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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

 

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It’s a good for a city to be called a “magnet,” so long as it’s attracting the right things.

In the case of Fort Lauderdale, business leaders just took heart after PwC, the national auditing and accounting firm, released an annual commercial real estate survey of 80 metro areas that for the first time ranks the city as a top “18-hour city.”

It’s a loosely defined term that refers to smaller cities with amenities, public services, and job opportunities that are comparable to those in larger places such as New York, Chicago and Los Angeles. But Fort Lauderdale is a place where it’s cheaper to live and do business, and where many entrepreneurs and investors find it easier to set up shop. Years ago, the city would button up and workers would go home at 5 p.m.

“Now you have more of an 18-hour city,” said Steve Hudson, president and CEO of Hudson Capital Group, a Fort Lauderdale-based real estate investment firm. “Young people are being attracted here — there are more jobs. People are catching on that this is very laid-back place to live that has a lot of benefits.”

Others cities the category include Charlotte, Denver, Minneapolis/St. Paul, Portland, Oregon, Salt Lake City and San Diego.

The PwC report also said Fort Lauderdale’s downtown is at the leading edge of the nation’s top 10 metropolitan areas that have workers returning to their offices from COVID -19. In addition, retail vacancy rates this year were 4.8%, the lowest in a decade and down from 8% in 2020.

All of it bodes well, according to real estate analysts and leaders of the Downtown Development Authority, for a local economy that is likely to continue a run to the upside in 2022.

The Migration Behind The Magnetism

Much of that optimism is based on a continued surge of population growth as thousands of people moved into South Florida from northern urban areas during the COVID-19 pandemic.

“You’re seeing a pretty strong migration of talent into this area, and the companies are paying attention,” said Ken Krasnow, vice chairman of Colliers Florida, the commercial real estate service firm.

Jenni Morejon, president and CEO of the DDA, said net migration into the city this year was 4,900 people, many of whom took up residence in new apartment towers that are sprouting in Flagler Village. Business leaders expect those numbers to grow in 2022 and 2023, and base their expectations in part on continued inquiries from out-of-town companies looking to expand.

“A rise in the number of downtown retail and restaurant operations is largely attributable to owners noticing a boost in the local population, and taking advantage of rents that are lower than elsewhere in South Florida,” Morejon said. “The downtown population has eclipsed 21,000. Many of the new restaurateurs that came to Fort Lauderdale have seen success in Miami and other places around the country and recognize rent is not as expensive as it is in Miami and West Palm beach. It’s really encouraging. New retailers are coming to downtown Fort Lauderdale. The movement has driven retail vacancy rates in the city’s core downward to 4.8% this year, which is lower than pre pandemic levels.”

Many of the newly arrived residents, Krasnow said, have the ability to work remotely from new homes in Fort Lauderdale while keeping their jobs in their original cities.

“People are free to effectively work or live wherever they want and increasingly they are choosing to live down there,” Krasnow said.

Aside from the well-documented flight from northern cities to the Sun Belt for tax and weather-related reasons, professionals in the legal, financial, technology and engineering fields are looking for more walkable neighborhood spaces and diversified cultural activities.

“The talent is choosing to live in places that have all of those dynamics,” Krasnow said. “We rate very well on all of those scales.”

Tim Petrillo, co-founder and CEO of The Restaurant People, operators of a dozen restaurants in the area, said the pandemic “put gas on the fire” of migration into the city, with many of the new residents being remote workers.

“I know we see all the time these people in the restaurants,” Petrillo said of the demographic. “Before, talent used to follow companies. Now we’re seeing companies following talent. Now companies are looking to establish a presence in our market. One challenge facing the city is that there has not been a lot of office space built in Fort Lauderdale. The 25-story The Main Las Olas which contains 1.4 million square feet of office, retail and residential space at 201 Las Olas, is the only new building with major office space to rise since the Bank of American tower a decade ago.”

