I’m sure that all of you readers can’t wait for me to go off on my monthly tangents and voice my personal opinions, but every once in a while, I need to supply you loyal readers with some Commercial Real Estate facts, so here you go.
Absorption: The square feet leased in a specific geographic area over a fixed period of time after deducting space vacated in the same area during the same period.
*Vacancy: The total amount of available space compared to the total inventory of space and expressed as a percentage.
*PSF Rents: Price per square foot rents.
Office
While demand for medical office space will certainly continue for the next decade, performance varies considerably by market, says Marcus & Millichap. Well-performing markets are found in Texas, the Midwest, and the Northeast. However, the Southeast, the West, and Mountain states suffer from an oversupply of spec development built during the housing boom.
Industrial
Weary of fighting for office trophy properties, institutional investors are looking more closely at plain-Jane warehouses, according to CoStar, which has tracked an uptick of 3Q11 bib-box warehouse sales in major distribution hubs. Six quarters of positive absorption and a 70-basis-point drop in vacancy since 2009 may signal rent growth ahead.
Retail
Tablets and smartphones will completely revolutionize the shopping experience at apparel and department stores in the next three years, according to Chainstoreage.com. Cash registers and checkout counters will disappear, as sales associates armed with mobile devices will make sales wherever the customer happens to be. By 2015, more than 2.7 million tablets a year will be shipped for use in retail and hospitality locations.
Multi-family
Buy multi-family “any way you like it” is the advice from Emerging Trends in Real
Estate 2012. Every market and class was suggested by commercial real estate professionals interviewed, except one: avoid markets with oversupply of single family homes to rent.
Niche Investment Prospects for 2012
• Medical Office
• Urban mixed use
• Data centers
• Self-storage
• Mixed-use town centers
Source: Emerging Trends in Real Estate 2012 survey
So what do these optimistic forecasts tell us for the overall national commercial real estate market?
Well, what this is telling me is that commercial real estate in the U.S. has been determined by investors to be the most secure investment, even in these uncertain times. It is tangible, transparent, and the rates of return are attractive compared with the alternatives; banking industry, stock market, foreign investment.
Speaking of foreign investment, commercial real estate in the U.S. continues to be the “go to” option for foreign investors who want a safe investment with stable but high returns. According to Real Capital Analytics, foreign investors accounted for 10 percent of all sales volume in 2011 (if we don’t start taking our hands out of our pockets, our country will be owned by foreign countries).
So how do these national forecasts relate to our local market in Flagstaff, Sedona, and the Verde Valley?
Well, in Flagstaff and in Cottonwood, we have two major hospitals that will continue to require additional medical office space. As the baby boomers age, they will drive the needs in the local markets, especially in retirement communities.
Flagstaff’s downtown environment with mixed urban uses will continue to thrive and new tenant mixes will add to the established retail.
Northern Arizona University, Coconino Community College, and Yavapai Community College will increase demand for student living and related retail uses.
Due to the impact of the economic conditions in the last three years, many homeowners have had to or elected to downsize their living facilities, which results in a need for storage.
We are going to have a good couple of years in the Commercial Real Estate market, so let’s take advantage of it!
Mark T. Belsanti, CCIM is owner/agent of da Vinci Realty, LLC. He can be reached at
928-779-3800 Flagstaff, 928-254-1770 Sedona, or mark@davincirealty.com.
You can view da Vinci Realty’s website at www.davincirealty.com to view his listings and read past articles.
