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An agricultural site in the fast-growing residential area west of Delray Beach could be rezoned for industrial development.

The West Atlantic Industrial project would be within the Agricultural Reserve, a swath of farmland in southwest Palm Beach County that has been a hotbed of single-family home development over the past few decades. County rules require developers to preserve a certain amount of green space for every acre they develop.

This application would address the lack of industrial development in the largely residential area. It comes at a time when industrial vacancy rates in Palm Beach County are near record lows and rents are on the rise.

Roger and Karen Fina filed a land use application for the 10.1-acre site at 10321 W. Atlantic Ave., which is at the very end of Atlantic Avenue on the edge of the wetlands. It currently has agricultural uses and a single-family home the Finas have lived in for nearly 30 years. By rezoning it to “light industrial,” that would permit up to 198,137 square feet of industrial space.

Lauren McClellan of Palm Beach Gardens-based JMortan Planning & Landscape Architecture, which represents the applicant, said the site is not under contract to a developer but the Finas are looking to possibly develop it with office/warehouse or landscaping services. No site plan has been submitted.

“As new residential projects continue to be approved in the Agricultural Reserve and more people populate the area, additional services are needed and should be located close to the need,” the developer stated in the application. “Approval of additional industrial land will allow for needed services to be located near existing housing, thus reducing vehicle trips outside of the Agricultural Reserve and ultimately contributing to less traffic congestion and better access throughout the Agricultural Reserve.”

The applicant’s traffic study said the development would result in 885 daily vehicle trips.

This application will require County Commission approval. An initial vote could take place in early May.

 

Source: SFBJ

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Supply chain problems, labor shortages, and the housing shortage are all fueling inflation to eye-popping levels – and for CRE investors, that will mean greater competition for assets.

Headline inflation is up 7.1% from last year, the biggest uptick since 1982. And that rising inflationary pressure is forcing the Fed to switch gears and tighten policy.

“This will in turn put upward pressure on interest rates, raising the cost of capital for CRE investors,” says Marcus & Millichap’s John Chang.

Supply chain is the first contributing factor to inflationary pressures.

“It’s hard to move products from the manufacturers to the customers,” Chang says.

He points to shortages in raw materials, limitations on foreign port capacity, shipping container shortages, backlogs at domestic ports like those in Los Angeles and Long Beach, and a shortage of trucks.

“Basically, people want to buy more stuff than our supply chain can handle right now, so there are shortages and that means prices go up,” Chang says.

Retail sales are up 16% over 2019 numbers, while the amount of product moved by trucks in the US is down 5.1% over the same period.

The second issue? Labor shortages, which continue to stoke inflation.

“Quite simply, the US has never experienced a labor shortage like this,” Chang says. “At least not in the last 22 years, when records have been kept. As a result, companies are competing for personnel, and that’s driving up wages.”

Average hourly earnings are up 5% over last year, and sectors like accommodations and food services have seen labor cost increases of more than 15%.

“Rising wages create broad-based long-term inflation,” Chang says.

The third challenge is the housing shortage: there are not enough houses to buy or apartments to rent right now, and the problem will likely continue at least in the near term. There are currently about 1 million houses for sale in the US right now, about two months’ worth of supply; typically, four to six months’ worth of supply is required to maintain stability in the market.  Housing prices shot up 14.9% last year in response to the shortage.

In addition, there are only about 480,000 apartments available for rent, a vacancy rate of 2.6%, the lowest on record. Rents rose 15.5% last year.

“The Fed will be taking action to curtail the rising costs,” Chang says.

He notes that Fed Chairman Jerome Powell has already announced plans to accelerate the end of quantitative easing that was put in place during the pandemic, and says this will likely put upward pressure on long-term interest rates. The overnight rate is also on track to increase three times or more this year, which will put upward pressure on short term interest rates.

“As a result, interest rates are likely to continue to rise,” Chang says.

The ten-year Treasury rate is already up about 30 basis points from the beginning of December to a little over 1.7%. For investors, this will equate to more competition.

“Commercial real estate is viewed as one of the best places to invest money during periods of high inflation, especially properties that can increase rents with the market, like apartments, hotels, and self-storage properties,” Chang says. “Rising interest rates, and increased investor demand, implies that levered yields will compress this year. Basically, more commercial real estate buyer competition will push cap rates lower while the cost of capital, or interest rates, rise. That means CRE levered returns may tighten. But several property types still offer higher yields, like well-positioned office assets, retail assets, medical office buildings and some hotels, and properties in softer markets harder-hit by COVID restrictions could also offer higher yields and stronger multi-year returns.

 

Source: GlobeSt

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After receiving unsolicited offers to buy its 8.6-acre industrial site in Medley last year, KDD Properties decided to list it and see how many institutional investors would line up with competitive bids.

“There were no less than 25 offers from various public and private pension funds and institutional investors,” Sky Groden of JLL, which marketed the property, told The Real Deal. “The deal ended up transacting at 25 percent higher than the unsolicited offers.”