Petrillo and Alan Hooper, through their Urban Street Development firm, are in a joint venture with Hines, the Houston-based office development giant, to add to the commercial mix with an expansive mixed-use project in the Flagler Village area, scene of multiple high-end apartment rentals towers.

A key proposed component is a Hines concept called Timber, Transit and Technology [T3], a seven-story structure aimed at attracting technology and financial service firms. The developers expect to complete the project in 2024.

Developers Jockey For Position

The influx of new residents and ensuing demand for places to live hasn’t been lost on developers, who seem to be working overtime at their drawing boards.

“We see that a lot,” said Stephen Chang, chief operating officer of Suffolk Construction of West Palm Beach, which is involved in a variety of commercial projects regionwide. “There is a definite boom going on right now for South Florida,” he said. “You have a lot of out-of-town developers very interested in South Florida because of the climate and its business acumen and how the government has kept the doors open. Financially it’s relatively cheap, when you compare to older cities like New York or Chicago.”

Areas Poised For Prominence

Fort Lauderdale has some areas that developers seem particularly keen on, based on their existing amenities, Brightline among them. For example, the Kushner Companies of New York and Aimco of Denver have proposed a joint venture to build a 540-foot mixed use project at 300 West Broward Boulevard, slightly to the west of Brightllne’s downtown train station. It would be comprised of two 38-floor towers atop a 10-floor podium, with 956 residential units and 23,752 square feet of ground level commercial space, according to the companies’ development application with the city.

The effort would result in the tallest structure in the city, reaching higher than the 499-foot 100 Las Olas building tower and serve, the developers say, as “an urban gateway to the heart of downtown Fort Lauderdale.”

The proposed building follows an earlier proposal Kushner submitted this year for four other high rises called “Broward Crossing,” also near the Brightline station.

Both companies declined to comment. But their application echoed what local analysts say about why developers want to build here: to leverage nearby existing civic and cultural amenities and build momentum toward more growth — and profits.

“The site is located at an important junction between major transportation hubs, civic and cultural institutions, and commercial attractions,” the application says.

It goes on to note the nearby Brightline and the Broward Central Bus Terminal, the civic and cultural landmarks including the future Joint Governmental Campus, the Museum of Discovery and Science, the Broward Center for the Performing Arts, and Esplanade Park.

“The proposed building is an opportunity to create not only an icon for the city, but also a new community space that contributes to the life of the neighborhood and enhances the pedestrian connections from around the city,” the application adds.

The companies also think the project would inspire further development westward along Broward Boulevard.

“The hope is to add new energy to the neighborhood, supporting the local economy and the lives of those throughout the local community,” the application says.

 

Source: SunSentinel

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The U.S. industrial real estate market will continue to be on fire heading into 2022 but longer lead times to obtain construction materials and across-the-board price increases will also affect the sector.

Cushman & Wakefield PLC took a two-year look into the future, predicting industrial absorption from the start of 2022 to the end of 2023 will be 855 million square feet. Although demand will be high, and issues will make new industrial development challenging, Cushman expects new supply will slightly outpace demand in the next two years, which’ll help moderate the market somewhat.

Cushman is predicting new industrial deliveries will reach 932 million square feet in 2022 and 2023. E-commerce is a big reason — but not the only one — behind the warehouse sector’s massive growth since the pandemic. Online sales rose to 21.6% of total retail sales in the second quarter of 2020, compared to 16.2% in Q1 2020, and remain around 20% as of Q3 2021, according to CBRE Group Inc. (NYSE: CBRE) research.

“2021 was the best year ever for industrial real estate,” said James Breeze, senior director and global head of industrial and logistics research at CBRE, during a recent forecast call with reporters.

Third-party logistics have dominated industrial deal activity this year, a share that could grow in 2022 as costs continue to rise, and space and labor becomes more challenging to find.

“Many retailers or wholesalers will outsource their distribution to 3PLs at a greater clip in 2022,” Breeze said. “This outsourcing is going to be prevalent throughout the country.”

