Browse Tag: Xceligent

Amazon’s Acquisition Of Whole Foods Has A Rival: Walmart

Photo of Whole Foods store

Is it time to put a halt on the recent wave of think pieces all across the web concerning the recent announcement that Amazon will acquire upscale grocer Whole Foods? Two research analysts at JPMorgan have identified a potential rival bidder: Walmart.

The potential bidding war comes with the stock price of the grocery chain edging higher than Amazon’s offer of $42 per share. The following CNBC video spells out the details that might arise with a competition for the 431-location, 91,000-employee grocery brand. Click below to view:

Becoming A Whole Foods Landlord

While the market (and regulators) decide the fate of Whole Foods deal, what does it take to become a landlord for a Whole Foods outlet?  As it turns out, the chain has thoughtfully provided a partial specifications list as well as a downloadable spreadsheet containing a Master Broker List, including contact information and territories for over 70 brokers across the US and Canada.  Also available: a list of Whole Foods stores currently under development.  Brokers and owners can propose a store site at this online form at WF’s site.

 

 

Trends and Predictions for Industrial Real Estate from NAIOP I.CON Conference

NAIOP I.CON logo

Last week, more than 600 attendees attended the NAIOP I.CON Conference to learn more about the trends that will be impacting industrial real estate.  Topics included: the impact on possible changes in trade agreements, the development of supply chain management allowing for nearly instant delivery of products and the impact of cannabis legalization in many states. Key highlights from the panel discussions include:

  • There is a major focus on the last mile, a term used in supply chain management to describe delivering products to your home.
  • Last mile is giving new life to infill / older buildings.
  • Location trumps all for last mile buildings, and occupiers will pay premium rents for these buildings.
  • Last mile buildings are for moving product, not storing product, so many of the traditional amenities like 30-foot clear height are not important.
  • City leadership must recognize that last mile re-use is valuable to constituents and be welcoming to these uses.  
  • Last mile facilities are providing new life for 50,000 to 100,000 square foot older industrial buildings or vacant retail spaces.
  • Of Amazon’s 100 million square feet of logistics space, only 3 million is focused on last mile.
  • Developers like ProLogis are getting creative and developing Georgetown Crossroads, a 3 story, 414,000 s.f. logistics building on 9 acres in Seattle.
  • Multistory logistics facilities are also being discussed in gateway markets like San Francisco, Los Angeles, Northern New Jersey and Miami.  
  • Japan and Singapore utilize multistory distribution centers, even up to 11 stories, but use smaller trucks.
  • In California, marijuana operations and dispensaries will challenge last mile delivery for space and may be preferred by cities due to its tax generating capacity. 
  • Warehouses can be retrofitted to grow marijuana, but the capital expenditure is more than 5 times the cost of a green house.
  • The Gulf Coast markets will be the biggest beneficiary of the recently completed Panama Canal expansion. 

 

Walgreens Rite Aid Purchase Hits Antitrust Snag

English: Walgreens in Little Egg Harbor, New J...

With 13,200 stores in 11 countries including over 8,100 in the USA, Walgreens Boots Alliance, home to the venerable Walgreens drugstore brand, made big news in October 2015 when it announced its intention to acquire national drug chain Rite Aid. Rite Aid’s 4,600 stores across the US would join Walgreens in a mega-deal — pending approval by the Federal Trade Commission.

However, recent developments suggest the FTC is not happy with the idea.  By the time the dust settles, Walgreens could be compelled to kill the deal or move over 1,000 stores to the sales block in order to get the deal done

Compliance Moves Might Involve 1,200 Walgreens Stores Sold

Reuters reports that Walgreens has indicated it may sell as many as 1,200 stores to smaller chain Fred’s as a way to resolve antitrust problems under the proposed merger.
But regulators have looked at that proposal askance, as so many stores ending up in Fred’s hands would create a new national competitor, something that requires top-tier financing and commitment, which hasn’t been easy to come by, with similarly-shaped national retail merger deals including Office Depot / Staples falling through thanks to the FTC.

