Cincinnati Warehouse Property in 2017

English: Cincinatti, OH.

Earlier this year, we looked at Cincinnati’s new Amazon air hub. One quarter on from that Cincinnati warehouse announcement, what is the wider economic picture for logistics and warehouse property in “Blue Chip City”?

According to Xceligent’s 1st Quarter Industrial Market Report for Cincinnati, unemployment fell to 5% in January of this year. Coming along for the ride on the wave of economic good news are two markets: Cincy’s industrial and office property markets. When people go to work, you generally have to put them somewhere, and that’s where Cincinnati’s expanding options in industrial and office property come in.

Florence/Richwood Submarket Hot

Of the largest positive industrial transactions in town 1Q2017, the metro’s southern sections of Florence and Richwood claimed the lion’s share of square footage. Warehouse projects in the submarket included over 670KSF of space sold to grocery giant Kroger.That deal came with a sale price of over $33 million. Other large Florence transactions 440KSF leased to shipper UPS and 275KSF of leased space at 10600 Toebben Drive.

Cincinnati Warehouse Leasing Trends: On The Uptick

Higher transactions and lowered vacancy is the trend in the Cincinnati warehouse market.  From the latest Xceligent Cincinnati Industrial Market Report (1Q2017):

Cincinnati warehouse leasing trends 1Q2017

Check out Cincinnati’s industrial, office and multifamily properties for sale or lease

Want a wide and fast analysis of Cincinnati’s commercial real estate markets?

Start by dropping us a line to request free copies of Xceligent’s 1Q2017 Market reports in Industrial, Office and Retail property. 

Next, browse the market live: click onto these live queries of listed properties:

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Latest Federal Reserve Beige Book: National CRE Market Review

The Federal Reserve Beige Book, the national summary of the economy as published eight times yearly by the Federal Reserve Board arrived April 19.  What’s the commercial real estate national market picture at-a-glance?  Here’s an executive overview by district.

New York: Housing markets have improved somewhat except at the high end, while commercial real estate markets have been steady to slacker. […] industrial market continued to strengthen. New construction activity has been sluggish–both on the commercial and residential side. Banks reported that loan demand strengthened, while delinquency rates were mostly steady.

Minneapolis: commercial real estate activity was steady at strong levels.

Boston: Commercial real estate markets were somewhat mixed in the region. [..] Office construction activity continued to be restrained across the District. […]  Apartment construction activity remained significant but the pace of new deliveries slowed and the pipeline of planned projects contracted somewhat amid evidence of slowing rent growth.

Philadelphia: Commercial real estate loan volumes grew notably […]

Richmond: On balance, commercial real estate leasing rose moderately. Industrial and retail leasing and sales activity remained very active throughout the District.  […] Commercial real estate loan demand generally strengthened, but varied throughout the District.

Atlanta: Demand for commercial real estate continued to improve and construction increased from the year-ago level across most of the District. […] Most commercial real estate contacts noted improvements in demand that continued to result in rent growth and increased absorption, but cautioned that the rate of improvement varies by metropolitan area, submarket, and property type

Chicago: The pace of commercial real estate activity increased only a little overall, and the gains were limited to the for-lease segment. That said, a number of contacts reported signs of slowing activity, particularly in the retail segment.

St Louis:  Commercial real estate activity has been flat since the previous report. Local contacts indicated that demand has remained steady for most property types. Contacts noted some concerns that St. Louis office vacancy rates will rise in the near future due to new construction combined with expiring leases of vacant properties. […] Commercial construction activity was mixed.

Minneapolis: […] commercial real estate activity was flat at strong levels. […] Office vacancy rates in Minneapolis-St. Paul have ticked higher after significant new office development. There were reports of more preleasing before new projects move into the construction phase. A Minneapolis-St. Paul source noted that retail vacancies had crept up to 6 percent, but that “is still considered very low. Prime retail areas are very tight and have high rents.”

Kansas City:   […] [C]ommercial real estate sector activity continued to rise at a modest pace as vacancy rates declined and absorption, completions, construction underway, sales and prices increased. A moderate expansion in the commercial real estate sector was expected in the coming months.

Dallas:  Apartment leasing activity slowed and occupancy fell in the first quarter. Annual rent growth was solid in Dallas-Fort Worth but moderated in Austin. Rents were flat to down in Houston. Contacts generally expect slower rent growth this year.