Prologis, the behemoth industrial developer that dropped $43 million to acquire 29 acres of industrial properties in areas close to Miami International Airport last year, placed the winning bid. In December, the firm closed on the Medley property, which consists of a fully leased, 43,700-square-foot building and 5.5 acres of trailer truck parking.

“More and more, industrial developers and institutional investors are looking at truck stops and construction equipment yards, like the Medley site, that offer vacant land that can be developed,” Groden said.

With a limited number of big industrial properties for sale across South Florida, even major players are turning to smaller buildings on large parcels. There’s a rush to wheel and deal for any existing warehouse properties as the sector continues to outperform all others, commercial real estate experts say.

 

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There is no shortage of capital searching for opportunities in commercial real estate.

In most cases, this has generated high competition, compressed cap rate and pushed asset pricing.

The middle market sector—defined as deals valued at $20 million to $50 million—is a rare sweet spot for CRE investment. Too small for big institutions and too large for many high-net worth individuals, the market segment offers plenty of opportunity.

The middle market is also the playground for Walker & Dunlop Investment Partners, who is finding a lot of success in the sector.

“The middle market happens to be the largest portion of the commercial real estate market,” Sam Isaacson, the president of Walker & Dunlop Investment Partners, tells GlobeSt.com. “It makes up the majority of the real estate in this country. A lot of that real estate is owned by baby boomers, and a lot of them are getting older and are making changes to their real estate holdings.”

Equity capital is also not interested in middle market investments. These players have too much capital to deploy to consider a middle market deal.

“A lot of the institutional owners of commercial real estate, like the pension funds and the endowments, have significant capital to deploy at any given time,” says Isaacson. “When they are looking to deploy capital into real estate, they are not going to look at a $4 million or $5 million equity check on a middle market asset. They are focused on deploying $20 million to $25 million at a time. We see that over and over again. There is less capital chasing those middle market deals.”

As a result, family offices and other mid-tier private investors end up transacting in the middle market space.

“That isn’t to say that we don’t see competitors, but it isn’t nearly as saturated as assets that are $100 million-plus in size,” says Isaacson.

While the price tag is a primary marker of a middle market asset, quality of tenancy and asset functionality are also characteristics to look for in a middle market asset.

“We have been really successful at investing in the older vintage ex-manufacturing facilities in blue-collar markets in the Midwest,” says Isaacson. “We have done really well at repositioning those assets into warehouse and logistics assets from some dysfunctional use. That has been really successful.” Walker & Dunlop Investment Partners is also investing in neighborhood centers with mom-and-pop ownership. “We are fairly bullish on them,” says Isaacson, adding that office is the only asset in the middle markets that the firm is eschewing. “We don’t think the COVID story has run its course.”

 

Source: GlobeSt

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Bridge Industrial (“Bridge”), a privately-owned, vertically integrated real estate operating company and investment manager, has acquired Pompano Beach Commerce Park — a three-building, 336,852-square-foot industrial campus in Pompano Beach.

Following the acquisition, Bridge plans to launch a comprehensive capital improvements program at the property, inclusive of landscaping, parking lot upgrades, monument signage, and roof replacements. The acquisition will mark Bridge’s first property closing as part of a new value-add strategy.

“The acquisition of this campus in a prime submarket marks not only the latest addition to our growing portfolio, but the introduction of a new value-add strategy that will expand our capabilities and allow us to acquire existing buildings and deliver even more services to our clients in the region,” said Nick Siegel, Partner with Bridge.

Jose Lobon of CBRE National Partners represented the Seller in the transaction.

Located on Powerline Road in the Pompano Beach submarket of Broward County, Pompano Beach Commerce Park is made up of three industrial buildings — spanning 140,094 square feet, 124,894 square feet and 71,864 square feet, respectively. The facilities possess several attractive characteristics including 24-clear heights and multiple points of ingress and egress along its 800 feet of linear frontage along Powerline Road. Bridge has had previous development success in Pompano Beach, with its Bridge Point Powerline Road project spanning over 450,000 square feet less than one mile from its newest acquisition.

The campus is located less than two miles from I-95 and just 1.4 miles from the Florida Turnpike, allowing users to reach nearly all of Florida’s population of 6.2 million within just a 60-minute drive. The property also sits just 15 miles from Port Everglades and the Fort Lauderdale-Hollywood International Airport, and roughly 40 miles from the Port of Miami and Miami International Airport. The central location of the site allows its tenants to service 92% of South Florida’s 6.2 million population within a 60-minute drive time.

“South Florida is one of the most supply-constrained markets in the entire country, and Bridge has found major success in developing and operating state-of-the-art warehouse space that can help meet the immense demand from industrial users in this area,” said Kevin Carroll, Southeast Partner at Bridge.

Bridge is one of South Florida’s most active industrial real estate developers. The company has acquired approximately 700 acres in 17 separate transactions throughout Miami Dade and Broward Counties and delivered approximately 7 million square feet of Class-A industrial space across the region since entering the market in 2012. The company’s current South Florida portfolio spans more than 5 million square feet of company-owned and third-party managed properties with an additional 2.5 million square feet under construction.

 

Source: CRE-sources