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Craig Tomlinson in GlobeSt: Is now is a good time to buy office? History shows that opportunities now could prove to pay off

TULSA, OKLAHOMA (March 20, 2023) – Experts wonder if the “next great buying cycle” for office could be now. Research by Revolution notes that when lenders tighten, the four-year forward price change vastly outperforms.

“Think back to the early 1990s savings and loan crisis, the dot-com bust, and the Global Financial Crisis,” Colliers’ Aaron Jodka wrote. “Those who acquired assets during those periods saw strong outperformance in the years that followed.”

Not everyone would agree. Indeed, office investment sales have plunged amid the sector’s uncertainty. Thomas G. Koelzer, partner, Tenant Advisors/CORFAC International, tells GlobeSt.com that office building values are declining, and that sellers and buyers are far apart in agreeing on values. “Many sellers have resorted to auctions to sell their properties since there’s not enough market data to support the normal sales channels.”

Furthermore, “more bad news is coming for landlords because the full pain of the post-pandemic office market hasn’t been felt, since many tenants still have time left on their leases. As these leases expire, many tenants will either reduce their size or simply not renew their leases. This phenomenon means a long-term (if not permanent) reduction in the demand for office space.”

Then again, Jodka may have a point. An informal survey of CRE experts suggests that there are some niche opportunities presenting themselves in certain markets and property types.

Craig Tomlinson –
Senior Vice President

Small-Office Buyers Have Opportunities
Craig Tomlinson, Northmarq senior vice president, tells GlobeSt.com that office is out of favor with the investor herd, but that spells an opportunity for buyers willing to do their homework.

“The ‘bad news’ is derived from increasing vacancy and sublet space surrendered by large corporations in urban office towers and in leased corporate campuses,” he said.

“Large corporations, in general, have not mandated return-to-work, or have shifted to hybrid models that need significantly less space. Not so with the smaller suburban offices. Those buildings tend to be occupied by small or private businesses where the decision makers are onsite and want their staff presents too.”

Tomlinson said that suburban office 100,000 SF and less also tends to have a rent roll without a dominant tenant, diversifying an investor’s rollover risk.

“Smaller office buildings are more likely to be owned by private investors who may be more motivated to transact in a rising rate environment,” he said. “‘Big capital’ doesn’t like ‘small office’ because aggregation is a chore and so is management. That fact has created a real opportunity for buyers of smaller office buildings that will persist through 2023.”

‘Everything is Still Scrambled’
Manuel Fishman, shareholder, Buchalter who represents real estate developers and owners in the acquisition, sale, and financing of commercial properties, tells GlobeSt.com that when it comes to buying office assets today, the short answer is “no” for multi-tenant office and “yes” for single-tenant occupancy, triple net buildings, with a credit tenant.

“There is too much uncertainty for multi-tenant office, office occupancy, office demand, interest rate climate, and return on capital,” Fishman said.

“Everything is still scrambled, and assets are still not being written down to true value. Now is the time to fundraise for money and come up with a thesis for which segment of the market to invest in. The time to invest will be later.”

The Next Buying Cycle ‘Has Started’
Ed Del Beccaro, EVP/San Francisco Bay Area regional manager of TRI Commercial Real Estate/CORFAC International, tells GlobeSt.com that the next buying cycle for office has started.

“Higher interest rates, high vacancies are having various office ownerships receding their office portfolios both on the mom-and-pop and institutional levels,” Beccaro said.

“In some cases, owners are just going to sell to cut their losses as loans become due or major tenant leases expire who are not renewing over next year. In other cases, opportunistic buyers will look at buying older class and B buildings to convert to life science or housing or just tear down.”

Price Discounts Not Seen in 14 Years
Chris Okada, CEO, Okada & Company, tells GlobeSt.com that today, select asset classes in New York City’s commercial real estate market, including office space, are experiencing a decline in prices, reaching levels last observed in 2009.

“High vacancy rates due to remote and hybrid work models, high-interest rates, limitations imposed by rent stabilization and rent control laws, and economic uncertainty have led to this decline,” Okada said.

As a result, the number of office-related foreclosures, mortgage defaults, and deeds in lieu of foreclosure negotiations have skyrocketed in 2023,” he said. “However, due to the problems this sector faces, we have begun to see some incredible price discounts not seen in 14 years.

“With discounts ranging from 30% to 60% off-peak pricing, there are remarkable investment opportunities present in New York City commercial real estate, particularly in office space. Okada & Co. believes the next 12 to 24 months present opportunities for significant returns on real estate investments, possibly the most significant in a 25-year period.”

Erik Edeen, director of operations, Tri-State Investment Sales, based in Avison Young’s New York City office, tells GlobeSt.com that the office sales market in New York follows the “tale of two cities” narrative prevalent in the leasing market.

“Trophy/Class-A buildings with strong rent rolls can still be underwritten and financed while the lower quality buildings have a less certain future,” Edeen said. “While cap rates have expanded across the board, the more speculative and lower-end assets are finding difficulty in a market that’s sparse with price discovery.”

South Florida Is Thriving
Daniel Chaberman, Grupo Eco Developer, tells GlobeSt.com that South Florida is an attractive market for many forms of CRE.

“While most of the country and cities in the world are struggling, facing a recession or dealing with the consequences of COVID-19, we are on the opposite side of the spectrum in South Florida,” he said.

“The response to COVID-19 generated a large amount of migration of wealthy families from New York, Chicago, and the West Coast. We have been receiving a lot of businesses and many like Grupo Eco have relocated their headquarters to South Florida.

“And we are still seeing important businesses and firms relocating into the state. We are very positive about the transformation of the market here that started with COVID-19.”

Don’t Acquire Just Because Asset Looks ‘Cheap’
All that said, Mukang Cho, CEO and managing principal of Morning Calm Management, reminds readers of the volatility in the capital markets, which could make any purchase difficult.

He said the financing environment for real estate is difficult with lenders of all types continuing to deleverage and stay on the sidelines as they deal with certain issues, such as problems with their legacy portfolios or an inability to effectively finance their positions.

“Financing for office buildings as a whole remains dislocated if not broken,” Cho said. “This environment is different from the Great Financial Crisis and will reward the best ‘stock pickers.’ One cannot acquire office buildings indiscriminately just because they seem “cheap”; and just about everything will appear “cheap” compared to recent historic prices.

“Market fundamentals, the relative competitiveness of the underlying asset versus the market, nature of the existing rent roll, a sponsor’s expertise in operating office buildings – these things will matter more than ever as the capital markets will no longer bail out underperformance.”

Read the full story.

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Jeff Tracy tells WMRE sales-leaseback sector continues to generate solid activity

TULSA, OKLAHOMA (February 24, 2023) – Jeff Tracy, senior vice president of Northmarq’s Tulsa office, was featured in Wealth Management Magazine’s recent story, “Higher Interest Rates Fuel Sale-Leaseback Activity.” The article highlights that despite higher interest rates dampening transactions in the broader commercial real estate investment sales market, they have had the opposite effect in the sale-leaseback sector, with the market on pace for a record-high year.