Demand for office space was healthy in Dallas-Fort Worth, and office construction continued to be elevated there. In Houston, office demand was mostly weak and office construction tapered.

San Francisco: In some regions, activity in the commercial real estate sector slowed to a modest pace. In Alaska, residential and commercial construction activity declined, as commercial investment stalled and overall economic activity remained sluggish.

REIT Risk: Bank Borrowing Rising

English: US Bank tower in Denver, Colorado. Are banks a source of REIT risk?

The real estate investment trust (REIT) is an investment vehicle with a particular sensitivity to borrowed capital. REIT risk tied to capital source is heightened because the legal structure of a REIT is centered on distributing the vast majority of its earnings to shareholders.  This means the REIT is prevented from holding back significant capital reserves, which in turn means it must borrow to finance its acquisitions and operations.  That borrowing takes the form of credit from bondholders and from banks.

Taken by itself, the REIT structure’s dependency on external capital need not present untoward risk to the REIT, but the borrowing side needs balance to protect the REIT from overexposure to a certain type of borrowing.  Between the two tradition avenues, commercial banks and bond issuance, US REITs are increasingly exposed to bank credit.

According to a new REIT risk report by investment ratings agency Fitch, US REITs have doubled their exposure to bank borrowing over the past seven years. Fitch put the borrowing from commercial banks at 8.5% of total REIT debt in 2010. That figure is now 16.5% as of year-end 2016.

Access to multiple forms of capital is a characteristic of investment-grade REITs, and a weakening in the unsecured bond markets would challenge REITs to tap additional unsecured bank borrowing. Fitch has viewed negatively companies with less mature capital structures that rely on fewer sources of funding. The inability of issuers to obtain cost-effective unsecured funding via the bond or bank market could cause rating downgrades or negative outlook changes.

Two Environmental Factors: Low Interest, High Profile

The changes come as REITs have literally come into their own as an equity investment — 2016 was the year that REITs received their own sector classification from Standard & Poor, taking them out of the wider category of “finance” and into a spotlight of their own.  That move boosted REIT stocks in the investing public’s eye at the same time that very low interest rates have prodded REITs seeking capital toward corporate bond issuance and the risk premiums that go with these bonds.

Both factors have emphasized the viability of REITs as an investment class, but the rise in one kind of vital borrowing that will be sensitive to Federal Reserve interest rate moves, which can almost go nowhere but up — is seen as a signal by Fitch that balance in borrowing sources is something REITs need more of as a class.

(Photo credit: Wikipedia)

Legal Marijuana: What Will The DOJ Do To A Growing Business?

Seal of the United States Department of Justice

US Attorney General Jeff Sessions has gotten to work on clarifying the US Department of Justice’s posture on legal marijuana. The move couldn’t come sooner for the commercial real estate industry supporting this growing sector of the economy.

The enforcement of federal marijuana laws in the face of legalization by 29 states is of considerable concern to commercial real estate markets; based on the latest wave of state legislation passed, nearly 1 in 5 Americans now have access to state-legal marijuana, a figure that encompasses a whopping 68 million people.

In legalized states — and in the states expected to vote in favor of legalizing — the commercial real estate industry is on the march with sourcing and developing the industrial, land and retail property types that support and house the growing, distribution and dispensary needs of the legal marijuana business. But the road has gotten bumpy since the 2016 election.

A perpetual challenge to smooth real estate investment and to property sourcing is market uncertainty, and the Trump administration has been doing the legal marijuana industry no favors on that score. Since his confirmation as AG, Sessions, who as recently as April 2016 made the statement that marijuana users aren’t “good people”, has introduced quite a bit of national uncertainty into the legal marijuana business.  First pointing to Congress as the responsible party for a final decision, Sessions this week got a memo out to 94 US Attorney’s offices and DOJ heads that appears to take greater ownership of the impasse in legal marijuana enforcement.

The memo (read the full memo here)  addresses a newly created Task Force of Crime Reduction and Public Safety and tasks them with the following:

Task Force subcommittees will also undertake a review of existing policies in the areas of charging, sentencing, and marijuana to ensure consistency with the Department’s overall strategy on reducing violent crime and with Administration goals and priorities. Another subcommittee will explore our use of asset forfeiture and make recommendations on any improvements needed to legal authorities, policies, and training to most effectively attack the financial infrastructure of criminal organizations. 

