businessman looking through telescope_186407930_s 770x320

Industrial has been on quite a tear over the past few years, as changes in consumer behavior have driven demand for more logistics and fulfillment facilities in key markets.

And according to one industry expert, the sector should stay a favored asset class for experienced investors, despite rising capital costs.

“Post-pandemic consumer behavior has changed and the rate of growth in ecommerce has slowed which has already led to pullbacks by some companies,” says Greg Burns, Managing Director at Stonebriar Commercial Finance, noting Amazon’s recent announcements regarding its industrial portfolio. “Demand for industrial though was driven by other factors as well including a move toward onshoring and the disruption of just in time supply chains.”

With that said, however, Burns said “depending on the what and the where, I would not be surprised to see cap rates widen another 50 to 100 basis points.”

“The cost of debt and equity capital have increased and cap rate hurdles have increased for institutional buyers,” Burns says, adding that he recently saw an increase of 100 basis points in an appraisal for a property in a market where his firm closed a deal six months ago.

Burns will discuss what’s happening in the capital markets in a session at next month’s GlobeSt Industrial conference in Scottsdale, Ariz. He says Stonebriar’s definition of industrial includes not just warehouse and distribution facilities, but manufacturing, life sciences, cold storage and data centers as well, and notes that “each of those sub-categories have their own dynamic and, broadly, all are growing.”

“We prefer properties with multi-modal access, especially those near ports, with most opportunities we’ve seen recently being to the southeast of a line drawn from Baltimore to Phoenix,” Burns says. “We also pay attention to outdoor storage capacity as that has become a greater consideration for tenants. There have been several announcements of new manufacturing sites relating to microchip and electric vehicles which should lead to demand for new logistics properties nearby.”

As the costs of debt capital rise, Burns says Stonebriar’s underwriting will continue to focus on the sponsor, asset and market and “that won’t change.”

“We do few spec development deals and will likely be more granular on understanding the demand/supply side of a respective market,” Burns says.

Ultimately, a recession seems likely and Burns says the changing economic landscape will have “varying impacts” on investors and individual markets alike.

“From our perspective, there will be a premium on a sponsor’s experience and capacity,” Burns says. “I anticipate industrial will remain a favored asset class for investors although those with less experience in the sector could pull back until the economy recovers.”

 

Source: GlobeSt.

 

outlook_forecast_184185546_s 770x320

Core CPI inflation and headline CPI both decelerated last month, in a trend experts say could portend more disinflation factors in the near term.

Analysts from Marcus & Millichap note in a new analysis that the prices for some commodities also fell in October, including apparel and used motor vehicles, and the fees certain medical services.

“And these may be early signs that less disrupted supply chains are alleviating some of the structural drivers of inflation,” Marcus & Millichap say.

Headline CPI increased 7.7 percent over the 12 months ending in October, the smallest year-over-year increase since January of this year. While the deceleration is notable, Marcus & Millichap experts say the downshift is unlikely to be enough to fend off another hike in the overnight lending rate in December.

“The Federal Open Market Committee noted in its most recent forward guidance that it is looking for a clear trend of inflation normalizing toward the 2 percent target,” Marcus & Millichap say. “Even so, the FOMC has also acknowledged that there is a delay between when monetary policies are put in place and when the economy responds, and last month’s slower price climb, paired with an uptick in unemployment, support a more moderate rate hike. The current expectation is for a 50-basis-point December rise in the fed funds measure, capping the fastest year of increases since the early 1980s.”

But October’s inflation news offers a “mixed outlook” for retail CRE: while rent growth has improved and vacancy has tightened over the last year, prices continue to keep pace at restaurants and grocers. Gas prices also ticked up in October after three months of decreases, and higher energy bills are predicted to constrain consumer spending entering the holiday shopping season.

High housing costs are good news for the multifamily sector, where rents continue to rise at a rate that’s half the typical house payment. Over half of last month’s CPI increase was driven by higher housing costs, Marcus & Millichap says.

“In recognition of these housing needs, multifamily construction activity is set to hit a record magnitude next year,” Marcus & Millichap say. “While the new supply is warranted in the long-run, in the short term it will drag on fundamentals, especially as high inflation and rising interest rates weigh on economic outlooks and prompt more households to stay put in 2023.”

Lenders are also pumping the brakes as the cost of debt continues to increase. CBRE’s Lending Momentum Index fell by 11.1% quarter-over-quarter and 4.7% year-over-year in Q3, while spreads widened on 55%-to-65%-loan-to-value (LTV) fixed-rate permanent loans running from seven to 10 years in length. Marcus & Millichap has noted that pricing is recalibrating across most property types as the expectation gap between buyers and sellers widen and lending criteria have tightened.

“But once interest rates stabilize, however, investors and lenders will be better able to determine valuations and move forward on trades,” the firm says. “In the interim, the dynamic environment fostered by the Fed could lead to unique options for buyers, who may face less competition now than when rates plateau.”

 

Source: GlobeSt.

 

inflation_188946049_s 770x320

Pesky, lingering inflation that is higher than we’ve seen in years, along with six interest rate hikes totaling 375 basis points since the beginning of the year have had varying degrees of impact on all sectors in commercial real estate.

The speculation of further hikes later this year and in early 2023 doesn’t help.

Industrial real estate remains one of the darling sectors, though it is being tested by current economic conditions.