CBRE is forecasting vacancy rates next year for warehouses to remain at or even below 3.6% in 2022. Cushman is predicting industrial vacancy in North America will end 2023 at 4.1%. Expect rents to continue to rise for industrial occupiers, too. Cushman is forecasting average net asking rents for warehouse space in North America will reach a new high of $8.72 per square feet by the end of 2023.

“Even with the rental-rate hikes, tenants need warehouse space so much they’re willing to pay the new rates,” said Erik Foster, principal and head of industrial capital markets at Avison Young USA Inc.

“In fact, transportation costs are a bigger concern for many groups leasing warehouse space,” Breeze said.

Real estate costs are typically only 3% to 6% of total logistics costs, compared to 50% for transportation. The cost to ship goods via ocean freight grew more than 200% in 2021, while domestic-freight costs jumped more than 40%, according to CBRE.

 

“Leasing more space may actually save some occupiers money, if they are able to use additional facilities to cut down on domestic or international transportation,” Breeze added.

Investment activity for industrial real estate is expected to remain hot in 2022. Since the pandemic, some capital sources have pivoted away from uncertain asset classes, like retail and office, and instead poured money into industrial and multifamily, both of which have been on a tear in 2021.

Capitalization-rate compression across several U.S. markets has been observed in 2021 and is expected to continue, but cap-rate spreads between primary and secondary markets will be observed, CBRE predicts.

CBRE is predicting Phoenix and Las Vegas will post cap rates in line with the Inland Empire, about 3.1% in the first half of 2021, in 2022. Prices in the Pennsylvania Interstates 78/81 corridor are expected to be closer to those seen in New Jersey industrial markets, about 2.9% in H1 2021, says CBRE. Northern and central Florida could approach cap rates observed today in south Florida. Miami industrial real estate saw cap rates averaging 3.75% in H1 2021.

“With the amount of investor interest in industrial right now, there are some groups that don’t have much experience owning or operating warehouse real estate,” Foster said. “We’re seeing folks that are sophisticated, with real funds behind them, move in like never before to an asset class that they don’t know that well, which can cause risk.”

 

Source: SFBJ

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Seagis Property Group announced today that it has acquired a 10-acre industrial property located at 1700 Eller Drive in Hollywood.

Seagis plans to build a 199,615 SF warehouse building that is 36′ clear with 32 dock doors, 172 car parking spaces, and 45 trailer parking spaces. The development will increase the Company’s South Florida portfolio to 111 buildings and 6 million square feet.

“We are excited to announce our first development project in South Florida. 1700 Eller Drive is one of the most strategically located industrial properties in all South Florida as it is adjacent to Port Everglades, within a mile of Fort Lauderdale International Airport, and immediately accessible to I-595/I-95,” said Bradlee Lord, Vice President, who is based out of Seagis‘ local office in South Florida.

Seagis Property Group LP owns and operates over 12.1 million square feet of industrial buildings in New JerseyNew York City, and Miami-Dade/Broward. Seagis is headquartered in suburban Philadelphia, with offices at One Tower Bridge, 100 Front Street, Suite 350, Conshohocken, PA 19428.

 

Source: Tioga Publishing

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Downtown West Palm Beach’s growth has caught the eye of developers and real estate investors, but one district has been left out of the activity.

Now, this is poised to change. The city, working with NDT Development and Place Projects, wants to implement a set of building regulations aimed at breathing life into the area anointed the Nora District.

A rendering of the Nora District Redevelopment (IMAGE CREDIT: ArquitectonicaGEO)

Stretching between Quadrille and Palm Beach Lakes boulevards and from Dixie Highway to the FEC Railroad tracks, the area is poised to be redeveloped in a manner reminiscent of Miami’s Wynwood Arts District.

Commissioners just took the first step by voting unanimously on to change the comprehensive plan, a blueprint for growth and development, for the Nora District. Next, the state plans to review the tweaks, and if it approves them, the commission is expected to take a final vote on Feb. 7, 2022. In the meantime, the city also is working on zoning and land development rules for the Nora District.