Gone is any mention of Congress, and the singling out of marijuana in a sentence concerning itself with consistency reads (to these eyes, anyway) as a signal that the AG is looking for ideas from his bureaucracy. If I had to guess, at least some of the feedback Sessions receives will mention in no uncertain terms that violent crime and the legal marijuana business are distinctly different phenomena in at least 29 states of the union.

The deadline for response from the memo recipients is July 27th of this year.

Tampa Office Market Analysis: Amgen Moves In

Picture of Amgen office and flag

The $25 million dollar office investment biotech giant Amgen has made in the Westshore business district of Tampa is touted to bring over 400 high-paying jobs to the Sunshine State. The California-based company’s plan to open a “capability center” — a kind of business support and operations facility — will occupy four floors of Corporate Center One, at 2202 N. Westshore Blvd., taking up over 125KSF.  The facility will open in October of 2017.

What made up the Tampa office market environment that Amgen’s property professionals liked? Competitors, talent and options. On the competition front, other biotech and pharma giants have digs in Tampa, including Squibb, Bristol-Meyers and Johnson & Johnson. Surely the location of so many highly-trained pharma and tech professionals living in and around Tampa metro sweetened the deal for Amgen.

Westshore: Market Snapshot

On the office property front, Tampa’s CBD is marked by options in Class A and B properties, plus a sliding vacancy rate, as specified by Xceligent’s 4Q2016 Tampa Office Market Report. The report shows the Westshore submarket where Amgen settled to be the largest source of deal activity.  The submarket sported five of the top eight lease transactions in the quarter, with inventory for the submarket adding up to over 14M SF, the largest number on offer in Tampa. Westshore’s vacancy rate is pegged at 8.4%, according to the report.

CommercialSearch: Properties listed in Tampa’s Westshore Submarket

Check out the office and industrial properties listed today at CommercialSearch.com located in the Westshore submarket of Tampa by clicking the link.  Total number today: 113 listings on offer, ranging from A, B and C class properties.

As always: to obtain a free copy of the latest Tampa Office Market Report from Xceligent, click here to drop us a line.

(Photo credit: BizJournals.com)

New Moapa Solar Plant Outside Of Las Vegas: Sold

View of Moapa Peak from near the Carp-Elgin ex...
Moapa Valley, NV

Demonstrating a state of the art in pollution- and water-free, photovoltaic (PV) energy generation is a new fully operational solar plant 30 miles north of Las Vegas. The Moapa Southern Paiute Solar Project will generate enough voltage to power well over 100K homes, but Las Vegas isn’t the target of all that juice — every watt will be sent 270 miles away to serve Los Angeles. What’s more, the project was sold after an impressively brief ten days of operation, in a deal to private asset manager Capital Dynamics. Terms of the Moapa Solar deal were not disclosed.

Free Report: Moapa Solar’s light industrial neighborhood shows low rents, high construction

The Moapa Solar Project takes advantage of the Las Vegas market’s northeast Clark County area. The site is located in the Moapa Valley, where the market quadrant offers the Las Vegas industrial market’s second lowest rents. The most recent Las Vegas industrial market report (4Q16) from Xceligent spots the northeast area ‘s weighted average asking rents at $0.46 per square foot (on a triple net basis).

The NE Clark County area also offers the market’s biggest volume in new construction by a significant margin. At over 2M square feet of new construction, the area nearly doubles the second place market (Henderson). Vacancy rates for the overall market are improving — year-over-year totals have dropped from 6.1% to 5.4%. Flex properties have had the most significant positive change in vacancy with rates improving from 10.1% to 7.4%. If you’re interested in obtaining a free copy of Xceligent’s latest Las Vegas Industrial Market Report, drop us a line here.

Live Query: Moapa Valley land and industrial properties listed on CommercialSearch.com

To check out a live query at CommercialSearch of land and industrial properties in the Moapa Valley northeast of Las Vegas, click here now.

(Photo credit: Wikipedia)

Trump Hotel Lease In DC Not Illegal

In a letter delivered to The Trump Organization yesterday, a US government agency acting as landlord to the President’s luxury hotel in Washington DC has determined the President’s hotel is in compliance with its lease.