But the FTC may be wary of Fred’s move, and rival drugstore chain CVS reportedly has pointed out to the FTC what it says are similar deals gone bad. CVS executives say that the sale to Fred’s isn’t sufficient to ensure competition. They compare the situation to Safeway’s sale of 146 stores to Haggen Holdings in 2015 in order to win antitrust clearance for its merger with Albertsons. Haggen eventually went bankrupt and sold some stores back to Albertsons in the process. 

Some observers have never been all that sanguine about the deal’s prospects, considering the skepticism the FTC (at least in the Obama era) has shown against some mega-mergers, including deals involving retailers. Last May, for example, regulators scuttled a proposed $6.3 billion tie-up between rivals Office Depot and Staples, despite Amazon’s entry into the office supplies retail and business contracts spaces.

Walgreens Store Counts By State

What locations are likely to be affected by the acquisition moves? The inventory of saleable Walgreens stores roughly matches population distribution by state, even though Florida tops the list with 831 stores, followed by Texas (713) California (633), and Illinois (598).  The chain claims that 75% of the US population lives within five miles of a Walgreens.

(Photo credit: Wikipedia)

Telecommuting Turnaround: IBM Changes Its Tune On Remote Working

Home office

Telecommuting or remote working enabled by technology and online access has long been a commercial real estate market worry. The phenomenon of employees skipping on commutes and avoiding distant offices has raised fears of a softening national demand of office space since at least 1996. As reported by Global Workplace Analytics, regular remote working at home among the non-self-employed population has grown by 103% since 2005. From 2013 to 2014, the population of all employees grew 1.9% while the population of telecommuters grew 5.6%,  putting the growth in telecommuting employees at more than double the rate of all employees.

Anecdotally, the telecommuting trend has contributed to disruption of office space demand patterns over the years, depending on locality. Also, we’ve covered the telecommuting trend here at CRE Blog before.  While it is tough to put the effect of remote working into terms of a market’s absorption rate or development pipeline, the technology industry’s line about remote working has been more or less unchanging, touting reducing real estate costs and overhead as a boon to tenants and space consumers.

But now, one of remote working’s chief technological enablers has decided it won’t be “eating its own dog food” after all. IBM has taken the dimmest possible view on telecommuting for its own business, proclaiming that its employees must return to their offices or find work elsewhere. As reported by Ars Technica, the tech giant has nearly 40% of its workforce under remote work policy, and that policy is coming to a close.  This week is the deadline for those employees to return to their cubicles with Big Blue, or, alternatively, to leave the employ of the upstate NY-headquartered company.

Clients whose business operations include significant telecommuting might well take note about the distinct split in IBM’s very recent remote working advocacy vs. its practice. Will that mean a reclaiming of unused rented space, or will it mean a hunt for new digs?  Only great relationships with your clients will give you the business intelligence to know where the remote working saga is headed.

(Photo credit: Wikipedia)

Abandoned Construction: A Leading Indicator For Economic Change?

4th lock on the canal, abandoned in constructi...

The commercial real estate data ecosystem is an exciting place where study of routine market phenomena promises to expose new knowledge and improve our perception of market trends. When it comes to routine phenomena in the CRE industry, construction permitting and construction abandonment are great examples. Abandoned construction can follow permit issuance, even though issuing a permit reflects a milestone in a commercial property development where forward-looking diligence, commitment and optimism on the part of the underwriters, the developer and local government are all at high enough volume to actually break ground on a project.  What can the data on construction permitting and abandoned construction show us about that area?

Of course, getting past an important milestone does not ensure a completed project. When construction is permitted and begins, but does not complete, it’s a sign that something went wrong in the typical arenas: financial (scheduled funding does not materialize), legal (neighbors, competitors or government catch up to the plans), collaborative (partnerships/joint ventures stress and fracture),  insurance, construction — you name it, it can go south.

Beyond being bad news for individual development and developers, abandoned construction also projects ills onto the surrounding area, effectively serving as a highly visible advertisement for the area’s potential for uncertainty and failure. Is it possible that counting and analyzing an area’s abandoned construction projects can produce a leading economic indicator?

That’s the premise behind the report at BuildFax.com, a real estate data analytics team based who looked at the linkage between construction project abandonment and wider economic change in the related areas. The findings are fascinating and the relationships might surprise you.