“NDT and Place Projects, which together own 13 acres in Nora, approached the city in 2019 to discuss how to breathe new life into the district,” said Joe Furst, founder and managing principal of Place Projects. “The city had tried before to encourage other development in the area that had not come to fruition,” referring to regulations implemented over a decade ago.

Despite that effort, 39 percent of properties remain vacant, even as roughly 211 residential units and 50,000 square feet of commercial space have been built annually over the past 15 years in the rest of downtown, according to the city.

A rendering of the Nora District Redevelopment (IMAGE CREDIT: ArquitectonicaGEO)

The vision for Nora is to create a multi-section neighborhood, where towers would rise in some places, and existing buildings would be preserved or renovated in others. The northern section, with mostly vacant lots, is expected to see buildings of up to 20-stories at the corner of Palm Beach Lakes Boulevard and the train tracks, scaling down to 15 stories on lots to the east along the boulevard, according to the city. The height that is currently allowed is two stories along Palm Beach Lakes Boulevard and five stories along Dixie Highway.

“NDT and Place Projects, which own most of the vacant lots in the northern Nora area, envision a multifamily project and potentially offices,” Furst said. “The maximum proposed heights would be allowed through the transfer of development rights, including from historic buildings elsewhere in downtown. Transferring development rights means developers also would have to include affordable and workforce housing.”

But the big projects won’t be the first step by NDT and Place Projects. Instead, they would start with infrastructure improvements and repurposing the mostly vacant buildings they own along Railroad Avenue, the future main street in Nora.

Aerial of the Nora District Redevelopment (IMAGE CREDIT: ArquitectonicaGEO)

The mid-section of Nora, roughly between Eighth and 10th streets and home to single-family houses and duplexes, will be preserved. The southern section along Quadrille Boulevard could see buildings up to 10 stories, double the currently allowed height, according to the city.

NDT and Place Projects have put roughly $40 million into property acquisitions and other costs associated with drawing the Nora vision, according to Furst.

“Ultimately, the Nora District could bring in other developers as well,” Furst said.

Based in West Palm Beach, NDT’s other recent ventures include buying a West Palm Beach office tower in July with three other partners for $60.7 million. The firm is led by Ned and Sam Grace, as well as Damien Barr.

Miami-based Place Projects has ventures in Brickell, Wynwood and St. Petersburg, according to its website. It was a development partner in the 545 Wyn office building in Wynwood.

In another part of downtown West Palm Beach, Stephen Ross’ Related Companies has amassed the majority of the office towers in a bet on financial firm influx to the area. Its latest downtown project is the One Flagler office building, dubbed in real estate circles the “hedge fund tower.”

 

Source: The Real Deal

 

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South Florida’s industrial market fundamentals, particularly for bulk warehouse space, blew through the third quarter of 2021 on strong leasing demand and new construction

The region’s healthy consumer market and growing population helped push investor and occupier confidence in the industrial market, which is likely to continue through 2022.

The backlog at West Coast ports is causing weeks of delays for goods that need  to travel to East Coast markets, making warehouse/distribution space in South Florida an attractive and faster alternative from a distribution standpoint. Bottlenecks in the supply chain are realigning how many firms view real estate needs locally with a shift in philosophy for inventory management.

Previously, companies focused on lean supply chains where materials and goods arrive “just in time.” In a market like South Florida, that meant limited amounts of warehouse space were needed.  Now, companies are turning to an inventory strategy that follows a “just in case” model, where more goods are stored closer to customers to minimize fluctuations in demand. South Florida, with three deep-water ports, has the capacity to address the immediate logistics needs for companies with changing inventory strategies.

In the last year, 18,200 new industrial and warehouse-related jobs were created in Miami-Dade, Broward and Palm Beach counties. They were added because of big-box expansion by e-commerce firms, together with a push into last-mile facilities. Hiring also occurred with traditional retailers, plus new-to-market entrants, which increasingly viewed the tri-county as a strategic location to serve the immediate needs of customers.