Four industrial real estate professionals, including owners, investors and brokers, three of them based in Chicago and one based in Houston, participated in a roundtable discussion, giving their perspectives on inflation, interest rates and industrial real estate. The participants: Alfredo Gutierrez, Founder, SparrowHawk; Rick Nevarez, Director of Acquisitions, Clear Height Properties; Kelly Disser, Executive Vice President, NAI Hiffman; and Hugh Williams, Principal and Managing Broker, MK Asset Brokerage.

What are the implications of the five 2022 rate hikes on transaction/acquisition activity?

Alfredo Gutierrez: It’s a challenging time as there are more investors stepping to the sideline. This means that if you are selling an asset today you might get three or four offers versus a dozen one year ago. On the  buy side, if investors have cash or lines of credit tied to a low rate, they are utilizing their resources. The fundamentals on the income side of the equation, because of rent growth, are still strong—that’s factual. Some are putting down their pencils because they are concerned about the potential for a recession and whether we’ll see the same levels of rent growth.

In reality, cap rates are a function of how much capital there is to invest into something. The question is how much dry powder remains on the sideline. We’re seeing an erosion of capital on the retail side and people starting to get squeezed. However, banks, life companies and institutions still have capital to place, and I believe it will flow into industrial.

Rick Nevarez: Activity has slowed, but it hasn’t come to a grinding halt. Overall, we continue to see deal activity and are expecting a big fourth quarter. It’s like airplane turbulence:  some respond with white-knuckle gripping of the arm rest while others acknowledge it’s taking place and go about their business. It’s really a matter of understanding the fundamentals of the real estate and how the current economic environment impacts those fundamentals.

Kelly Disser: It’s an interesting time with different groups being impacted in different ways. Owner occupants, private investors, institutional investors—all have acted or reacted differently. The demand for industrial space and leasing absorption today is still very strong. Inventory/vacancy is at an all-time low. As a result we’re seeing rent growth like we haven’t seen before. In certain underwriting acquisitions, we are seeing the impact of interest rates on values somewhat mitigated by rent growth and rents trending even higher than what we see today. The equation is evolving.  The development and investment sales markets have reacted and adjusted. Those with large funds have the ability to remain active and aggressive—and they are distinguishing themselves. Investors/developers who are sourcing capital on a deal by deal basis may be having issues in the current environment.

Hugh Williams: There was a point this summer when large institutional investors essentially said, “pencils down on all deals,” unless it was a perfectly placed asset/tenant combination in the middle of the fairway. Investors and developers are proceeding with haunting caution because at some point the math does not work.  You cannot acquire an asset when you underwrite debt costs that are greater than your projected return. That is problematic.

But we need to remember we’ve been in a low-rate environment for a long time, an environment that couldn’t last forever; and there are geopolitical events taking place that are also important considerations.  I have heard people say they are pulling back but some of them aren’t sure why. Overall, leasing activity is quite strong, and things are still moving forward particularly in select markets and micro-markets.

How are the rate hikes changing the flow of acquisitions and dispositions, if at all? And are they impacting different size buildings differently?

Nevarez: Interest rate hikes have pushed some buyers and sellers to the sidelines. But we are still buyers, looking at a variety of opportunities including value-add acquisitions. Sometimes you have to tweak underwriting to have a deal pencil out and make sense. Now more than ever, you need to understand ALL elements of the transaction, and what is motivating buyers and sellers.

Gutierrez: The effect based on size is really a case by case situation. But in general, if you had two assets where essential building characteristics except for size were essentially the same, the smaller asset would feel the pinch more. While smaller buildings are more likely to have shorter term leases, it will depend on the tenant roster and the lease terms. At the same time, because the rent roll may turnover more quickly, smaller buildings may be able to adjust pricing more quickly, too.

Disser: Interest rate hikes are impacting the flow of acquisitions and dispositions. The  pace has slowed in the second half of 2022 from what we saw the prior 18 months. But it is all relative, the first 18 months coming out of covid we saw activity levels, values and rents not seen before—in Chicago and across the country. An adjustment was needed.  There was simply too much money chasing too few assets:  the definition of inflation. Impact varies from case-to-case, according to location, submarket, or quality of asset.

Williams: My hypothesis is that if you go to a smaller, non-institutional building, it’s generally a different type of buyer, with a different mentality. For example, an operator like Blackstone is taking the long view. They are likely focused on main and main locations. When they go to build, they are focused on operating their platform as a business, not necessarily the conditions of the moment or focused on a near to short term exit. Smaller owners may be at greater risk—real and emotional—based on being prisoners of the moment (as we all are).  The short stroke is big boats are better ballasted against storms. Small boats get tossed about.

In other asset classes—like office and multifamily—some say that activity has slowed as the market looks for a re-set. To what degree is that occurring in the industrial sector, and are there other considerations (i.e., size, etc.)?

Nevarez: It’s really hard to say that any asset class is recession-proof, but industrial certainly is close. If the market was overbuilt, the impact might be different. There may be a scaling back and slight reset of pricing, but it’s not the same as other sectors because demand has been so strong. Our portfolio, for example, is 96% leased due to lack of product in the markets we own and operate in.