Jeff Tracy –
Senior Vice President

Although the sale-leaseback activity slowed in the fourth quarter as buyers and sellers tried to figure out new pricing amid higher interest rates, the sector has continued to generate solid activity, according to Tracy. “What we have seen, historically, is that the sale-leaseback category tends to bounce back the quickest and isn’t as sensitive to interest rate impacts,” he said.

Even on deals where cap rates may have increased from a 6 percent to 8 percent, it is still better than the financing rates some of these middle market companies can get on their business in the current market, notes Tracy. “That’s why you’re really seeing this pick up steam, because people realize the value to sale-leasebacks and that it is a nice alternative to traditional financing,” he said.

Another aspect to the sale-leaseback story is that some businesses are still coming out of the pandemic and are looking for capital to aid in their recovery. “If you think about what’s happened over the last three to four years, it’s really been pretty traumatic from a perspective of upending businesses,” said Tracy. Starting in mid-2022, there was fundamental recovery even in some of the more severely impacted businesses. Businesses that took on significantly more leverage during the pandemic are now looking to clean up those balance sheets, and a sale-leaseback is an attractive way to do that, he adds.

Topics in the story include:

  • Business owners hungry for capital
  • Plenty of investor interest
  • Looking ahead in 2023

Read the full story.

The story was written by Beth Mattson-Teig and published in WealthManagement.com on February 21, 2023.

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Daniel Herrold shares insights with Wealth Managment about off-market deals amid the CRE industry’s liquidity crunch

Daniel Herrold
Senior Vice President

TULSA, OKLAHOMA (February 17, 2023) – Daniel Herrold, senior vice president of Northmarq’s Tulsa office, recently spoke with Wealth Management Magazine in a story focusing on how opportunities for investors looking for off-market acquisitions have opened up as sellers become more concerned about marketing a property that fails to sell.

“Off-market deals have always been highly sought after because investors believe that opportunities that haven’t been widely distributed and/or marketed offer more attractive pricing,” he said.

Herrold went on to note that that owners willing to sell their assets at a time when values are declining usually have a motivation to sell, such as personal financial need or an upcoming loan maturity, so they are looking for a qualified buyer who can offer speed of execution and transaction certainty.

Other topics covered include:

  • Federal Reserve’s impact on off-market deliveries
  • Flexibility of 1031 exchange
  • Remaining Challenges

Read the full story.

The story was originally written by Patricia Krik and appeared in WealthManagement.com on Februrary 16, 2023. © 2023 Informa USA, Inc., All rights reserved

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Colin Cornell spotlighted in GlobeSt: Outpatient health care services driving CRE income

Booming demographics and demand, leading to growth in this sector.

Colin Cornell
Vice President

TULSA, OKLAHOMA (February 8, 2023) – Nationally it appears that there is insufficient square footage available to accommodate the significant growth seen in the healthcare real estate sector, with the rate of absorption outpacing new product deliveries, according to Northmarq.

“This has put national occupancy rates for medical office at a historic high,” Colin Cornell, Northmarq vice president, healthcare investment sales, tells GlobeSt.com.

“We anticipate a steady stream of opportunities for investors in 2023, including newly developed facilities, new long-term leases on historically vacant MOBs, and retrofits of what were historically retail-oriented buildings.”

Cornell said that like most sectors, healthcare has been in the price discovery stage since interest rate increases began, but values seem to be settling somewhere between 2019 and 2021 levels.

“The investor demand is there, and the question is will owners be willing to meet that demand at the new return buyers requires,” he said.

These investors are best to focus on outpatient services, according to JLL’s most recent Healthcare and Medical Office Perspective, which shows that outpatient sites dominate healthcare services delivery compared to hospital admissions.

Additionally, according to Kaufman Hall National Hospital Flash Report, outpatient revenue rose 8% in 2022, while inpatient revenue was flat when compared to 2021.

JLL’s report said that up to a third of hospital revenue is activity shifting to ambulatory surgery centers, office-based labs, and other ambulatory sites.

“More sophisticated procedures can be done in outpatient settings than possible a decade ago.” Amber Schiada, head of Americas work dynamics and industry research, JLL, said in prepared remarks.

“Innovation in care combined with reimbursement pressures are driving a sustained shift to outpatient facilities, and consumer preferences for outpatient care have increased as well, as outpatient facilities are often more accessible or conveniently located,” she said.

“Furthermore, experience shows that outpatient locations are less expensive to build and operate, produce better-quality medical outcomes, and yield higher rates of patient satisfaction.

MOS and Health Care RE Producing Income
Allan Swaringen, President & CEO of JLL Income Property Trust, tells GlobeSt.com, “Medical office space, and healthcare-oriented real estate more generally, will continue to be a key piece of an income-producing, core fund such as JLL Income Property Trust.

“The extremely positive demographic trends driving tenant demand for this sector, combined with the often-long-term leases of tenants who look to serve their local population and often invest heavily in building improvements, create a scenario where owners can generate long-term, stable cashflow,” he said.

“That’s why we have continued to construct a geographically diversified healthcare-oriented portfolio that today is valued at nearly $635 million and totals approximately 1.4 million square feet.

The Continuum of Care
Andrew Salmon, chief future officer at SALMON Health & Retirement, tells GlobeSt.com that given the aging demographics, “it’s no surprise that we are seeing an explosion in need for outpatient facilities.

“What’s pivotal is the consideration for the continuum of care, as the 80+ population is forecasted to balloon nearly 50% in the next 10 years, and they will require both inpatient and outpatient opportunities as they age.

“Our goal is to establish the continuum of care across the aging population, to ensure that independent and assisted living opportunities exist with convenient, local access to major medical providers, allowing our residents to maximize the outpatient system while maintaining independence.”

Outpatient Services Leads to Higher Satisfaction
Doug King, national healthcare sector lead for Project Management Advisors, tells GlobeSt.com that healthcare providers have been actively positioning outpatient services closer to where their patients reside for at least a generation.

Outpatient facilities typically result in higher patient satisfaction, King said, and the challenges to outpatient facilities presented by telehealth and home healthcare are minimal as many clinical limitations and regulatory challenges exist for these two off-site methods.

“Decentralized ‘brick-and-mortar’ outpatient facilities will continue to grow,” according to King. “A vast majority of care will be occurring in outpatient settings, including urgent care centers, free-standing emergency departments, medical office/doctor offices, and ambulatory care facilities – outfitted to accommodate same-day surgical activities.

“In healthcare, we say, ‘follow the money’ and The Center for Medicare and Medicaid services are reviewing how reimbursement strategies can promote this model. An example is the growth of OBL (office-based labs) to house sophisticated surgical and imaging services performed on an outpatient basis.”

Developing, Rehabbing, Modernizing Facilities
Mitch Creem, principal of GreenRock Capital, tells GlobeSt.com that investors have always viewed medical office buildings as safe investments during uncertain financial times, primarily due to their historically proven resiliency during market downturns.