New inventory and aggressive development captured some of the new employment. In the first nine months of 2021, 5.4 million square feet of new industrial space was delivered in the region. As the industrial inventory and deliveries grew, so did the occupiers’ space requirements for square footage, but new construction could not keep up.

As of the end of the third quarter, 6.6 million square feet of industrial space was under construction, with three projects representing 1.8 million square feet of new inventory. Still, overall industrial vacancy in South Florida fell to 4.4 percent in the third quarter. Both Miami-Dade and Palm Beach County were even tighter at 3.3 percent, with Broward County coming in at 5.9 percent as available space throughout the region decreased year-over-year.

While not a record-setting year yet, new leasing activity year-to-date of 11.6 million square feet was only 18 percent less than the full amount for all deals done in 2019. Net absorption, or the amount of space absorbed by tenants, was 7.8 million square feet in 2021. That represents a 250 percent increase in the amount of space absorbed when compared to 2020.

yc37i south florida industrial absorption The South Florida Answer to West Coast Logistic Bottlenecks

In Miami-Dade, leasing reached more than 6.8 million square feet year-to-date, an increase of 15.5 percent compared to the same period one year ago. For that same period, Broward County recorded more than 3.6 million square feet, a 36.1 percent rise from 2020. Palm Beach County had 1.0 million square feet in new leasing activity so far in 2021.

Limited availability on heightened demand allowed landlords to push asking rates to all-time highs. Overall average asking rents for all South Florida were at $9.87 per square feet, triple net, the highest amount recorded. Rents in Miami-Dade were at $9.17 per square foot, a 7.1 percent jump from last year. And Broward County also reached an all-time high of $10.27 per square foot in the third quarter. Palm Beach County topped out at $11.07 per square foot with the asking rate rising steadily over the last three quarters as construction picked up.

AfGHE south florida industrial rents e1637699131823 The South Florida Answer to West Coast Logistic Bottlenecks

Confidence in South Florida’s economy and potential for growth will only be enhanced by the lifting of U.S. restrictions on foreign travel. The influx of travelers and investors from overseas, starting over the holidays, will contribute to additional optimism in industrial market fundamentals in the region. The longer that challenges remain at West Coast ports to efficiently move goods into the United States means that South Florida becomes the better, more reliable strategic alternative for companies. The region’s positive fundamentals post pandemic,including solid population growth and rising incomes, make South Florida an attractive market for investment.

 

Source: Commercial Observer

 

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A group of developers obtained a $40.78 million construction loan to start work on a large industrial project in Lake Park.

Wells Fargo Bank provided the mortgage to ASVRF Silver Beach Road LLC, a partnership between Los Angeles-based American Realty Advisors, Atlanta-based Ridgeline Property Group, and Fort Lauderdale-based Mitchell Property Realty. It covers the 24.2-acre property located at 1600 Silver Beach Road, just east of Congress Avenue.

Called Silver Beach Industrial Park, the project will total 380,000 square feet in four buildings with 32-foot clear ceiling height.

CBRE’s Robert Smith, the leasing broker for the project, said it will break ground in December.

 

Source: SFBJ

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A company managed by Jon Samuel, the developer of Midtown Miami, paid $15.7 million for a warehouse in Coral Springs.

Coral Vutec Properties LLC, managed by Daniel Sinkoff, sold the 105,183-square-foot warehouse at 11711 W. Sample Road to MGX I LLC, managed by Samuel of Miami-based Midtown Group. The buyer was represented by Josh Wade of Delray Beach-based Flagship Retail Advisors.

The price equated to $149 per square foot. The warehouse last traded for $5.25 million in 2009, so it gained in value. One of the largest tenants is Access Fabricators Corp., which is also managed by Sinkoff.

 

 

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CRE shattered performance records in the third quarter, driven by household wealth and record demand.