Gutierrez: A lot of people have put pens down, so to speak. Unless you need to place capital, you won’t. With some of the overall questions that exist, and fewer offers to consider, there isn’t necessarily a lot of pricing clarity. As 2022 wraps up our volumes will be down, particularly for the second half of the year.

Disser: It is always dangerous to generalize. The idea of a price reset isn’t absolute in industrial, as it may be in other sectors. In the industrial sector I think value equations are evolving, given rent growth. We see absorption, leasing and rental rates continuing to increase. The user/occupier clients of mine generally are operating businesses that are still strong and eyeing expansion.  In addition to scrutinizing interest rates, many are watching how lenders behave—as many have slowed loan origination activity. For some groups, the ability to secure the capital for a project in some cases is as much of a question as the cost of the capital.  If you lose your equity partner or can’t get a loan—you’re out.

Williams: There is a group that has been waiting 5-6, 10 years for a reset! The sky is continually falling.  Say it long enough and eventually you will be right. Pricing may fluctuate from its peak, but I don’t anticipate an incredible swing. The reality is that developers are much more rational today and have been that way for the last decade. What is going on in the interest rate environment forces additional austerity measures onto industrial developers.

All of the various elements at play lead me to believe that the sky will not fall, maybe a little rain, but rainwater is one of the keys to life—ask California.

How are higher interest rates impacting user sales/acquisitions? Are the higher rates making them any more or less likely to look at renting versus owning?

Nevarez: Higher Interest rates make it harder for users to come up with the capital to purchase an asset. Most users would rather place their capital in their actual business operations (machinery, employees, etc.).  Current owners may also look at their overall business plan to determine where they may need additional capital and find creative ways on how to get that capital. They look at their actual real estate as an opportunity to raise capital—through a sale leaseback—and to Clear Height (landlords) as a way to get that capital, creating a win-win situation for both parties.

Gutierrez: One of the factors that pushes users to consider an acquisition is the upward trajectory of rental rates. They figure they might as well buy. But in the current interest rate environment, the cost of ownership—if there was an inventory of buildings for users to buy—is up as well.

While there are concerns across the industry about interest rates, inflation and their overall impact, Alfredo Gutierrez suggests that the potential for stagflation would be worse. “If the Fed is going to push us into a recession, put us there and make it short-lived.”

Disser: Everything is getting more expensive across the board; that is why inflation is so crucial at this point in time. I don’t believe the increases in interest rates have impacted user sales whatsoever.  The most limiting factor is just availability of space or available options that could be purchased.  There is virtually no inventory. I have clients who want to sell their buildings—they need more space—but have no where to go; because there is nothing larger for them to buy.   Clearly the higher cost of funds results in larger interest payments, but the demand and growth seems to be greatly outweighing borrowing costs.

Williams: Not everyone needs to own a home, not everyone needs to own industrial real estate. Unless there is a specialized need, most operators should probably focus on their business and not try to get into the real estate game. The other consideration is that because of the overall tightness of the market, it’s hard to make a move—hard to buy a building. For many owner-users real estate is as emotional as it is practical.  Those that really want to buy will find a way but my supposition is that things slow on the user front because higher interest rates also affects the entire supply chain of activities within a warehouse as much as the cost of acquiring that warehouse.

 

Source: REjournals

cold_canstockphoto2998525 770x320

For most of the last few years, Amazon has been the dominant force in South Florida’s industrial market, but the e-commerce giant’s recent pullback hasn’t had a negative impact on the region’s warehouse market, industry insiders said at Bisnow‘s South Florida Industrial Outlook event last week.

“The last few years it has all been Amazon, right? They were making 90% of that e-commerce growth. They were really bailing us out of all that space we could not lease,” Bridge Industrial Vice President Aaron Hirschl said at the event. “Now it’s everybody else playing catch-up. It is 85% of all the e-commerce deals are other groups other than Amazon. It’s really good to see that positive growth there.”

The vacancy rate for South Florida industrial properties dropped to 1.8% in the third quarter, according to JLL research. Rents have grown 60% year-over-year, to an all-time record of $14.35 per SF. Construction is speeding up as a result: So far in 2022, approximately 2.3M SF of new product has been delivered. Over the next 18 months, JLL projects deliveries to hit 7.8M SF.

“Much of that is still fueled by e-commerce, even in the absence of the industry’s leader,” Prologis Vice President Jason Tenenbaum said at the event, held at the GalleryOne Fort Lauderdale by Hilton. “I’d say e-commerce continues to be the predominant player, I am guessing in the majority of our portfolios, and that’s notable particularly because of Amazon’s specific slowdown this year,” he said. “I would say the vast majority of our work is centered around that space.”

Tenenbaum said that he expects more leasing in the e-commerce space to come from third-party logistics companies as retailers themselves look to outsource their distribution. Those companies, called 3PLs, have accounted for more than 35% of all warehouse leasing in South Florida so far this year, according to a just published CBRE report.

“I think as pricing and rents continue to rise and supply is constrained, you will see a lot more of all of our clients electing to 3PL their supply chain,” Tenenbaum said.

After e-commerce, the biggest driver of demand in the industrial market is in the food and beverage industry and their need for cold storage, developers at the event said. The global cold storage market was over $9.6B last year and is projected to reach $11.3B this year and hit $25.4B by 2027, according to an October market report by Reportlinker.