The GSA lease, discussed earlier here at CRE Blog, has a 60-year term on the renovated former US Post Office Pavilion property that the President, while in real-estate developer mode, converted to the luxury Trump International Hotel D.C.

The GSA, whose purpose is to manage half a trillion dollars worth of federal property in a portfolio of over 8,300 owned and leased buildings, sent the letter in response to unique questions arising from the non-divestment of President Trump from his portfolio of properties.  GSA is the owner of the building in question and was called upon to review the structure of the lease for compliance.

The letter is fascinating in that it provides a rare view into an operating structure of a Trump property, plus a snapshot of some of the Trump / Trump family’s real estate empire’s various legal structures.  It also references that the hotel operations group undertook changes to Section II of its internal operating agreement in order, one assumes, to achieve compliance.

Getting Paid? No, says GSA.

CBS Marketwatch reports that the changes and structure as expressed in the letter makes it so that distributions sourced from the hotel will not make it to the pocket of the President; such funds instead will remain within the operating LLC rather than going to his ownership vehicle.

Download the entire GSA letter here — and take a long look at what full compliance means in these unprecedented times.

Self Storage Investing On Rebound In 2017

Photo of self-storage facility hallway

After reading IRR’s latest report on the national self-storage property marketplace, I was inspired to take a closer look at this dynamic sub-sector. A wealth of commentary and metrics, the 2017 National Viewpoint National Self-Storage Report lifts the veil on this specialty sub-sector’s comeback from the 2008 recession and suggests where the market is headed based on past performance.

The fundamentals of the market are solid, says report author Steven J. Johnson, MAI, Senior Managing Director at IRR-Metro L.A.  Coming off of a hot year in 2016, the national marketplace in self-storage saw two huge portfolio deals completing, totaling over $3 billion alone. This in a wider market that sports some interesting drivers and leading indicators:

Only 15% of self-storage held by REITs

Quoting the report as calling the national market “fragmented” and dominated by small groups or mom-and-pop operations, it surprised me to see that institutional investors have thus far left 85% of the self-storage pie on the table. From where I’m sitting, that suggests that, all things being equal, acquisition volume in is likely to rise in 2017. Adding to the heat: cap rates on average are landing between 6 and 6.25% across all class types.

Customer life events drive the self-storage business

Classic drivers of the self-storage industry include marriages and divorces.  There were approximately 2.2 million marriages and 800K+ divorces in the US in 2016.  This shows basically flat to declining national trends, both trailing downward slightly, which might appear to go against the case for market growth, but remember that buried in these numbers are cohabitation events displacing some marriages.  Other important life events include births,

See for yourself: browse Self Storage national property listings right now at CommercialSearch.com

Check out the live national picture in self-storage property right now —  click over to this query of  self-storage properties for sale at CommercialSearch.com. The current listings count reads nearly 250 properties, located all across the US in primary, secondary and tertiary markets. The range of locations and classes tell the tale: this is an investment property class that has hung out its shingle and is doing business.

(Photo credit: Wikipedia)

CommercialSearch Integrates Realtors Property Resource

Logos of CommercialSearch and RPR

Transformational providers of commercial real estate data don’t often find ways to interoperate, but when they do, the user benefits pile up fast.  Starting tomorrow, a notable new integration arrives: REALTOR® users of CommercialSearch’s national marketplace in commercial real estate data will have one-click access to powerful new features driven by RPR Commercial, including tax information, transaction history, and more.  From RPR:

As of March 16, 2017, REALTORS® with CommercialSearch who hold RPR accounts can easily jump from a listing within CommercialSearch into RPR’s extensive commercial property and trade area data, investment analysis tools, business intel, and comprehensive reports.

“RPR’s mission is to serve the needs of our 1.2 million REALTORS®,” said Emily Line, RPR vice president of commercial services. “Through partnerships like the RPR / CommercialSearch integration, we are able to expand our service offerings and to ultimately save our members time and money previously spent on multiple applications and subscriptions.”

The integration offers REALTORS® on CommercialSearch one-click access to RPR data found on both the website and RPR Mobile™. Subscribers will find property and owner facts, mortgage and tax info, transaction history, maps and photos. Visual heat maps can be drawn down to the census block group level with 25+ variables including traffic counts and more than 20 million business points of interest. And RPR Commercial reports––which can be sent by way of email or text–– reveal data on consumer segmentation, population, age, marital status, economic conditions, and education comparisons, among other datasets.