“Some of the results are shocking,” Marcus & Millichap’s John Chang says. “I anticipated strong commercial real estate momentum in the third quarter as the lockdowns had pretty much ended, new households were being formed, spending had increased and companies were shifting their positioning toward stronger growth⁠—but I was still surprised. At the start of Q3, many companies were taking a wait-and-see approach, and leasing was soft.

But despite that, about 26 million square feet of space was leased in Q3, on par with the quarterly pace of demand from 2018 and 2019. That brought vacancy down 10 basis points to 16.1%.

“Expectations for retail were positive going into Q3, but I don’t think they were very optimistic,” Chang says.

But the sector outperformed, filling 28 million square feet of space in the quarter and posting the best quarterly absorption numbers since 2017. Total occupied retail square footage is now officially back above pre-COVID levels, and vacancy fell by 20 basis points. Average rents also rose 2% year-over-year.

“I wouldn’t say the retail real estate sector is crushing it, but compared to most people’s perception, retail is outperforming expectations and also surprised to the upside,” Chang says.

As for apartments, 273,700 units were filled in the quarter, a record absorption number for the sector. Developers are on pace to deliver a record 400,000 units this year, and the national vacancy rate hit 2.8% for the quarter. Rents are also up 11.2% year-over-year.

“I don’t think anyone was expecting an all-time low vacancy rate and double-digit rent growth,” Chang says.

And in the industrial sector, rent growth was up 3% quarter-over-quarter and 8% year-over-year, in alignment with most forecasts. The surprise? Absorption: 157 million square feet were absorbed in the quarter, bringing the annual total to 364 million square feet so far.  That shatters 2016 highs.

“The third quarter delivered better than expected results with some record-breaking space demand numbers,” Chang says. This will likely add more fuel to investor optimism, especially in the office and retail sectors where expectations have been more modest.”

Chang has said he expects the momentum continue into the end of 2021. Supply and demand trends remain favorable, and active investors continue to price strong growth into their underwriting, particularly for industrial, self-storage and apartment properties.

 

Source: GlobeSt.

 

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In Prologis’ recent third quarter earnings call, CEO Hamid Moghadam was blunt in his assessment of the industrial sector’s supply-demand equilibrium:

“With vacancies at unprecedented lows, space in our markets is effectively sold out.”

It is, of course, little secret that industrial rents are at a premium and tenants are jockeying for what space they can find. But new details in Prologis’ Industrial Business Indicator report show just how much of an uphill climb supply will have before it meets current and future demand.

Prologis reports that construction starts have risen to an all time high of 120 million square feet, with speculative construction representing roughly 88% of all starts in the quarter. But pre-leasing has also reached its own record of 70%. That, coupled with construction delays, which are spreading out deliveries, means the risk of oversupply is low.

“We do not anticipate significant supply relief in most key locations; new supply is concentrated in low-barrier secondary and tertiary markets and the outlying submarkets of inland markets,” Prologis Research said.

Indeed, it concludes that demand is set to outpace new supply through the near term. The reasons include the ongoing rise of e-commerce penetration and companies’ move to build resilience into their supply chains. In addition, retail sales are robust, and trillions of dollars in pent-up savings and record-high consumer net worth should support future spending growth.

Prologis Research forecasts net absorption of 375 million square feet and deliveries of 285 million square feet for the full year.

“Looking ahead, we expect that market conditions will remain exceptionally competitive for customers looking to expand, making it essential to plan early and move quickly.”

 

Source: GlobeSt.

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Everyone is becoming more accustomed to seeing small trucks roam their neighborhoods, delivering goods ordered online.

But even as the coronavirus pandemic greatly intensified demand for these services, most municipalities are reluctant to approve proposals to develop new industrial service facilities where distributors and other businesses can store, maintain or dispatch vehicles, heavy equipment or bulk materials.

“Nobody wants to live next to a truck terminal,” JLL Senior Associate Kate Coxworth said. “That not-in-my-backyard, or NIMBY, attitude keeps new supply low, sending rental rates soaring for existing industrial service facilities in markets across the U.S.”

That’s helped in the past 12 months to draw in a new cadre of developers and investors who now see these facilities as an essential component of the rapidly expanding industrial sector.