“But now, 75 years after the Boomer generation was born, we are expecting a ‘gray tsunami,’ fueling the need for additional healthcare services and many more sites of care,” Creem said.

“Physicians, hospitals, real estate investment funds, and individual investors are all keen on developing new sites or rehabbing and modernizing existing buildings to provide state-of-the-art care and attract new patients.”

Deliver Care in Outpatient Settings More Economical
Brian Edgerton, senior vice president, healthcare services team – NAI Hiffman, tells GlobeSt.com that after historic growth in 2021-2022, the sector is not without headwinds.

“It saw rising cap rates and fewer starts and deliveries at the end of 2022,” he said. “In 2022, healthcare real estate developers kept busy delivering modern medical office buildings to accommodate health systems and large multi-specialty practices, including those seeking to consolidate multiple specialties under one roof in highly visible, patient-proximate locations.

“At the same time, developers are feeling the squeeze of construction cost increases, supply chain delays, and interest rate hikes, all of which are reflected in the higher rental rates that must be charged to make these deals pencil out.

“Yet, even if they’re paying more today than they would have a year ago, it is still more economical and efficient for providers to deliver care in outpatient settings, many of which are located in close proximity to where their patients live and work.”

Edgerton said that like retail, healthcare increasingly follows rooftops, “so services are moving closer to the patient thanks to technological advancements that can more easily be implemented in newly developed and repurposed buildings, rather than the medical office building of 30 years ago.”

When Choosing Project Sites, Demographics Matter
Craig Gambardella, vice president at TSCG MD, tells GlobeSt.com that clients understand that their property, and a potential fit for an outpatient healthcare facility within that particular property, is crucial in their decision-making.

“You must look at demographic, psychographic and prevalence of diseases in certain trade areas, and 5- to 10-year projected growth of not only disease prevalence, but how that translates to outpatient demands to help health systems forecast potential growth,” Gambardella said.

For example, the owner of a large mall that is looking to repurpose a portion of it into medical must accurately forecast the demand in that area for an outpatient facility, what types of clinical services may be needed, based on disease prevalence and 5- to 10-year projected growth, he said.

A Continued Extension of Outpatient Services
Rich Steimel, senior vice president and principal in charge, healthcare, New York, at Lendlease said that throughout the industry, more procedures are taking place away from the main clinical facilities as there is a continued extension of outpatient services across metro areas and into the suburbs.

“This shift allows hospital campus operations a greater opportunity to expand and connect with a growing base of patients who require critical care but desire the convenience of off-campus facilities.”

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Craig Tomlinson tells GlobeSt to expect slowdown in life science sector through mid-year

Craig Tomlinson
Senior Vice President

TULSA, OKLAHOMA (January 30, 2023) – Craig Tomlinson, senior vice president at Northmarq, recently spoke with GlobeSt.com in a feature story focused on the healthy normalization of the life science sector after explosive growth in recent years. The past two years set a high bar for the sector, and after such a run a cooling period can be expected.

Tomlinson told GlobeSt.com that after three high-profile sales (exceeding $250 million) of life science properties in 3Q 2022, RCM data reported none in the last quarter. “These are very high basis properties, typically +$1,000 per foot,” he said. “That, plus the lack of sale comps, explained lenders’ reluctance to fund such transactions.

“The slowdown is expected to continue through mid-year, with the exceptional sale-leaseback possible. Those are typically higher yield as compared to third-party transactions.”

Other topics covered include:

  • Life Science Relies on ‘Different’ Financing Sources
  • Pandemic-Caused Therapies Drove Growth
  • Leasing Activity Dropped 62%
  • After the Big Run, Normalization is ‘Healthy’
  • Boston is Still a Leader

Read the full story.

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Lanie Beck featured in GlobeSt perspective on office demand in the new year

December’s typical seasonal slowdown worse than in the previous two years.

TULSA, OKLAHOMA (January 26, 2023) – Holidays and extreme weather conditions prompted a typical seasonal office demand slowdown in December, according to the VTS Office Demand Index (VODI). However, the year-over-year decline for the month was slightly larger than in previous years.

New demand for office space ended the year 31.3 percent below its May 2022 peak and fell 20.7 percent year-over-year to a VODI of 46 in December.

The report said that a tight labor market, layoffs, threats of another COVID-19 variant, and interest rate hikes have “given pause” to prospective office tenants.

Nick Romito, CEO of VTS, said in prepared remarks, “The reality is that the outlook for the U.S. economy is still unknown, and expectations of a recession continue to loom large in 2023. Where the economy heads will be the through-thread for office demand decisions as we head into the new year.”

Romito said a silver lining is a significant momentum in return-to-office trends. “Continued momentum in return-to-office will undoubtedly provide a tailwind for office demand in 2023 and beyond,” he said while acknowledging that “realistically, it seems unlikely to ever revert in full.”

A weekly report from Kastle that measures office worker occupancy showed the national average of 49.5% of workers were in the office compared to pre-pandemic. The Kastle measurement has not exceeded 50% since COVID-19 set in.

Lanie Beck
Senior Director

Remote Work Makes Office Leasing Picture is ‘Hazy’
Lanie Beck, Northmarq Senior Director, Content & Marketing Research, tells GlobeSt.com that the outlook for office leasing is a bit hazy right now, with many factors influencing tenant demand.

“Merger and acquisition activity, and the resulting consolidation of physical space that often occurs, can impact office demand,” she said. “Layoffs too can alter a tenant’s need for space.

“But the remote work trend has been one of the primary drivers in recent years, and for employers who haven’t mandated a return-to-office, they’re undoubtedly evaluating both their short and long-term needs for traditional office space.”

Tech Layoffs and Potential Recession Won’t Help
Doug Ressler, business manager, Yardi’s Commercial Edge, tells GlobeSt.com that office-using sectors of the labor market lost 6,000 jobs in December, according to the Bureau of Labor Statistics, only the second monthly decrease since the onset of the pandemic in early 2020.

Financial activities gained 5,000 jobs in the month, but information lost 5,000, and professional and business services lost 6,000. Year-over-year growth for office-using sectors has rapidly decelerated in recent months.

Office-using employment growth will further decelerate as tech layoffs bleed into 2023 and a potential recession loom. Between January 2021 and July 2022, office sectors added an average of 117,000 jobs a month. In the last five months, they have averaged only 25,000 jobs per month.

“Even as some firms become more forceful in bringing workers back into the office, many have fully committed to hybrid and remote work policies,” Ressler said. “This will be another year of uncertainty and change in the office sector as it moves toward a post-pandemic status quo. Significant change will depend on the duration of the recession, rising interest rate stabilization, and the acceptance of a hybrid or pre-pandemic work model.”

Desired Space Shrinks by One-Fourth
Creighton Armstrong, National Director, Government Services, JLL, tells GlobeSt.com tenants committed to leases in 2022 leased space that was, on average, 27% smaller than their prior lease.

However, despite the smaller average, the overall volume of space leased held steady between 2021 and 2022 due to a slightly higher number of deals closed.