“If you look at where the demand is the most nationally, clearly cold storage will be it,” BBX Logistics Properties Mark Levy said. “In South Florida, if you look at the footprint of the market as a percentage of the total base, it’s a very, very small amount of cold storage space product that has been delivered.”

Tenenbaum said that the tourism industry in particular has been active in looking for cold storage properties, a piece of the market that had been largely absent for the previous two to three years.

“There was a time in the last 24 to 36 months where the tourism activity was way down. Now it’s back at a high pre-pandemic levels,” Tenenbaum said. “As tourism has come back and the cruise ships are set to sail again, that’s a really active space.”

Levy said that while the cold storage market is “still tremendously undersupplied,” building the space on a speculative basis is still a rarity. But Bridge Industrial launched a spec cold storage warehouse in Hialeah last year, and signed FreezePak to a 312K SF lease in March.

“I remember when Bridge was working on that development and we thought ‘Those guys are crazy! There is no way that they are going to get those rents,’” Hirschl said. “And sure enough, they leased it out and knocked it out of the park. They proved a thesis and it was really cool to see it happen.”

Kroger, the largest grocery chain in the country, doesn’t have a supermarket in South Florida, but it opened a 60K SF warehouse in Opa-Locka this year to start delivering groceries directly to customers’ homes. Kroger said in its September earnings report that its delivery sales grew by 34% from the previous year.

“Kroger does not have any grocery stores here but they are renting near people’s homes,” Hirschl said. “That trend is really interesting to see if they can really penetrate the market here.”

Butters Construction & Development Director of Acquisitions Adam Vaisman said on a panel that, in addition to e-commerce and food and beverage companies, manufacturing is an increasing presence in the market. He said his firm signed a 200K SF lease with a manufacturing firm in Broward County and was getting ready to break ground.

“You will definitely see more of the manufacturing jobs, especially given our labor pool here in South Florida,” Vaisman said. “We are definitely starting to see that and I think that trend is starting to pick up if you continue to have global instability the way we do.”

But while manufacturers and cold storage providers largely need specialized space, e-commerce users are taking any space they can get in a market with soaring rents and sub-2% vacancy.

“Location is the most important always, so for e-commerce users, if they can’t find a new building and it’s a market they need to be in, they will make it work with a Class-B space or a Class-C space,” said Seagis Property Group Vice President of Florida Acquisitions and Leasing Bradlee Lord. “Public transportation will only get increasingly worse as the population grows. With Covid in 2020, the roads were still relatively busy. Location matters as congestion gets worse.”

 

Source: Bisnow

 

Red Percentage Symbol Surrounded By Dollar Sign

The past two years were like nothing ever before seen in South Florida.

A period of record growth was fueled by inbound migration, strong consumer spending and record low interest rates — all of which drove billions of dollars invested in the development of millions of square feet of commercial real estate.

Much of this was brought on by the pandemic. Now, the pandemic has subsided and the South Florida CRE market has come to a moment of reckoning. Or has it?

The Federal Reserve has raised interest rates five times this year, including the increase of 75 basis points on Sept. 21, all in an effort to stem inflation. The Fed’s effort to keep the economy moving at the start of the pandemic led to the slashing of its target rate to 0%-to-0.25%. It remained there for the next two years, until March, when it set its first increase of 25 basis points.

The era of relatively cheap money for commercial and residential borrowers has come to an end. While the current rate of around 3% to 3.25% still is historically low, borrowing costs are at their highest level since 2019. In June, Federal Reserve Chairman Jerome Powell noted that the rate could reach 3.8% by late 2023. Simply put: These are the most aggressive rate hikes in generations.

This leaves developers and owners of office, industrial and retail projects to perform a delicate balancing and forecasting act incorporating borrowing costs versus long-term demand.

With borrowing costs rising, and fears of inflation and a possible recession looming, how will CRE across South Florida respond? It’s impossible to judge from how other markets are responding. Some have seen commercial projects tabled and vacancies rising, even if rents remain stable.

South Florida Is The Outlier In The CRE Marketplace

Development remains robust. Warehouse, logistics and industrial projects continue unabated from Homestead in the South and Palm Beach County’s Western expanse to the North, with numerous infill projects in between. Luxury rental apartments in hot markets, such as Brickell, Coral Gables, Fort Lauderdale’s Flagler Village and downtown West Palm Beach, are rising to meet the demand of the more than 800 new arrivals still coming to Florida daily.

Conflicts exist between remote workers and their employers calling for a “return to the office;” and with the hybrid workplace model continuing to evolve, future office needs remain unknown. Yet, the region has numerous dedicated and mixed-use Class A projects in development.

While the concept of “headwinds” comes up in any conversation about the unknown impacts of rising interest rates, inflation and the possibility of recession, South Florida and the state are outliers for other reasons. Whether through REITs (real estate investment trusts), private equity, hedge funds and other institutional capital seeking a solid vehicle for their funds; family offices and investors looking for a hedge against inflation; Latin American families seeking a less turbulent harbor for their money; those looking to real estate as a hedge against inflation; or developers bullish on local market prospects, Florida is rich with liquidity.

 

Source: SFBJ

Businessman playing jenga. resolution and high quality beautiful photo_canstockphoto99488249 770x320

The stock market has been on a tumultuous ride as of late, making commercial real estate even more attractive to investors looking for stability amid the chaos.