You can download a free copy of the BuildFax report “Is Abandoned Construction An Early Signal For Economic Change?” at this link.   The study finds a tight association among its sample between abandoned construction and wider economic bad news for sample areas. The study blends fifteen years of construction data with current data, so the model isn’t fit for prediction today. But without a doubt, the study can make an impact on the thinking around abandoned construction and the full range of what failed projects can add up to for communities, businesses, and all stakeholders.

Photo credit: Wikipedia

Marijuana Real Estate: The Business Impact Of Legalization

English: Discount Medical Marijuana cannabis s...

Today’s guest post is by Steve Golin, SVP, Strategic Accounts at Xceligent.

The 2016 election season bought another crop of nine states joining Colorado, Washington, Oregon, Alaska and Washington DC in approving recreational and medicinal marijuana sales at the retail level. While the growth and occupancy of storefront retail establishments is the most conspicuous sign of a burgeoning industry, the behind-the-scenes marijuana real estate uses of cultivation, manufacture and processing have proven to be the most impactful on the supply of industrial real estate in markets where cannabis has been legalized.

Legalized cannabis generates huge cultural and social impact plus wealth generation, with commercial real estate a key benefactor. The marijuana real estate impact for each market’s industrial property base will vary by state based on product growing climate and existing real property base inventory. Let’s notice the historical trends in Denver, one of the earliest civic adopters of medical and retail marijuana.

In 2012 Colorado voters passed Amendment 64 legalizing recreational use of marijuana. By mid-year 2016, 62 of Colorado’s 271 municipalities and 22 of the state’s counties had created rules and regulations governing recreational marijuana use. With interstate distribution of a controlled substance still prohibited at the Federal level, each state and the associated market forces were compelled to create the environment necessary to manufacture, distribute and regulate product.

At a state level, regulations now provide for licensing of cultivation facilities, product manufacturing facilities, testing facilities, and retail stores. Local governments were put in the position of allowing or prohibiting related facilities at the whim of their voters. Many cities and counties opted to not allow for either retail dispensaries and grow operations, leaving the City and County of Denver controlling the lion’s share of the market. Translating this opportunity for a commercial real estate industry suffering through the 2009 financial crisis reveals a staggering result. Absorption of older Class C industrial properties skyrocketed through the recession of 2010 – 2014 to the tune of 4 million SF. Since 2014, according to Xceligent Market Trends Reports, Denver added another 2 million square feet in industrial absorption. In 2016, occupancy numbers for cannabis related grow and distribution activity now totals 8 million SF statewide plus another 1.5 million in greenhouse operations.

“Colorado’s marijuana industry is a mature business having already been through 2-3 business cycles with significant inflection points”, according to Jason Thomas of Avalon Realty Advisors, a leading industry professional services firm. “While each state is building its own machine to adapt to the new industry dynamic, Colorado is the model and leader of regulation for the industry” adds Mr. Thomas*.

Colorado’s dramatic absorption of light industrial real estate from 2010 through 2016 can be directly attributed to State regulatory oversight of “seed to sale”. How will this develop in other states? The depth of development will correlate directly to the regulatory, business and geographic climate in each state. Certain economically troubled cities and towns will look to grow operations as business reality for their functionally obsolete industrial and land base.  Adelanto, CA, for example has taken a leap of faith and tied itself to the industry. Dozens of land deals there potentially aggregating over 100 acres of development rights are whispered to have occurred. This could portend California experiencing staggering absorption in outdated industrial inventory and land once the transition from Medical to Retail is regulated. 

For the CRE investor, owner and developer valuing and trading properties with cannabis related occupancy is rife with conflicts even as the industry matures. Class C properties that once sold for $20.00 or 30.00 dollars per square foot, now have $200.00 in new improvements and may be leasing for $12.00-$16.00 NNN. Valuations must take into consideration rent, improvements, function, tax, legal concerns (federal forfeiture, etc.). Given these considerations, cap rate values based on income generally range from 11% to 13% according to some industry professionals.

The risk to landlords from existing federal statutes may still control investment decisions. Marijuana is still illegal and classified as a Schedule I Controlled Substance. Federal marijuana charges still pose risks including the risks of being charged with maintaining drug-involved premises, racketeering/RICO, money laundering, significant fines, forfeiture of property and/or jail time.  