Seattle Office Demand in Hibernation
Bret Jordan, president of the Northwest region at Ryan Companies US, tells GlobeSt.com that office demand in Seattle went to sleep in July of 2021 and hasn’t yet awoken from its slumber.

“We’re seeing the large layoff announcements oxygenating the smaller scale and start-up companies’ labor choices, so we are expecting office demand to awaken mid-year,” Jordan said.

“The caveat is that demand will be smaller in nature given the past cycle was full of giant demand deals. This is a reversion to our norm and not a fundamental shift in the underpinnings of our region.

One data point supporting this is the net new demand for residential, he said.

“While again lower in total than the heady pandemic years it remains resilient and in excess of the foreseeable supply,” Jordan said.

Minneapolis to Seek New, Amenity-Rich Assets
Peter Fitzgerald, vice president of real estate development at Ryan Companies US, tells GlobeSt.com that despite the downward trend of office demand, he expects an unprecedented flight to the newest and amenity-rich assets in the Minneapolis-St. Paul market.

He said that new construction is leading the market with several buildings 90%+ leased. One example is 10 West End. Ryan Companies sold the Class A office building in St. Louis Park, Minn. to Bridge Investment Group.

“The building opened in January 2021, in the thick of the pandemic, and experienced nearly 300,000 square feet of leasing activity until it was sold in November 2022,” Fitzgerald said.

Office Tours Increasing Significantly
Chicago-based developer Bob Wislow, Parkside Realty, tells GlobeSt.com that while winter months can sometimes put a damper on real estate tours, especially in colder climates like Chicago, he hasn’t seen a decrease in activity this year.

“Tour requests at all five of our office buildings have significantly increased this month, with one seeing the highest level of activity in years,” Wislow said.

“Companies that need new space because they are expanding operations or have a lease expiring are looking at all options available to them because they know their office space represents more than just a place to do work.

“With hybrid schedules becoming the norm, it’s more important than ever to offer a dynamic environment that promotes collaboration and engagement and provides the amenities and conveniences workers want in exchange for their commute. It also helps to be in an area that is buzzing with activity, as that energy and vitality can’t be recreated in a remote setting.”

South Florida Worker Office Occupancy 60% to 70%
Tere Blanca, founder, chairman, and CEO of Blanca Commercial Real Estate, tells GlobeSt.com that across South Florida, there is a “tremendous” return to the office, especially across the finance sector and it seems that three to four days a week has become prevalent in many industries.

“Because Miami, Fort Lauderdale, and Palm Beach (South Florida in general) is experiencing such constant, amazing migration, with the demographics very strong, many companies are moving here and whatever contraction we might see is mitigated by new buildings being created,” Blanca said. “There is quite a bit of new product in the pipeline to deliver over the next three to seven years; whatever is available right now is getting leased.”

She said buildings are seeing employee occupancy at 60% to 70% in most cases.

“The reality is, even before COVID, when a building was leased out, you still never had full occupancy, Blanca said. “This was from people traveling, being out for meetings, having a family situation, etc. This is why parking garages can oversell by 15% to 20%.”

Offices Need Tech Modernization
Katie Klein, North America Country director at WiredScore, tells GlobeSt.com that what people look for in an office has changed.

“To bring employees out of their homes and back into the office, office landlords must provide appealing properties and spaces. One way to do this is to provide the technology platform that modern office tenants require,” she said.

According to WiredScore North American Office report, only 38% of offices are considered advanced ‘smart offices,’ yet 80% of employees state they would be more inclined to go to the office if their building had smart technology.

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Rob Gemerchak and Jeff Tracy in GlobeSt: Where demand for industrial space is coming from now

The automotive industry and construction, machinery and materials sectors are driving the need for space.

MINNEAPOLIS, MINNESOTA (January 23, 2023) – Logistics and parcel delivery remains No. 1 in million square feet requirements for industrial space but other industries have been making traction, according to a new report from JLL.

The report showed that the automotive industry has seen its demand increase by more than 156% since 2021 to serve an influx of electric vehicle and battery manufacturing endeavors across the country.

And demand for construction, machinery and materials companies grew by more than 41% this year because of the oversized pipeline of commercial and residential demand for housing.

JLL added that with companies reevaluating their existing operations and addressing the COVID-induced supply chain disruptions, demand will continue to increase for manufacturing and automotive users.

From a macro perspective, supply chain woes continue to create backlogs at the ports. The concept and practice of reshoring have come into play, and many occupiers have placed this at the forefront of their business operations.

Tight availability, high rents, and port congestion along the West Coast have pushed many occupiers to the Southeast region and to ports along the East Coast, such as Savannah and Charleston, which are seeing record TEU volumes.”

JLL Portfolio with a 99% Occupancy Rate
Allan Swaringen, president & CEO of JLL Income Property Trust, tells GlobeSt.com, “We’re a strong believer in the value of top-tier industrial product in markets next to irreplaceable transportation infrastructure.

“We’ve built our national, more than 13.6 million-square-foot industrial portfolio on this thesis and continue to see strong tenant demand for these types of properties given our industrial portfolio’s 99% occupancy rate.

“The scale and accessibility of transit-oriented, larger properties will continue to drive tenant demand as they seek the logistical efficiency provided by being in proximity to infrastructure such as airports, ports, and major thoroughfares.”

These properties are also typically close and accessible to large labor pools, Swaringen said, with “good” examples being Atlanta’s Northeast submarket, San Diego, and Louisville’s Bullitt County submarket.

Jeff Tracy –
Senior Vice President

Industrial Outperforming Other Sectors
Meanwhile, investor interest in industrial continues to flourish. Northmarq’s Jeff Tracy, senior vice president, Tulsa, tells GlobeSt.com that while there has “obviously” been an impact on cap rates, “we continue to see the broad industrial sector perform well in relation to the other sectors.

“From an industry perspective, logistics and general light manufacturing continue to garner the most interest from buyers,” Tracy said. “Additionally, outdoor storage and assets that require quality outdoor yard space for operations are also popular amongst buyers at this point and seem to achieve the most aggressive pricing compared to other asset classes and sectors.”

Tracy added that the Midwest and Southeast are performing the best in relation to other locations around the country.

Rob Gemerchak –
Investment Sales Broker

Robust Online Retail Sales Boosts Logistics Demand
Northmarq’s Rob Gemerchak, vice president, Toledo, tells GlobeSt.com that despite the challenges in the economy, there continues to be strong user demand across a range of industrial sectors, including logistics, technology, and manufacturing.

“Logistics demand is the strongest and is being driven by robust online retail sales and a national focus on supply chain efficiencies,” Gemerchak said.

“While the largest industrial markets such as Chicago, Dallas, Atlanta, New York, and Los Angeles continue to grow and thrive, there has also been tremendous growth in several notable markets such as Indianapolis, Kansas City, Phoenix, and Columbus.

“Looking towards the future, we expect that industrial demand and development will follow population growth in regions such as the Southeast and Southwest, as companies seek to locate near consumers and with strategic access to a growing employment base.”