“I think it gives everyone a little heartburn to see the S&P 500 fall by more than 6% in a little over a week,” says Marcus & Millichap’s John Chang. “But the stock market has been on this trend for awhile.”

Specifically, the stock market is down by 10% over the last month and by 24% from the peak at the beginning of this year. And while it gained 27% in 2021, the losses this year have basically wiped out last year’s gains. The CRE market also had big pricing gains last year, according to Marcus & Millichap data, led by industrial at 17.9%, self-storage at 13.6% and apartment at 8.1% The difference?

“While the stock market peaked at the end of 2021, “commercial real estate kept going,” Chang says.

In the first half of 2022, the average industrial prices went up by 13%, self-storage went up by 10.5%, and hotels increased by 13.7%. Meanwhile, in the first half of 2022 the stock market fell by 20%.  The caveat, however, is that pricing is typically locked in 90 days before a deal closes, meaning second quarter pricing numbers were probably locked in before the Fed began aggressively raising rates.

Chang says the Fed’s press conference after its latest hike on September 21 “will probably impact” CRE pricing, “but the impact will be far less severe than what we’re seeing on Wall Street.”

“In general, CRE values tend to move more slowly than the stock market. They also tend to be less dramatic,” Chang says, adding that quarter-over-quarter pricing swings over the last 20 years have been “enormous” while commercial real estate pricing has largely remained steady.

Total annual returns also drive this point home, with CRE delivering a compound annual growth rate of 7.8% since 2000, beating the S&P at 5.3%.

“It still has its ups and downs, but its amplitude tends to be very modest compared to the stock market,” Chang says.

 

Source: GlobeSt.

manufacturing_canstockphoto6100225

Among the harsh lessons the pandemic taught industries is that relying on thinly sourced supply chains, particularly for manufactured goods, can be a mistake.

Something coming from that experience is a degree of reshoring manufacturing—bringing it back to the U.S., as Avison Young notes.

The push has been growing for “several years … with 1.3 million manufacturing jobs brought back to the U.S. since 2010.” Manufacturing grew by 21.6%, according to the Census Bureau, and new manufacturing facilities construction was up 116%. The reason is to diversify supply chains.

“Many companies are investing in domestic facilities based on lessons learned during the pandemic, as product shortages disrupted their business flow,” the firm wrote. “Recent intense pandemic lockdowns in China took many businesses by surprise and threw another jolt into the already disruptive supply chain. By locating facilities in the U.S., they can mitigate risk and gain more control over the production, quality and distribution of their products.”

Technology companies have been leaders in the push to reshore manufacturing. Examples are multi-billion-dollar chip plants, thanks to the $52 billion CHIPS and Science Act that was part of the Inflation Reduction Act.

The shift isn’t only the province of giant companies like Intel, Samsung, and TSMC.

“Many small- to mid-sized companies are also reshoring or expanding domestic manufacturing,” said the report. “Aside from the supply chain benefits, companies are also trying to work around skyrocketing shipping costs and other transportation costs. And, geopolitical issues related to China are prompting some companies to reduce their reliance on those foreign labor ties.”

With the increase of manufacturing facilities comes a boost to warehousing, because factories need storage and distribution space, as do tiers of suppliers to these manufacturers and potentially distributors.

“Despite the higher labor costs of operating in the U.S., it can be more cost-effective to manufacture products closer to the customer base, when reduced shipping and distribution costs are factored in,” the analysis noted.

An additional benefit that experts in supply chain and manufacturing logistics have noted for at least 20 years is shortening that by shortening the distance to a customer base, a company can react more quickly to changes in the market. Having factories in Asia and then shipping goods by sea leaves 30 to 60 days of inventory in transit, setting an effective time barrier on how quickly updates, design modifications, or error corrections can be incorporated.

 

Source: GlobeSt.

 

golf course

The City Commission of Parkland agreed to purchase part of the shuttered Heron Bay Golf Club, which could lead to the city working with a developer to build on much of it.

The city of Parkland will buy part of the Heron Bay Golf Club (MAP CREDIT: CITY OF PARKLAND RECORDS)

The commissioners voted 4-1 on Wednesday, Sept. 21st, to purchase 65 acres on the west side of Nob Hill Road, north of Heron Bay Boulevard, for $25.41 million from the North Springs Improvement District (NSID). The city will have a 90-day due diligence period before closing. Part of the land is in Parkland and part is in Coral Springs.

“Our commission is committed to developing the land in a way that ensures our unique Parkland charm and characteristics are honored and embraced,” Parkland Mayor Rich Walker said. “It is our intention to ultimately seek a developer who will partner with us to produce the desired outcome for all of our residents.”

The entire Heron Bay Golf Club property totals 220 acres. The NSID purchased the full site from Canada-based ClubLink for $32 million in 2021. The NSID, a quasi-government entity that provides water and drainage services for parts of Parkland and Coral Springs, issued a request for proposals to sell the 65 acres along Nob Hill Road to a developer.

Parkland officials decided to make an offer for the site so that their city, not the NSID, would determine how the site is used in the future.

 

Source: SFBJ

port everglades_145015725_s 770x320

WSP USA’s extensive experience with maritime structures has helped facilitate a critical expansion at Florida’s leading container port – while at the same time mitigating the project’s environmental impacts.