David O’Rell, managing director of CommercialSearch, believes the partnership furthers Xceligent’s commitment to providing an open technology platform that combines researched content with leading workflow tools.

“We are excited to partner with Realtors Property Resource®,” said David. “We will now be able to provide RPR account holders an exclusive opportunity to analyze local dynamics surrounding properties actively listed for lease or sale in the CommercialSearch national marketplace.“

About RPR® Commercial

Realtors Property Resource® (RPR®) is a wholly owned subsidiary of the NATIONAL ASSOCIATION OF REALTORS®. RPR Commercial provides REALTORS® with persuasive, decision-making data and reports for all types of clients. From identifying site selection using data sets such as public records, traffic counts, business points of interest, demographic and psychographic insights, and consumer spending data, to presenting reports that accurately depict current market activity as well as future projections, this valuable members-only benefit truly helps to validate a practitioner’s expertise.

About Xceligent™

Xceligent™ is a leading provider of verified commercial real estate information across the United States. Xceligent’s professional research team pro-actively collects: a comprehensive inventory of commercial properties, buildings available for lease and sale, tenant information, sales comparables, historical trends on lease rates and building occupancy, market analytics, and demographics. This information assists real estate professionals, appraisers, owners, investors, and developers that make strategic decisions to lease, sell, and develop commercial properties. Xceligent™, backed by dmg information, has launched an aggressive national expansion that will provide researched information in the 100 largest United States markets. Visit Xceligent.

Milwaukee Industrial Real Estate Market

Map of the Milwaukee area including the Milwaukee industrial market

 

The Milwaukee industrial market is a healthy one, offering midwestern location, pre-recession market characteristics and a high level of cooperation among commercial real estate practitioners.  In Brew-town, brokers share data easily and in doing so, drive transaction counts across the whole market. Shared data means more options for making client needs fit inventories.  A quick sampling of recent listings and deals includes:

What’s behind Milwaukee’s industrial market? We ask veteran broker Brian Parrish

Specialist in the sale and lease of industrial property in Milwaukee, Brian Parrish has been building expertise in the market for fifteen years. Currently President and CEO of PARADIGM Real Estate, Brian took a few minutes to share his expert perspective on what makes this market tick.

Xceligent data shows combined vacancy rates for the industrial market in Milwaukee have held at 4.2% from 1Q 2016 to 4Q2016. Does what you're seeing 'on the street' match with this finding?
Brian: Yes, we are back to pre-recession levels. The only reason it isn’t lower is that some new construction has come onto the market and is in the process of being absorbed.  It is common to hear brokers and buyers lamenting about lack of inventory, so to the street it may feel like even less is available. Quite a bit of the vacancy at this point constitutes larger and older buildings that require some repurposing. Nonetheless, this is still an attractive proposition compared to the increasing costs of new construction.

Another marketplace factor is that bank financing is readily available for industrial users (buyers). Much of the vacant space tends to be in properties for lease, where a sale is not possible.  As interest rates rise and users become more frustrated with inventory, the pendulum should swing towards leasing again.

Talk a little about your most recent transaction. How long was it in the pipeline?
Brian: PARADIGM recently represented General Capital in the purchase of a 135,000sf former Sam’s Club on 76th Street near Good Hope Road in Milwaukee. The deal took about 8 months from beginning to close, and involved rezoning the property from retail to industrial. The building has been leased on a long term basis to Sellars Absorbent Materials. It is a great example of how a vacant building can be repurposed from one economic driver to another, continuing to provide employment to the local community.
What do you think the big story in 2017 will be in Milwaukee industrial property?
Brian: Milwaukee — particularly Downtown — is truly experiencing a renaissance. Every day a new construction project gets announced, so it is hard to contemplate a story that would draw more buzz than the noteworthy projects we already have in town.  With that said, I think we will see some more speculative development in the north and the west submarkets of southeastern Wisconsin where such has lacked over the last several years.

Get the latest Milwaukee industrial market numbers from Xceligent

Click here to request a free copy of Xceligent’s latest Market Report for the Milwaukee industrial market.