Charleston, Savannah, Jacksonville E-Commerce Magnets
Avery Dorr, vice president at Stonemont Financial Group in Atlanta, tells GlobeSt.com that he’s seeing “a significant bump” in demand in port markets across the country, with the East Coast outpacing the West in recent years.

“The practice of reshoring is more important as supply chain woes continue to create backlogs at the ports,” according to the JLL report. “Tight availability, high rents, and port congestion along the West Coast have pushed many occupiers to the Southeast region.”

This year the Southeast region was the top market in terms of demand, accounting for 240 msf in requirements.

Dorr said that Charleston, Savannah, and Jacksonville have been magnets for e-commerce users and third-party logistics providers, and Stonemont continues to source out new speculative development opportunities in those markets.

“Florida and Texas have been at the top of our radar due to the tremendous population growth, deep labor pools, and overall business-friendly climates in both states,” Dorr said. “Investor appetite in these areas is particularly strong and we anticipate activity will remain healthy there in 2023 despite recent economic headwinds.”

High-Barrier, Major Urban Markets Should Thrive
Ryan Nelson, Managing Principal of Turnbridge Equities, tells GlobeSt.com that high-barrier-to-enter, major urban markets will see the greatest industrial growth in 2023.

“Businesses are striving to be as close as possible to the end user, and this has made urban markets with high population densities and land constraints a hotspot for last mile logistics,” Nelson said.

“Recently, Turnbridge topped out Bronx Logistics Center, the largest industrial development in the NY Metro Area, set to be complete in Q3 of 2023, which is one of a very limited number of new industrial projects that will be delivered in the market, given land scarcity, construction costs, and debt capital markets dislocation.”

Nelson said projects that will be delivered in 2023 will have been financed in the last cycle with the majority delivering pre-leased.

“New development starting in 2023 and delivering in 2024 or later will largely be limited to build to suit, as spec construction will be constrained by capital market dislocation,” he said.

3D Printing Shrinking Commercial Space Requirements
BKM Capital Partners’ CEO Brian Malliet, tells GlobeSt.com, “The small-bay, light industrial landscape has been transformed over the last decade and a half as tenant demand shifted towards dynamic growth industries such as e-commerce, technology & innovation, and advanced manufacturing.

“E-commerce demand has reshaped the supply chain, which has driven demand for industrial product to new levels,” Malliet said. “As consumers demand faster delivery times, retailers require well-located and highly functional light industrial warehouses to reduce transportation costs and meet customer needs.”

He said that new technologies are driving further use of chip capabilities, such as autonomous vehicles and robotics, that now utilize light industrial spaces for their operations since many of these spaces offer flexible zoning for multiple uses, including office, assembly, warehousing, and manufacturing.

Companies capitalizing on advanced manufacturing and 3D printing are also migrating toward smaller facilities, according to Malliet, with 3D printing allowing businesses to accomplish operations in just 10,000 square feet that would previously have needed five times the space.

Desire to Produce Goods Closer to Customers
HSA Commercial Real Estate recently broke ground on four speculative industrial warehouses totaling 1.9 million square feet along the Interstate 94 corridor between the Chicago and Milwaukee metros.

“We’re bullish on adding modern warehouse space along major logistics arteries,” Robert Smietana, vice chairman and CEO of HSA Commercial Real Estate, tells GlobeSt.com.

“Robust tenant demand for this space ranges from traditional retailers and e-commerce companies to third-party logistics firms, to manufacturers that are reshoring all or a portion of their operations. Across industries, there’s a desire to produce and store goods closer to customers as a means of mitigating future supply chain disruption.”

Logistics Firms Lessening Negative Impact of E-Commerce’s Pullback
Pedro Nino, vice president, head of Industrial Research and Strategy, Clarion Partners, tells GlobeSt.com that after some demand pulled forward in 2021, pushing net absorption to the highest levels on record, US industrial net absorption began normalizing in 2022.

“Despite some deceleration from e-commerce users, which accounted for most of the recent surge in” absorption, the industrial market still recorded its second-highest total for overall annual net absorption in 2022,” Nino said.

“This highlights the pent-up demand in the market as record low vacancies, limited supply, and an ultra-competitive leasing environment previously left some unfulfilled requirements on the sidelines.”

A combination of Clarion’s portfolio data, which includes more than 215 million sf and nearly 1,000 industrial properties across the US, as well as data from leading brokerage shops, show that third-party logistics firms and general retailers have sufficiently lessened the negative impact of an e-commerce leasing pullback.

“This makes sense as traditional retailers continue building out their modern/e-commerce distribution strategy, all while 3PLs offer comprehensive solutions, and ultimately, flexibility, in all things related to transportation and order fulfillment,” Nino said.

‘Even a Recession’ Won’t Stall E-Commerce Demand
Contrarily, CommercialEdge said that e-commerce growth will continue to drive high levels of demand in the industrial sector for the foreseeable future, but it will not reach 2020 levels again.

“New supply has yet to match demand, and even a potential recession is unlikely to cause e-commerce sales volume to fall.

CommercialEdge said that in-place rents have grown the most in the Inland Empire (13.1%), Los Angeles (10.7%), and New Jersey (8.9%). The lowest rates of rent growth were found in Tampa (2.5%), St. Louis (2.6%), Memphis, and Houston (both 2.8%).

The national vacancy rate measured 3.8% in November, falling 20 basis points from October. Despite record levels of new supply delivered in 2022, the vacancy rate fell throughout the year.

In-demand markets in the inner portion of the country also have low vacancy rates, including Nashville (1.2%), Columbus (1.7%), Indianapolis (2.5), Kansas City (2.5%) and Phoenix (2.9%). The abundance of space available on the outskirts of these markets for new development keeps rent growth lower than what is being seen in most port markets.

When Amazon Slowed Its Network, Others Stepped Up
Adrian Ponsen, Director of U.S. Industrial Market Analytics, CoStar, tells GlobeSt.com that as supply chain bottlenecks eased in 2022, imports into the U.S. surged to record highs.

To help process this increased flow of goods, “third-party logistics companies stepped up and increased their overall leasing in 2022 relative to 2021, helping to compensate for the fact that Amazon slowed its distribution network expansion,” Ponsen said.

He said that building material and gardening supply retailers like Home Depot and Lowe’s, which are some of the largest U.S. industrial tenants, also accelerated their leasing in 2022, mainly to increase the speed and scale of their home delivery offerings.

Additionally, industrial leasing by retailers like Dollar General, Rite Aid, and Target also accelerated in 2022, as these companies sell day-to-day necessities that have remained in high demand even as households feel the pinch of inflation.

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Jeff Matulis provides analysis in WMRE: Institutional investors take a temporary break on medical office buys

Jeff Matulis –
Senior Vice President

TULSA, OKLAHOMA (January 18, 2023) – Jeff Matulis, senior vice president, recently shared his insights on the medical office industry with Wealth Management Magazine. The story focuses on how investor interest in medical office properties registered a slowdown during the second half of 2022. Brokers and analysts, however, say they expect a rebound this year as inflationary pressures ease and the Fed is expected to pull back on interest rate increases.