The Turning Notch Expansion aims to increase berthing space to accommodate larger modern container ships at Port Everglades. The Port handles more than 1 million 20-foot-equivalent units of cargo volume and serves as a gateway to Latin America, the Caribbean, Europe and Asia.

The program is an important component of the Port Everglades masterplan which identified this project to double the containerized cargo capacity of the existing port over the next decade, and to allow for berthing of super post-Panamax vessels.

To accommodate these larger ships, the port initiated the redevelopment of 25 acres of container yard and berthing apron space at its Southport Turning Notch. WSP was hired by Broward County to provide civil and structural engineering design services and serve as a specialty consultant for port-related design issues for the $500 million project, which is scheduled for completion in the summer of 2023.

The project is being delivered via a general contractor/construction manager, where the contractor is selected and engaged early in the design phase of the project to help mitigate risk.

Infrastructure Improvements

The scope includes excavation of three million cubic yards of material to create a 42-foot-deep turnaround area for cargo ships, along with five additional berths, including a Super Post-Panamax berth. Marine and landside improvements entailed 5,000 feet of seawall/wharf and marine and utility infrastructure, including a stormwater drainage system comprising 7,200 feet of pipe and 1,900 feet of exfiltration trenches.

The project also consists of landside infrastructure improvements to support the acquisition of six additional Super Post-Panamax gantry cranes in Southport along Berths 31 and 32 as well as Berth 30. Additionally, the existing 100-foot gauge rails along Berth 30 project are also being extended westward to the limits of the new Southport Turning Notch Extension.

WSP’s scope for the expansion required the design of nearly one mile of new steel bulkhead wall, evaluation of an existing steel bulkhead wall, removal of several acres of land, container yard upgrades and improvements and fender and mooring hardware upgrades. Furthermore, Berth 30 – which is 970 feet long and located within the notch – has to remain operational during construction.

“WSP worked closely with the owner and the contractor team to execute the multi—faceted and highly publicized project in a timely manner within an operational terminal,” said Kosal Krishnan, WSP national maritime leader.

WSP also deployed construction administration staff and provided round the clock technical services in support of construction.

Marine Habitat Mitigation

To offset the project’s environmental impacts, WSP developed environmental mitigation to satisfy permit requirements. In the project’s first stage, the team restored approximately 16.5 acres of upland mangrove marsh by excavating fill to re-contour the marsh, then planting 70,000 Florida-native, nursery-grown mangrove and wetland transition buffer plants.

The mitigation design created additional mangrove habitat through the construction of riprap planters and restored the shoreline of an existing manatee nursery area by removing existing nuisance exotic vegetation and reconfiguring the eroded shore. For reef mitigation, 814 corals were relocated to create three acres of artificial reef habitat for natural recruitment, ultimately replacing nearly 15 acres of existing hard-bottom reef habitat.

“WSP monitors the mangrove and reef habitat on a quarterly basis to document the success of these mitigation areas, and ongoing observations of wildlife have revealed wading birds, shorebirds and other highly mobile avian species,” Krishnan said.

Located within the cities of Fort Lauderdale, Hollywood and Dania Beach, Port Everglades is in the heart of one of the world’s largest consumer regions, with a constant flow of approximately 110 million visitors statewide and six million residents within an 80-mile radius. The port has direct access to the interstate highway system and the Florida East Coast Railway’s 43-acre intermodal container transfer facility and is closer to the Atlantic Shipping Lanes than any other Southeastern U.S. port.

 

Source: wsp

 

businessman's arm grabbing_122283321_s 770x320

The state of Florida wants to sell a downtown office building and an off-site parking lot for more than $52 million.

The properties total 4.33 acres and includes the five-story Robert Hayes Gore State Office Building, at 201 W. Broward Blvd., and the 29,185-square-foot parking lot across the street.

David Wigoda and Lee Ann Korst, both senior VPs with the CBRE Group, will market the property on behalf of the state. They will accept sealed bids for the properties until Oct. 25 at noon.

Built in 1979, the Robert Hayes Gore building is 113,710 square feet on a 3.66-acre parcel. It houses offices for the state’s Department of Juvenile Justice; the Department of Children and Families and Adult Protected Services; the Department of Management Services; and the Bureau of Fire, Arson, and Explosives Investigations.

The properties are nearby Brightline’s Fort Lauderdale station, the Broward Center for the Performing Arts, the Museum of Discovery & Science, and the Nova Southeastern University Art Museum of Fort Lauderdale. They’re also zoned as a downtown regional activity center, which is “one of the most open zoning designations in Fort Lauderdale, CBRE added in its marketing of the properties.

 

Source: SFBJ

fire_flames on black background_123704909_s 770x320

Industrial outdoor storage has gone from being a niche in the industrial sector often owned by small private investors and mom-and-pop operators to a market estimated at $200 billion.

During the past three years, IOS has been growing dramatically and increasingly attracting the attention of—and significant outlays—from institutional investors and private equity firms.

“There is a lot of institutional capital chasing deals right now in the IOS space and it’s happened very quickly. I have two or three new groups calling me every week that I previously didn’t know about,” Zach Harris, a director at Stan Johnson Co. based in Tulsa, Okla., told Commercial Property Executive. “They’ve got committed capital and they’re ready to spend it. There’s definitely a rush to acquire product as quickly as possible.”

