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Archives for September 2021

What CRE Properties Are Worth Overpaying For?

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Competitive CRE Market Offers Unique Opportunities

  • Many properties currently selling at record low cap rates
  • Unlike other investments, CRE offers ability to leverage expertise/knowledge to outperform market
  • Creative investors can find unique angles for growth that are not already baked into price

Three Keys to “Overpaying” for Commercial Real Estate

  • Information: Understanding the property, submarket, and long-term trends that will impact that property
  • Insight: Seeing not what a property is, but what it can be
  • Perspective: Aligning property to future tenants and submarket outlook over next several years

Current Dynamic Landscape is Time for Client Outreach

  • Connect with investors – Leverage property and market knowledge to become source of information/insights
  • Find creative ways to add value – Help clients find their unique “angle”
  • Build relationships and position yourself as a trusted real estate advisor

 

As of 2H 2021
Base: All respondents (n=509)
Sources: Marcus & Millichap Research Services, M&M/WMRE Investor Survey

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Retail Sales Research Report | September 2021

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Consumers Moved Away From Service Providers, Boosting Retail Spending

  • Core retail sales reverse course in August. Shoppers remained active at the end of the summer, driven by online spending and back-to-school sales.
  • Retail real estate well-positioned for recovery. Although many smaller retailers struggled through the recession, the overall market has remained resilient following the downturn.
  • Recent home sales benefiting retailers. The pace of single-family housing acquisitions remained strong over the summer, which spurred purchases at furniture stores in August.

Outlook Appears Mixed

  • Vaccination rates could present headwinds. Due to the rise in cases, many consumers have curtailed their visits to local retailers. Some locations have reestablished restrictions to stop the spread of the virus, including the nation’s largest cities.
  • Upside potential persists. Despite the challenges presented by the rise in cases, the improving economy points to a positive retail sales market in the coming months, including a strong holiday
    shopping season.

* August Retail Sales; Job Openings as of July
Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; U.S. Census Bureau

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Q3 2021 Multi-Family Market Report | New York City Metro

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Manhattan Renters Returning After Year Away; Construction Keeps Pressure on Class A Units

  • Metro exiting challenging period. While fewer people left New York on a net basis in 2020 than in any of the previous three years, many residents did relocate out of Manhattan.
  • Outer boroughs performing well, construction a concern. Most submarkets outside Manhattan posted sub-3 percent vacancy in June, with some areas such as Southeast Brooklyn and Ditmas
    Park-Flatbush staying under 2 percent.

Investment Highlights

  • The number of properties that changed hands in the first six months of 2021 was up by about 9 percent from the second half of 2020.
  • Over the 12-month period ending in June properties traded at an average per unit price of $339,900, down 3 percent from the 2018 peak.
  • Sales activity was up across all five boroughs over the past four quarters, with the largest jump occurring in Queens.
  • Manhattan buyers targeted the Upper West Side most often, with numerous century-old properties with fewer than 20 units changing hands in a general range of $230,000 to $600,000 per unit.

* Forecast; ** Through 2Q
Sources: CoStar Group, Inc.; Real Capital Analytics; RealPage, Inc.

Download the Full Report Here

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions sold for $1 million or greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Real Capital Analytics © Marcus & Millichap 2021 | www.MarcusMillichap.com

Labor Shortage Creates Challenges and Opportunities for CRE

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Labor Shortage Looms Over Record Job Creation

  • U.S. has added 4.7M jobs through August, making 2021 the best year of job creation on record already
  • Despite recovering 75% of jobs lost during the pandemic, there is still a 2.5M person labor shortage
  • Roughly 2.9M workers have left the labor force since February 2020, creating headwinds for job creation

Multitude of Factors Creating Labor Shortage

  • Expiring Fed unemployment benefits may help fill some positions, but likely not only factor at play
  • Some workers retired, others may wait for children to return to school or for COVID to get under control

Labor Shortage a Double-Edged Sword for CRE

  • Real estate with employees, such as Hotels and Seniors Housing, face hiring headwinds and wage pressure
  • Construction labor shortages limit new supply risk, benefitting existing commercial real estate
  • Continued job creation drives spending and housing demand, benefiting Retail, Industrial and Apartments

* Job openings through July; Unemployed through August
Sources: Marcus & Millichap Research Services, BLS

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Q3 2021 Retail Market Report | Orlando Metro

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Investors Take Notice as Increased Tourism and Job Gains Fuel Retail Demand

  • Retail fundamentals held steady during health crisis. Orlando benefited from job growth that doubled the U.S. average prior to the pandemic, which translated to a level of resiliency during the health crisis.
  • Reduced pipeline to benefit metro vacancy. Uncertainty from the pandemic and material shortages prompted developers to reduce construction activity in the metro, which aided the metro’s vacancy rate during the health crisis.

Investment Highlights

  • Retail investors returned in force to Orlando in the second half of 2020, with transaction velocity reaching a two-decade high over the past 12 months.
  • Private investors were more active in the market, acquiring older properties as many institutions were on the sidelines.
  • Private investors were particularly active in the Lake County Submarket, targeting single-tenant net leased assets with yields in the 6 percent band.
  • Nearly half of all transactions in the metro over the last four quarters involved out-of-state buyers.

* Forecast; ** Through 2Q
Sources: CoStar Group, Inc.; Real Capital Analytics

Download the Full Report Here

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions sold for $1 million or greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Real Capital Analytics © Marcus & Millichap 2021 | www.MarcusMillichap.com

Q3 2021 Retail Market Report | Columbus Metro

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Regional Standout for Retail Performance, Columbus Attracts More Out-of-State Investors

  • Diverse hiring bolsters household count and local spending. Backed by a local economy that has recaptured 80 percent of the jobs lost during the initial months of the health crisis, Columbus’
    retail sector continues to enjoy the lowest vacancy rate among Midwest markets.
  • Major retail demand drivers re-established. Businesses surrounding Ohio State University, the metro’s largest employer, are poised to receive a jolt in sales this fall as students and staff
    return to campus.

Investment Highlights

  • Since the fourth quarter of 2020, sales velocity has returned to a pre-pandemic pace, supporting a 45 percent rise in deal flow over the past year ended in June.
  • Across both retail segments, Columbus offered buyers some of the highest first-year returns nationally over the past 12 months.
  • Shopping center trades accounted for one-fourth of recent deal flow.
  • Investors with experience owning multiple property types are pursuing mixed-use buildings throughout the city of Columbus, where 8 percent-plus cap rates are available.

* Forecast; ** Through 2Q
Sources: CoStar Group, Inc.; Real Capital Analytics

Download the Full Report Here

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions sold for $1 million or greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Real Capital Analytics © Marcus & Millichap 2021 | www.MarcusMillichap.com