“I feel volume will be down and pace will be slow for the first half of the year,” said Matulis. “Eyes will continue to be on the Fed with what they are doing with rates. Employment is still strong and there is plenty of capital to be spent, both debt and equity. Anytime we see a glimpse of inflation calming, the stock market lights up and treasuries drop. I think this gives us an idea of what is waiting on the backside of all this when the Fed stops their rate hikes.”

Topics covered include:

  • 2022 Data
  • The Buy/Sell Gap
  • Who’s Selling?
  • Expected Returns

Read the full story.

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Northmarq expert featured in GlobeSt: Small market, suburban office sales take the lead

Craig Tomlinson –Investment Sales Broker

TULSA, OKLAHOMA (December 6, 2022) – Small market and suburban office sales lately are holding up better than their urban counterparts for three reasons: they are smaller assets, they are better basis plays, and they are typically occupied by users who are more likely to have returned to work, according to Craig Tomlinson, senior vice president at Northmarq.

He tells GlobeSt.com this and that for Q3 22 in the net lease office sector, there were 71 arm’s length sales in small markets and 90 large (primary) markets.

For small markets, the average deal size was 34,000 SF and avg sale price was about $8.5 million and modest $245.00 SF.

In large markets, Tomlinson said the buildings averaged 54,000 square feet, selling for $25.5 million, a “whopping” $480 per square foot,” Tomlinson said.

“Smaller loan amounts and lower basis muted the effects of negative leverage for these buyers,” he said. “Small market office buildings are typically occupied by tenant’s who decision makers are local and more likely to mandate return to work measures.”

Tomlinson said all these factors gave small market office a leg up and he expects the trend to continue.

Flight to Quality ‘Will Drive Tenancy for Foreseeable Future’
The Newmark Office Report finds that “overall transaction cap rates have been stable, but there have been some relatively notable shifts within the office market. The spread between central business district (CBD) and suburban cap rates had closed in 2022.

“Higher-quality, Class A assets in suburban markets have performed better than CBD office markets thus far in 2022,” according to Newmark. “Similarly, secondary office market yields have closed relative to major metros, highlighting the strength of non-gateway markets, including Dallas, Austin, Atlanta, etc.”

Furthermore, Newmark’s report said that flight to quality “will drive tenancy for the foreseeable future, though high-quality assets in dynamic suburban markets may hold an advantage over traditionally stable downtown assets.”

Relatively high availability, downward pressure on rents and greater demand for a vibrant worker experience will benefit the upper tier of the office market.

For those with more risk appetite, capitalizing on low pricing for Class B+/Class A- buildings with plans to modernize “could be attractive, along with build-to-core in markets structurally lacking in top-tier office space.”

The analysis was written by Paul Bergeron and published in GlobeSt.com on December 6, 2022. Copyright 2022. ALM Global, LLC. All Rights Reserved.

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Craig Tomlinson discusses strength of life sciences sector despite headwinds with Wealth Management Magazine

TULSA, OKLAHOMA (November 14, 2022) – Amid the rising interest rates and uncertainty of the U.S. economy, the life science sector has remained a strong performer. But, as noted in a Wealth Management Magazine story titled “The Once Red-Hot Life Sciences Sector Returns to Normalcy,” signs off a slowdown are even permeating here.

In the third quarter, occupancy dipped to 94 percent across the top 12 U.S. life sciences markets—from a peak of 95 percent in the first quarter of 2022. A 30-basis-point increase, largely due to a significant amount of new supply hitting the market, has led to the addition of available, has led to the addition of available new space to outpace absorption.

In terms of construction, about 38 million sq. ft. of new life sciences is currently being built in the country. About 88 percent of it is being constructed on a speculative basis, while roughly 28 percent is pre-leased. The strong amount of speculative development is a bullish indicator of the confidence investors have in the sector, as prior to the pandemic spec lab construction was rare.

Craig Tomlinson –
Investment Sales Broker

That was because at that time, life sciences projects were large and pricey to build, typically costing up to $1,000 per sq. ft. and requiring an overall investment of at least $50 million, according to Oklahoma-based Craig Tomlinson, investment sales broker at real estate services firm Northmarq.

But since big private equity firms entered the sector, the sales price of life sciences assets has doubled, making new construction worth it. In the third quarter of this year, for example, Biogen sold one of its lab buildings in Boston to Boston Properties for more than $2,000 per sq. ft., Tomlinson notes. The Carlyle Group also sold the Good Start Genetics lab in Boston to GI Partners for roughly the same price per sq. ft.

Read the full story.

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Lanie Beck shares insights with ConnectCRE: Net lease investment sales face economic headwinds and tailwinds

TULSA, OKLAHOMA (November 8, 2022) – For the net lease sector as well as in commercial real estate at large, the economic picture remains murky, with inflation and rising interest rates at the forefront of consumers’ and investors’ minds, Northmarq (formerly Stan Johnson Company) says in a new report. Fears of a recession still loom, and there has been a noticeable decrease in consumer confidence this year.

Lanie Beck –
Corporate Research

Additionally, the industry continues to question the future of 1031 exchanges, and the upcoming mid-term elections could impact economic conditions and investor sentiment as well. Balancing out these trends are strong job growth, low unemployment, robust consumer spending and insatiable investor demand for quality assets, according to Northmarq’s Lanie Beck.

“In the single-tenant net lease market, we’ve seen investment sales volume decline over the past three quarters and compared to the record-setting end to last year, current activity levels may feel somewhat lackluster,” Beck reported. “Put in perspective, though, the market is on pace to have a very solid year, perhaps topping the $70-billion-mark and solidifying 2022 as a top three year in history.”

However, Beck said the fourth-quarter sales total will be telling. “The final three months of the year will not only dictate how 2022 gets logged in the history books, but it will also set the tone for 2023.”

The story was originally published by ConnectCRE on November 7, 2022.

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Daniel Herrold shares insights with GlobeSt: Holiday retail season to start earlier, see increased sales

Daniel Herrold –
Investment Sales Broker

TULSA, OKLAHOMA (November 4, 2022) – Holiday retail shopping is expected to start earlier, offer with more promotions and see more sales despite the challenges of a tight labor market, lingering supply chain issues, stubborn inflation and soft consumer sentiment.

CBRE is projecting a 6.9% increase in Q4 retail sales year-over-year to $1.48 trillion, despite inflation straining consumer budgets.

“Consumers can expect greater costs this holiday season, evidenced by an 8.2% annual increase in the Consumer Price Index (CPI) in September,” CBRE reported.

CBRE said the most notable rising expense could be the cost of a homemade holiday dinner, which is projected to average $103 this year compared with $84 in 2020, according to data from the American Farm Bureau Federation and the St. Louis Fed.

Families Seek Bargains for Their Budgets
Jim Bieri, principal, Stokas Bieri Real Estate, tells GlobeSt.com that right now, families are struggling to pay the bills and meet their expenses.