The demand for industrial storage space increased during the pandemic as e-commerce exploded and continues to be a significant part of the supply chain as more businesses seek locations for last-mile delivery and also want to be near ports and major industrial corridors. This hot commercial property type is mainly used for truck terminals, trailer storage, container storage, pallet storage and construction or heavy equipment yards. Trucking and truck parking are the heaviest users, particularly by third-party logistics companies.

Some of the biggest players in the IOS subsector include J.P. Morgan Global Alternatives and Zenith IOS, which formed a $700 million joint venture in February to create a national IOS storage platform and are aiming to build a portfolio worth $1 billion within the next two years. They kicked off their joint venture with the acquisition of four facilities in Dallas, including a nearly 27-acre property at 2118 California Crossing about 1 mile from Interstate 35 and 10 miles from Dallas Fort Worth International Airport.

Alterra Property Group closed its Alterra IOS Venture II LP fund in March with $524 million in total commitments, well beyond its original fundraising goal of $400 million. Limited partners in the fund included public and private pensions, endowments and foundations, asset managers, family offices and high-net-worth individuals. Alterra was an early entrant in the IOS market, launching its strategy in 2016.

Also in March, investor and developer Criterion Group and Columbia Pacific Advisors formed a joint venture aimed at deploying more than $2 billion in capital in IOS properties across the U.S. by late 2023. The joint venture’s first acquisition was a 41-property portfolio covering 520 acres across 11 states valued at $360 million. In June, Criterion Group announced the acquisition of eight IOS properties totaling 151 acres for an aggregate purchase price of $45.3 million. Criterion’s IOS portfolio now has 50 properties in 13 states valued at $550 million, including its first purchases in North Carolina and Virginia.

In June, Iconic Equities, a Miami-based real estate investment and development firm focused on industrial assets, and Leste Real Estate U.S., the real estate investment strategy of alternative investment manager Leste Group, formed a programmatic joint venture backed by about $150 million in institutional capital to acquire $400 million of industrial outdoor storage facilities across the U.S.

Iconic Equities—formed about 18 months ago—made IOS investments a core focus within the last six to nine months after focusing initially on more traditional industrial acquisitions and development in markets like Charleston, S.C., and Phoenix, according to Founder & CEO Tim Bishop. In Phoenix, the firm is set to break ground on approximately 1.2 million square feet and acquiring an additional 110,000 square feet in a forward takeout structure, .

The joint venture partners are looking for sites ranging from 5 to 15 acres in top U.S. logistics markets including New Jersey; Atlanta, Dallas, Los Angeles; the Bay Area; the Inland Empire; Nashville, Tenn.; Columbus, Ohio; Savannah, Ga., and South and Central Florida.

Their first acquisition was the $9.5 million acquisition of Garnett Storage, a 5-acre storage site in Coral Springs, Fla., which is leased to nearly 300 tenants seeking outdoor storage for boats, trailers, motor homes and commercial vehicles. The joint venture recently acquired a 6-acre IOS site in Fontana, Calif., in the Inland Empire and has deals in contract in the Inland Empire, Los Angeles and Columbus.

“Warehouse development in super infill locations near ports and in the major MSAs that typically sacrifice parking spark demand for IOS sites that can provide parking for trucks as well as storage for containers and pallets,” Bishop told CPE.

The Iconic team uncovers the opportunities for the joint venture, establishes the deal flow and structures the deal flow while Leste focuses on the capital market side of the transactions.

“From an institutional capital perspective, the reason this has become such an interesting niche over the last six months and really the last several years is it’s under penetrated by the institutions.” Leste Managing Director Josh Patinkin told CPE. “That coupled with really strong fundamentals in rent growth and tenant demand for these types of assets has come together to create a growing niche.”

Chasing Yield

There’s another important reason IOS has become increasingly popular with institutional investors. They are chasing higher yield.

“This strategy affords institutional capital the opportunity for higher yielding investments when their two biggest apprehensions right now are cap rate expansion and interest rate risk,” Bishop said. “When you get higher yield, you’re kind of insulated from that.”

The IOS market is not quite as mature as other real estate asset classes. Many of the properties are still owned by mom-and-pop operators and deals can be off-market or represented by local brokers rather than national brokerage platforms, Patinkin said.

“It’s not a very liquid market,” Bishop added. “There’s a lot of inefficiency in pricing and in evaluating risk and return and it’s especially extenuated in IOS because they’re smaller opportunities, they tend to have less institutional ownership and less of a national brokerage presence.”

Bishop and Patinkin also noted there are high barriers to entry in IOS due to a limited supply and many municipalities frown on these kinds of properties and are not likely to approve new uses in their communities.

“It’s one of the very few strategies where you can say supply is decreasing because a lot of these sites are very infill and tend to get redeveloped into other uses like traditional warehouse and there’s only so many of these permits that are out there,” Bishop said.

The IOS submarket in the Denver region has been growing organically over the past three years with a focus on infill sites close to the city, according to Cushman & Wakefield director Joey Trinkle.

“It’s harder to find buildings with outside storage and lower coverage in a strategic location close to the urban core that is also close to major interstate access,” said Trinkle. “There is higher demand from both the end user and investor sides to finding locations closer in.”

Rising Rents

Similar to the industrial sector as a whole, rents have also been rising in the IOS space, where leasing is priced by the acre rather than square footage.