Regardless of inherent risks, I think future investment and development of marijuana industry infrastructure and logistics is here to stay. Market conditions for related commercial real estate activity rest with each state’s independent climates for regulation, licensing, cultivation, processing and growing. For instance: the Bay Area in California has little developable land, so marijuana real estate investment there will be in warehousing. Riverside / San Bernardino has a huge industrial base, but it is significantly institutional, so the majority of warehousing will be through private ownership.

Once the initial tranche of investment takes place, the industry will look to alternative regional areas, like Adelanto in California or Pueblo in Colorado. Any supply-and-demand dynamic creates absorption of a certain class of real estate that will put upward pressure on rents and property valuations as the industry develops and matures. The commercial real estate industry gained enormous experience in Colorado over the past 7 years and will use that insight to evaluate opportunities for each market in the coming wave. Hold on tight,

Special thanks to James R. Thompson, Esq. Of Counsel, Miller & Law, P.C., Littleton, CO for his contribution on statutes impacting landlords.

(Photo credit: Wikipedia)

Browse Properties Near The New Las Vegas Raiders Stadium Site

A screenshot showing CommercialSearch.com's listed commercial properties surrounding the site of the proposed Las Vegas Raiders stadium site
Quickly search a walkable zone around the new Las Vegas Raiders stadium site.

The Las Vegas Raiders stadium land deal has crossed a major milestone. On May 2, 2017, the Associated Press was the first to report the activation of a sale deed for a 60+acre site near the Strip in Las Vegas for the construction of a stadium to house the NFL franchise Oakland Raiders when the team completes its move to Las Vegas in 2020.

The land deal, which includes two vacant parcels, came in at $77 million, significantly below the $100 million price tag that had been assigned by a public board overseeing the $1.9 billion stadium project. The NFL team owners voted one month ago to approve the move from Oakland to Las Vegas for the storied football franchise, and AP reports that the team has taken 40,000 $100.00 refundable deposits on “personal seat licenses” from fans.

The combined parcels are bordered on the east by I-15 with a view of the Las Vegas strip, on the north by Hacienda Ave., on the west by Polaris Ave. and on the south by Russell Road.

Browse Properties Walkable To The Proposed Las Vegas Raiders Stadium

There’s an easy way for site selection professionals and analysts who are interested in getting in on the economic impact of the Las Vegas $1.9 billion stadium project to get a quick sense of nearby commercial property availability. Click to find dozens of  properties near the proposed Las Vegas Raiders stadium at CommercialSearch.com.  The search query draws a walkable rectangle around the stadium site and includes retail, land, office, industrial and multifamily properties for sale or lease in that rectangle.

Get A Free Copy Of The Latest Las Vegas Market Report from Xceligent

If you need more Las Vegas market background from the city’s top commercial real estate professionals, you can get it for free. Click to request copies of the latest (1Q2017) free Las Vegas Market Reports (specify Retail, Office or Industrial) from Xceligent.

 

How To Find A Food Desert

Grocery store preventing the existence of a food desert

The food desert is that stretch of town or region where no grocery stores are operating, forcing residents into leaving the area to shop for basics, or worse, subsist on junk food for lack of better choices.  In social and health terms, food deserts are a serious problem, but in economic terms they can represent commercial real estate opportunity.  CRE investors seeking to profit from filling local needs can do much worse than finding highly populated areas that are underserved by grocery stores. These areas cry out for the development of food stores to fill the gap.  Tools to find these areas are very helpful for acquisition and site selection – but where can one find these tools?

As it turns out, the federal government is one place to look.  Enter the Food Desert Locator, a website run by the US Department of Agriculture.  It’s an interactive web application that takes reams of real estate, economic and demographic data and provides an easy-to-use mapping interface to cut through the clutter to get to the sites that really cry out for grocery stores.

The mapping application allows you to select areas based on income and access to grocery stores, as well as compare trends across years to find areas that have seen changes in access. Subpopulations are also selectable, allowing a range of site selection criteria.

Of course the final step in conducting this research is to use CommercialSearch.com to browse the retail property and land listings that lay in the areas you define with the Food Desert Locator.

With this one-two punch, site selection can be easy, quickly bringing you one step closer to a high-foot-traffic, only-game-in-town investment play in grocery store development.

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.