“I expect online discounts to start early on overstocked items as customers look to beat rising inflation and a deepening recession by buying early,” Bieri said. “Online sales will continue to play a strong role in holiday shopping, as families look for bargains to stretch their budget.”

Expect Plenty of Markdowns from Nordstrom
CBRE said an “ill-timed slowdown in July retail sales has left some retailers with excess inventory that may prompt discount offers to consumers.”

It reported that Nordstrom, for example, estimates $200 million worth of markdowns over the second half of 2022.

“However, retailers could benefit from excess inventory due to an extended holiday shopping season,” according to CBRE.

Data analytics firm Placer.ai expects a repeat of last year’s early holiday shopping season when weekly sales in October grew by 3.2% compared with 2.5% growth in November.

An Earlier Start to the Holiday Season
Joe Coradino, CEO, PREIT, tells GlobeSt.com that PREIT is gearing up for robust in-person shopping with an earlier start to the holiday season than in years past.

“The traditional holiday season timeframe for comparison is continuing to morph,” Coradino said. “Due to this, mall owners and retailers need to be stocking product sooner.

“Most importantly for our business, while there have been improvements in supply chain, we think customers will seek surety of in-person purchases. Toward this end, we will be offering customers rewards for shopping in our centers this holiday season.

“At the same time, we have seen a healthy shift of consumer dollars toward dining in our portfolio. Naturally, we expect some of these dollars to be reallocated to goods during the holiday season.
Coradino said that he is watching employment and wage levels, which remain “strong” right now, and know there are inflationary challenges impacting many consumers.

“That said, we think this year is the true return to holidays past and customers are looking for celebratory festivities with their loved ones.”

Parking Lots Are Already Busy
Mark Whiting, mall manager at Simon Property Group’s Northshore Mall, tells GlobeSt.com that shopping in stores is still the preferred way to shop.

“People crave connecting in real life and find joy in discovering the new and different,” Whiting said. “It’s too soon to project sales but we’re already seeing lots of shopping bags, busy Santa set reservation activity and busy parking lots – which is always a good sign and indicator of a busy holiday shopping season!”

Season to Be ‘Promotionally Driven’
Chris Butler, CEO of National Tree Company, said this holiday season will be “extremely” promotionally driven and that in general there will be consumer softness.

“We are seeing a ‘return-to-store’ post-COVID after consumers did a lot of their shopping online,” Butler said. “Over the long term, online shopping will continue to grow, but this year there is a softening based on strong comps from last year.

“Last year, holiday spending was pulled forward due to the supply chain and consumers worrying about lack of availability of goods. We believe that consumers will start spending much later this year.

“The most important thing will be the ability to react in real-time, using data to make in-season decisions to either spend more promo dollars or buy back if volume remains soft.

“We have not seen any issues with the labor market today. We have given our hourly workers a temporary ‘inflation increase’ but have not experienced any other issues.”

Compared to Last Year, This Season is ‘Flipped’
Dave Cheatham, president, X Team Retail Advisors and Velocity Retail Group, tells GlobeSt.com that he expects a more “normal” holiday retail season.

“The supply chain is improving, as we are now able to get merchandise out of the ports,” Cheatham said. “We should see more aggressive pricing during the holidays. I am not saying it will be completely back to normal, but it will be closer to what is expected.

He also expects that people will shop earlier online and in-store according to their preferences and will benefit from aggressive promotions and holiday deals.

“Last year, inventory was so low that retailers were not in any position to offer consumers special markdowns. The retail industry saw high demand for merchandise at all levels and low inventory.

“This year is flipped. Retailers will have a better level of inventory versus last year’s supply chain drought. However, the consumer may fill their shopping list with needs and staples for the family, rather than wants and aspirational luxury items.

“I expect value stores and the basics, such as clothes for the kids, to do well. One thing is clear, economic uncertainties will decidedly play a role in this season’s outcome.”

Retail Foot Traffic Picking Up
Avison Young’s Craig Leibowitz tells GlobeSt.com that according to Avison Young’s Vitality Index, when looking at retail foot traffic across the U.S. the week of Oct. 27, relative to the same week in 2019, he is seeing retail foot traffic at 71.5%.

“As a predictive element, when looking at tourism and hospitality foot traffic, we are seeing a recovery rate of 74.2%. which is a great indication of future demand. We expect this to increase into the holiday seasons.”

Retail Rent Collections at Favorable Levels
Mark Sigal, CEO of Datex Property Solutions, tells GlobeSt.com that three factors make him bullish about holiday sales.

“One is that rent collections in terms of timely rent payments by retailers to retail portfolio owners remain strong for both national and non-national retailers, a trend that has only increased in the past couple of months, and which is outpacing 2021’s numbers. This suggests merchants will have favorable footing to market to customers during the holiday season.

“Two, sales per square feet numbers across the 21 merchant categories that we track in Datex Tenant Track has shown a 71% increase in the number of merchant categories showing sales growth vs. the quarter prior, suggesting favorable tailwinds for merchants.”

The Tenant Track is a monthly report of rent collections, retail sales and occupancy cost trends from thousands of shopping centers, and tens of thousands of retailers nationwide

“Three, the job market remains strong, suggesting that consumers will be feeling flush, and will spend favorably during the holiday season,” Sigal said. “With an amelioration of the supply chain issues that impacted merchants’ ability to fulfill orders last holiday season, we believe this bodes well for the holidays.”

Investors Seek Recession-Resilient Retailers
Daniel Herrold, investment sales broker at Northmarq, following the acquisition of Stan Johnson Company, tells GlobeSt.com that, in general, most investors who are investing in single-tenant or multi-tenant retail are looking at both the historical performance of the tenant, as well as future trends and forecasts for the industry.

“Investors generally lean their preference on those retailers who are recession-resilient and have strong e-commerce platforms so they can capitalize on both in-store traffic and online shoppers,” Herrold said.

“If the forecasts point to a strong holiday season for retailers, that only affirms their investment in the sector. Strong holiday projections aren’t likely to increase investor interest or volume in the sector, but it should certainly help to maintain current investment volumes.”

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Mark Grossman discusses industrial outdoor storage trends with GlobeSt

Mark Grossman –
Investment Sales Broker

TULSA, OKLAHOMA (November 2, 2022) – Now’s not the best time to be a prospective tenant in an industrial outdoor storage (IOS) facility, according to a new report from Marcus & Millichap. A combination of strict zoning requirements, unfavorable building-to-land coverage ratios, and municipal development restrictions has confined many developers to traditional industrial properties, suppressing additional supply.

Therefore, existing IOS facilities have become increasingly coveted by industrial users.

IOS vacancy fell under 3 percent in mid-2022, below the historical average, while IOS rents have advanced by nearly 30 percent on average since the end of 2019. General industrial rents rose 24 percent during the same span.

IOS Investors Seek Shorter Lease Terms
Mark Grossman, investment sales broker and IOS specialist at Northmarq, following the acquisition of Stan Johnson Company, tells GlobeSt.com that industrial outdoor storage has grown from a small niche asset class in the industrial market to a top industrial product type, now with its own subsets and niches.