“A few years ago, we were seeing deals done for outside storage without a building on site for about $5,000 an acre,” Trinkle told CPE. “Now we see $6,000 per acre triple net, which really speaks to the value. Outside storage properties bring a unique mix of users, some are local trucking and transportation companies that are local to Denver. But we also see national credit corporations looking for strategic sites. That’s really who these investors are targeting.”

Trinkle and Managing Director Matt Trone are currently marketing a 27-acre industrial storage yard/trailer site at 409 W 66th Ave. in central Denver recently acquired by IG LogisticsImperium Capital’s industrial platform than owns and operates properties with large outdoor storage or transportation components, and Meadow Partners, an institutional middle-market real estate investor, for $19 million. IG Logistics launched last year with plans to invest $250 million in IOS properties and specializes in acquiring and developing infill assets in high barrier to entry, urban growth markets where demand for logistics real estate is driven by e-commerce, with a focus on last-mile facilities.

The central Denver property is a vacant lot that is zoned for outdoor storage and includes a 10,000-square-foot industrial building with about 6,500 square feet of office space, two drive-through service bays and 14 feet of clear height. It’s also situated near the confluences of I-76, I-25, I-270 and US 36 and near the BNSF Intermodal Facility and UP Intermodal Facility.

Trone described the former auto auction site as a “rare and very attractive piece of property” that can be divided down to three or four tenants, with options to share the building and office space, or some can just use the property for pure yard space.

In June, Trone and Trinkle and colleague Steve Hager represented a partnership of Biynah Industrial Partners and Platform Ventures in the $9.5 million acquisition of a 12.2-acre IOS property in central Denver from Prime Inc., in an off-market transaction. BIP, a Minneapolis-based private equity firm that invests in industrial real estate, and Platform, a Kansas City, Mo.,-based real estate investor and asset manager, plan to invest at least $150 million in IOS assets over the next two years.

The Cushman & Wakefield brokers are also marketing the property that has access to the major Denver highways and the two intermodal facilities.

“The previous owner was only using about 4 acres,”Trone said, “while the new owners plan to pave the unused land to maximize the space for interested tenants.”

They expect strong demand since development of infill locations over the past several years has displaced companies that need parking for trailers and heavy equipment.

“The renewal rate for tenants in the IOS sector is greater than traditional industrial properties,” Harris told CPE.

But they also tend to sign shorter leases, generally in the five- to seven-year range, which is attractive to institutional owners looking for value-add assets that will potentially see more frequent rent increases. With demand outpacing supply, owners also don’t need to worry about replacing tenants who leave. Triple net leases can often be found at IOS properties, where operating expenses in general are lower than traditional industrial properties.

Despite the increased investments in IOS in recent months, Leste’s Patinkin says the market is big enough to accommodate all the interested investors—at least for the next two or so years.

But Patinkin has advice for those considering investments in IOS: “You have to have really good access to capital because the credit markets are very young in IOS and there’s not a lot of participation yet. So, you have to navigate that. You have to be fairly deep pocketed and have support. You’re not going to get competitive individual small loans on an asset-by-asset basis. You have to know how to access the broader capital markets to navigate this strategy.”

 

Source: Commercial Property Executive

10349421 - hand of businessman holding dollars

A building that makes “no sense” to most investors could be a diamond in the rough to another — and knowledge and information is key in the current rising rate environment, according to one industry watcher.

“You can’t add value to bonds — and unless you own a VC firm or you’re Warren Buffett or Elon Musk, you really can’t create value by owning stocks,” says Marcus & Millichap’s John Chang. “Other than owning a company or a franchise, only real estate allows investors to roll up their sleeves, either physically or metaphorically, and create value in an investment.”

And Chang says this happens in one of three ways: repositioning, management, or knowledge.  Repositioning can be as simple as upgrading common areas and as complex as transforming high-rise office towers into apartments (a trend that’s happening at a rapid rate in some major metros).  It can also fall somewhere in between those extremes: think moving a Class C property to Class B or repurposing an outdated shopping mall into a mixed-use asset.

“Creating value in management can also run the gamut,” Chang says. “At the simplest level, an investor may see some high value but basic operational things that can be done — perhaps just cleaning up a property, adding professional management and moving the rents to market. Something more complex may be re-tenanting a building. An office investor I know bought a very large property with an enormous vacant space. He already had a major tenant lined up so he bought the building, restructured the space a bit and then plugged the new tenant in. Boom: the building went from 25% occupancy to 90% occupancy and the property value changed dramatically.”

Chang also draws on another anecdote, this time in the multifamily space, to illustrate this point further. He says an investor he knows with a great apartment management team bought several small- to mid-sized near the ones he already owns and leveraged that team across multiple units.

And finally, there’s knowledge, which Chang says is “all about finding market inefficiencies and exploiting them.” This could include acquiring assets based on emerging demographics or population migration, or could come on the heels of a major employer changing its HQ location or in advance of a tax or policy change. Chang says there are ample opportunities to “capitalize on information where the pending changes are not baked into an asset’s price.”

Several recent examples bear that out: the global supply chain dilemmas plaguing virtually every sector of the economy have prompted many companies to consider re-shoring or near-shoring to mitigate those types of risks in the future.

“These and more opportunities are out there, and a lot of them will make sense regardless of rising interest rates or other factors affecting the market,” Chang says.

 

Source: GlobeSt