“These facilities are the skeleton of the supply chain, and there are more people making the discovery that there are real opportunities here,” Industrial Outdoor Ventures CEO Tom Barbera said.

Barbera started Schaumburg, Illinois-based IOV about five years ago, and for most of that time, only three or four other firms specialized in acquiring and developing properties within the niche sector, he said. But things changed in 2021. A new group of six to eight firms is now out there and has made the market for industrial service facilities more competitive.

“And I think we’ll continue to see new folks get involved,” Barbera said.

National investment players have also joined the fray. IOV formed a joint venture in March with San Francisco-based Stockbridge, planning to make between $100M and $200M of acquisitions annually. IOV completed 24 acquisitions in its first four years, but thanks to the new joint venture, it has picked up the pace and has closed 16 new acquisitions since February.

That includes the 39K SF 1401 North Farnsworth Ave. in Aurora, Illinois, a Chicago suburb, and the 22K SF 4212 Perry Blvd. in Whitestown, Indiana, an Indianapolis suburb. Both are 100% occupied by MacQueen, a fire truck and emergency equipment provider that uses the properties for truck maintenance and repair.

“By the end of this year, IOV could close on another 20 properties and be in at least a dozen major metro areas, including South Florida, Atlanta, Chicago, Dallas and Houston,” Barbera said.

 

JLL also recognizes ISF’s growing importance as an asset class, and plans to establish a group of specialists that will handle such transactions, according to Coxworth, who helped represent IOV in the Aurora and Whitestown deals.

“JLL researchers have started tracking the nationwide vacancy rate among ISF properties,” Coxworth said.

It now stands at 3.1%, and with many municipalities expected to continue blocking new facilities, especially in dense residential areas now served by so many delivery trucks, investors can be confident the market will stay tight. In addition, ISF tenants promise steady returns.

“Almost all of the tenants are signing 10-year leases because they all understand that this is a hard commodity to find, and once you do, you better hold onto it,” Coxworth said.

These tenants have shown a willingness to pay much more in rent as the industrial boom continues, according to Timber Hill Group Managing Partner Cary Goldman, who founded the Chicago-based firm in 2018. The first truck parking facility he bought was near southwest suburban Stickney and Chicago’s Midway Airport, and tenants typically were paying about $135 per month for each space.

“But spaces in the same area now go for between $275 and $300,” Goldman said. “And spaces near Chicago’s O’Hare Airport can cost $375 and are trending toward $400. What other sector has seen its rental rates more than double in just a few years? Although that will certainly help bring in more investors, it’s a management-intensive business, and actually operating industrial service facilities will probably stay with specialists.”

Unlike the new distribution warehouses so popular with investors, ISFs sometimes have hundreds of tenants, each needing just one or a few truck spaces.

“It really is akin to self-storage,”  Goldman said. “And setting rental rates isn’t easy, as no one tracks the information needed to generate comps. There is no CoStar for truck parking places, The information is not easy to obtain and it takes a lot of real ground-level research. It’s also not a trophy asset,” he added. “It doesn’t look pretty on a brochure. It’s a lot of gravel behind a fence.”

Timber Hill Group now owns 16 assets, according to Goldman, and like IOV, plans to keep buying. It formed a joint venture in September with Chicago-based Champion Realty Advisors, and over the next 12 to 18 months the venture plans to acquire $150M of assets in infill locations near road interchanges and rail networks.

He said he expects that the market for ISFs will soon get even tighter in most metro areas. Not only is it tough to get the proper zoning and other approvals from cities for new truck parks and storage areas, but ISF owners can frequently score deals to transform existing spaces.

“Supply is actually coming off the market, because it’s being converted to other uses, an added bonus for ISF owners, Goldman said. “It provides good cash flow while you wait for great development opportunities.”

 

Source: Bisnow

 

Businessman looking through binoculars

Change is a major theme in this year’s Emerging Trends in Real Estate, an annual report by the Urban Land Institute and PricewaterhouseCoopers LLP, heading into 2022.