“We continue to see private and institutional capital specifically target IOS assets, and new investors are entering the market quickly.

“A noticeable trend in recent years is that investors are getting smarter about how to analyze this market and are investing creatively.

“Perhaps counterintuitive to the net lease sector – where the longer the lease used to mean greater value – we are seeing IOS investors seek shorter lease terms as a value-add play.

“There are so many advantages to IOS that make it attractive, but there are barriers to entry as well. This continues to be a fragmented market, there’s low vacancy, very limited supply, low expenses, and significant value-add opportunities. These characteristics are drawing sophisticated and smart money to this space.”

Same-Day Delivery Should Grow 25% Through This Year
Marcus & Millichap said that the global same-day delivery services market is expected to grow by 25 percent through 2022, creating additional demand for last-mile storage.

“Rising fuel costs have also caused firms to place further emphasis on consolidating operations, making the infill nature of IOS particularly attractive. In either case, IOS will play a major role in supporting firms’ operations, efficiently linking the wider supply chain to individual municipalities,” according to the report.

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Lanie Beck provides analysis to GlobeSt: Single-tenant net lease market on pace for strong finish

Lanie Beck –
Corporate Research

TULSA, OKLAHOMA (November 2, 2022) – The single-tenant net lease market is likely to end the year strong, with sales activity on track to make 2022 the third strongest year in history.

That’s according to a recent analysis from Northmarq, which notes that if current activity levels carry over to Q4, the year will claim $74 billion in annual sales volume. In particular, the industrial market is set to report its second strongest year on record, while the office and retail sectors are more likely to have closer to average years.

Overall average STNL cap rates leveled out during the third quarter as sales activity declined for the third straight quarter. Private buyers have the largest share of the market, according to the report, and while the market is “significantly” off-pace to reach 2021 numbers, strong annual performance is still within reach.

“In the single-tenant net lease market, we’ve seen investment sales volume decline over the past three quarters and compared to the record-setting end to last year, current activity levels may feel somewhat lackluster,” said Lanie Beck at Northmarq. “Put in perspective though, the market is on pace to have a very solid year, perhaps topping the $70-billion-mark and solidifying 2022 as a top three year in history.

However, fourth quarter will be telling. The final three months of the year will not only dictate how 2022 gets logged in the history books, but it will also set the tone for 2023.

Investors are still flocking to the sector, with sales activity for net-leased retail rising between 24% to 27% across the 12-month span ending in June, according to Marcus & Millichap.

“Moving forward, investors seeking long-term cash flow may capitalize on high pricing in other sectors and move equity via 1031 exchanges into less management intensive single-tenant properties,” firm analysts note. “Yield-focused buyers may target Midwest markets with increased frequency, as Detroit, Chicago, Kansas City, Cleveland, Indianapolis, Milwaukee and Minneapolis are home to average returns 30 basis points to 80 basis points above the national mean.”

Read the story on GlobeSt.com.

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Jacob Ryan featured in Wealth Management Magazine: Will the dark store distribution strategy survive past the pandemic?

Jacob Ryan –
Investment Sales Broker

TULSA, OKLAHOMA (November 2, 2022) – During the pandemic-influenced closing of many retail locations, e-commerce sellers pounced to reposition dark stores in urban locations as mini warehouses. But an improving position of strength in the U.S. retail sector has translated to more in-person shopping, this strategy warrants another review.

“In-person retail is back,” Jacob Ryan, investment sales broker in Northmarq’s Tulsa office, told Wealth Management Magazine. “Consumers emerged from the pandemic in a big way, and discretionary spending data supports that. The in-store experience provides us the touch and feel that we all desire.”

Who’s occupying dark stores?
Tenants using dark-store space as distribution facilities are usually retailers that have a large e-commerce platform of their own or have partnered with a third-party e-commerce operator, according to Ryan. The pandemic accelerated the demand for direct-to-consumer delivery at a record pace, requiring retailers to quickly find ways to cut costs and get products into customers’ hands as quickly as possible.

“The most logical place to turn was to start leveraging assets already under their control and converting under-utilized retail space to distribution and logistical support square-footage,” Ryan noted.

Other topics highlighted include:

  • Demand for dark stores
  • Industrial growth versus retail growth
  • Community concerns regarding dark stores

Read the full story.

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Northmarq’s Toby Scrivner featured in Wealth Management Magazine: Medical office deals slow down as rising rates reset price expectations

MINNEAPOLIS, MINNESOTA (October 14, 2022) – Northmarq healthcare specialist Toby Scrivner (formerly of Stan Johnson Company) recently shared his insights in Wealth Management Magazine in an article focused on the medical office sector. The story highlights how rising interest rates and the threat of an economic downturn have slowed real estate investment across the board, including in the medical office space.

The decline of sales of medical office assets, however, is not as deep as it has been in other sectors, with the market well-positioned to weather the latest down cycle. In fact, healthcare is considered recession-resistant and as such isn’t impacted to the same extent as other sectors.

Buyers of healthcare-related properties are adjusting to the same rising interest rates as buyers of other asset types, noted Scrivner. Because of the increased cost of debt, many buyers are sitting on the sidelines for now, looking for yields and sale prices that are more reflective of this new paradigm in the marketplace. That has slowed down the sale process.

“That said, healthcare real estate is not experiencing the same slowdown as other product types,” Scrivner said. “This is largely attributed to the limited amount of healthcare products coming to the market annually and the ever-increasing number of investors who want to invest in this sector. There is still supply and demand inequality in the market. While there have been cap rate adjustments for some assets coming to the market, there are still assets going under contract at pre-rate hike cap rates.”

Other topics in the story include:

  • Pricing expectations
  • Medical office financing
  • Buyer groups
  • Opportunities in the market

Read the full story.

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Northmarq hires Ben Davis to lead new Tulsa multifamily investment sales team

TULSA, OKLAHOMA (October 13, 2022) — Northmarq has hired Ben Davis to lead its new Tulsa multifamily investment sales team, marking the 23rd addition in the platform’s national expansion since launching in 2018. Davis will be senior vice president – investment sales, with a specific focus on the Oklahoma and Arkansas markets and will work in conjunction with Dallas, Kansas City and St. Louis offices to better serve clients in the region. He brings more than 17 years of experience in the marketing and disposition of multifamily properties and will collaborate with Northmarq’s investment sales and debt & equity teams in the greater lower Midwest region.

“Ben has consistently proven himself as one of the top multifamily brokers in the region and will be invaluable to our investor and developer clients active in the Midwest – an ever-increasing number,” said Trevor Koskovich, president – investment sales.

Prior to joining Northmarq, Davis was a principal and managing director at SVN OAK Realty Advisors, brokering nearly $1.3 billion in transaction volume and working with a variety of institutional and large private equity firms including The Pauls Corp, BLOCK Real Estate, Haley Associates, Sterling America, TMG Associates, Menora Financial Group, Radco and Hamilton Point Investments. Davis is a graduate of the University of Oklahoma.

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