary to complete portfolio acquisitions. In 2008, the low point in this cycle, almost no portfolios traded hands.

To date, much of the activity that has been occurring has centered on class-A properties in core markets. As a result of transaction activity being skewed toward best quality assets, cap rates in the net-lease sector have showed improvement in recent months. We are seeing more potential sales being teed up for the first quarter of next year. And we are seeing it on all product types, particularly retail.

Additionally, as more class-B and C product begins to sell, average cap rates could inch higher, perhaps by 50 to 75 basis points. The increase would spur on further acquisition activity by providing opportunities for investors interested in distressed and value-add assets.

Michael Koch is a member of the National Investment Sales Group at Carter. His area of expertise is in selling single-tenant net leased properties and portfolios nationwide. Michael has direct access to the most current and critical market information and is dedicated to fully understanding and exceeding the needs of his clients by using a disciplined and thorough approach to each transaction.

Atlanta Industrial Market Records Positive Absorption for First Time in 7 Quarters

The Atlanta industrial market may finally be showing some signs of life, posting the first quarter of positive absorption since third quarter 2008. The overall vacancy rate for the metro Atlanta industrial market was 13.8 percent at mid-year 2010, up from 13 percent one year ago.

Although year-to-date net absorption was negative 1.4 million square feet, absorption for the second quarter was positive for the first quarter since 2008 at 982,000 square feet.  This was due to the delivery of the 1.5 million-square-foot, fully-occupied, General Mills distribution facility completing construction in Social Circle, Ga. (rendering at right).

New construction continued to decrease across the metro area to just 2.1 million square feet in three buildings - 1.4 million square feet of which were in two buildings in the South Atlanta submarket developed by Majestic Realty that are 100% pre-leased to Kraft and Dendreon Corp.

As Director of Research, Elizabeth Jinks manages the staff, daily operations and vendor relationships for the group and provides her clients with a link to all of Carter’s many research resources. As author of all of Carter’s proprietary research publications, market overview sections of offer memorandums, third party quartlery reporting, and market forecasting, Elizabeth has an in-depth knowledge of the commercial real estate market, resources, and analytic skills to add value to any project.

Cisneros: Demand for Mission-Critical Buildings, Facilities Remains Strong

By Tony Wilbert, Wilbert News Strategies

AUSTIN, Texas (June 4, 2010) - Though the U.S. office and industrial markets continue to struggle, each sector has a bright spot. Specifically, demand for medical office/bioscience properties and data centers is holding up well in the challenging commercial real estate market, CityView Executive Chairman Henry Cisneros said this week.

The need for mission-critical facilities such as data centers and medical office buildings should continue to outpace demand for tradition office and industrial space, Cisneros told the 44th Annual National Association of Real Estate Editors Conference in Austin.

Cisneros served as Housing and Urban Development (HUD) secretary from 1993-1997 under President Bill Clinton. As executive chairman of Los Angeles-based CityView, an urban institutional invement firm, Cisneros has been involved with more than $2 billion in commercial and residential real estate transactions covering 45 projects in 13 states. CityView is an offshoot of American City Vista, a firm Cisneros founded in 2000 to work with homebuilders to develop homes average Americans could afford. 

He does see other "promising" sectors of the commercial real estate market. "Hotels can lead commercial real estate to recovery" because practically no new supply was added during the recession. Infrastructure work such as transportation and ports projects will boost the commercial real estate industry as well.

The apartment sector also is very promising, Cisneros said. As the percentage of Americans who own homes continues to fall due to the mortgage crisis, demand for apartments will increase, he said. The national homeownership rate has fallen from 70 percent to about 65 percent, and each point of decline equates to 1.5 million households needing new places to live, Cisneros said.

"There will be a major need for apartments," he said.

Expert Panel: Positive Signs Emerge but No Quick Fix for Real Estate Industry

By Tony Wilbert, Wilbert News Strategies

 AUSTIN, Texas (June 2, 2010) - Despite encouraging signs, effects of the commercial real estate recession will reverberate for the next couple years. That's the key takeaway from a panel of CRE experts who spoke today at the National Association of Real Estate Editors' 44th Annual Journalism Conference.

NAREE board member and National Real Estate Investor Editor Matt Valley, left, moderated the panel. He opened it with a few encouraging stats about increased investment sales activity and bidding wars for well-located, solidly performing assets. He also noted that Steve Pumper of Transwestern had to miss the panel because he was working on a deal. "That's a good sign," Valley said.

The panel pretty much stayed away from the question raised in the panel's title: "Commercial Realty Trends: The Next Meltdown or Not?" That is until Jeff Collins, real estate reporter at the Orange County Register, asked if CRE is headed for a meltdown.

Probably not, panelists said, but the small signs of an upturn might be fleeting. Expect to commercial real estate to be flat at best for a while, they added.

"I don't see us going into a double-dip recession, but we won't be enjoying an uptick for a couple years at least," said David Steinwedell, managing partner of Austin-based Stoneforge Advisors LLC. A former Wells Real Estate Funds executive, Steinwedell said the current "pricing bubble" for well-performing, quality assets soon would flatten.

Panelist Jeff Friedman, co-CEO of Mesa West Capital of Los Angeles, told the audience a double-dip real estate recession is a possibility. "What we're doing is not taking the medicine we should be taking," he said. "We're prolonging and amortizing the pain."

For his part, panelist Mitch Siegler, senior managing director of Pathfinder Partners, said commercial real estate will be in "a digestive mode" for the next three or four years because supply is well ahead of demand.