Housing affordability, soaring construction costs, climate change, proptech and the lasting impacts of remote versus in-office work are, unsurprisingly, some of the major topics and trends identified in this year’s installment. The report includes data, insights and survey responses from 1,700-plus real estate industry professionals.

While the economic recovery for the real estate industry has been better than expected since the pandemic, some adaptations and changes to the office, the way consumers shop and even how and where people live will be changed forever. The report’s survey found 47% of real estate professionals didn’t think changes implemented during the pandemic would revert back in 2022.

 “Long-term impacts from pandemic changes, such as the growing acceptance of work-from-home on the office market, are still unknown. But there’s a greater understanding that such shifts will impact commercial real estate,” said Anita Kramer, senior vice president of ULI’s Center for Real Estate Economics and Capital Markets. “A big lesson has been how things don’t have to change completely to have impact,” Kramer continued. “In the office sector, it’s not that everybody has to be working from home for changes to occur. The office sector is not dead but there will be a bit of a shift within it.”

She said when a fuller picture of how work-from-home will affect office emerges, that’ll prompt further questions: What happens to downtown businesses that rely on lunchtime crowds during the week, or older office buildings and retail centers that may be obsolete in a post-pandemic world?

Real estate investors’ capital war chests have been bolstered this year, but a disproportionate amount of money is flowing into a few sectors.

Tom Errath, managing director and head of research at Chicago-based Harrison Street Real Estate Capital LLC, said during a real estate economic forecast panel at ULI’s fall meeting this week that investors — some fairly new to real estate — are more recently wanting to understand alternative asset classes, which Harrison Street specializes in.

“We are seeing great interest from not only domestic capital but foreign capital,” Errath said. “These asset classes we focus on exist in other countries but they’re not as well developed there. If you want to access them in a meaningful way and take advantage of the transparency and liquidity that exists here, you have to be the in United States.”

Ben Breslau, Americas chief research officer at Jones Lang Lasalle Inc., also said foreign capital has been constrained during the pandemic because of travel restrictions and the inability to tour assets or markets. Once those restrictions lift, he said even more international capital will likely flow in to U.S. real estate.

Ken Rosen, chairman of Rosen Consulting Group of Berkeley, California, also said investors want to pile into the same few sectors. Disproportionately, industrial, multifamily and more niche sectors like life sciences are seeing the greatest competition from capital. The success of those sectors and more broad real estate fundamentals set the stage for more capital flowing in to commercial real estate in 2022.

But what about more traditional asset classes that have become less certain since Covid-19?

“Office remains a bifurcated sector,” said Breslau. “The flight-to-quality theme touted by many in the office space applies to investors, too. It’s not a rising tide lifting all boats but the best office space is seeing bidding wars from tenants. We have a lot of clients and investors who are getting incredibly frustrated, trying to deploy everything in two-and-a-half asset classes,” he continued, referring to industrial, apartments and alternative sectors.”That could propel savvy investors to find opportunities within sectors like office.”

“Properties are available to acquire now but investors may have to have more courage to buy what he called the more contrarian stuff,” Rosen said.

The ULI and PwC survey found most respondents felt there will be a year-over-year increase in availability of capital from lending sources, especially non-bank lending sources, in 2022 as compared to 2021. Sixty percent said they felt equity capital for real estate investing would be oversupplied in 2022.

Perhaps underscoring the continued optimism of the commercial real estate industry, 89% said they were confident about making long-term strategic real estate decisions in today’s environment, with 45% “strongly” agreeing with that statement.

ULI and PwC also identified several markets to watch in 2022.

“The scoring criteria is based on survey respondents’ scores on a city’s investment and development prospects, and other opportunities, said Kramer. “Smaller Sun Belt cities like Nashville, Tennessee, and Raleigh, North Carolina, are identified as supernova cities because of real estate fundamentals, in addition to having walkable downtowns and other factors.”

 

Source: SFBJ