We're friends with some pretty smart people. This week we interviewed NNN expert Jacob Baratz, Associate Advisor with Marcus & Millichap. Valbridge Property Advisors: What are you seeing with cap rates (in terms of increasing, decreasing or holding steady)? Jacob: "Although transactional velocity has eased, pricing and yields have remained remarkably steady. The limited development during this cycle and balanced debt levels have kept cap rates relatively steady despite rising Interest Rates and tapering transactional activity. Although some buyers are choosing to postpone acquisition plans based on the belief that rising interest rates will push cap rates higher, very little elevation in cap rates has thus far emerged." Valbridge Property Advisors: What are you seeing for a spread versus treasuries and where does the market see them heading? Jacob: "The rapid 75-basis-point post-election surge in the 10-year treasury rate opened a disconnect between buyers and sellers as they attempted to reconcile higher lending costs. Since the beginning of the year, the 10-Year treasury rate has largely stabilized in the mid-two-percent range, but we anticipate rising inflation will cause the Federal Reserve to further tighten monetary policy – adding to the current rising interest rate climate. However, it should be noted that the alignment of cap rate and interest rate movement is far from linear, as demonstrated repeatedly over the last 10 years." Valbridge Property Advisors: What are some of the NNN properties you’ve seen lately that stand out? Jacob: "We believe rising wages will lift discretionary income and together with elevated consumer confidence, spur spending that will support demand for retail space – expanding grocery stores, casual dining restaurants and service based businesses (that cannot be supplanted by e-commerce) have filled retail centers and pushed vacancy rates to their lowest levels since 200." Valbridge Property Advisors: What are some up and coming NNN properties in your opinion?
Jacob: "Again, we believe that service based business will continue growth throughout 2017. These retailers, that cannot be replaced by e-commerce are likely to face steady demand – retailers like Advanced Auto Parts, AutoZone, O’Reilly."
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Here at Valbridge | KC, we pride ourselves on our flexibility when it comes to different report types within the appraisal industry. This week we talk with our own Daniel Kann, MAI about Market Studies; specifically what they are and why they are so important. We hope you'll learn something from Daniel in this post, we certainly did! What is a Market Study? "A market study identifies the demand drivers for a particular type of property in a specific market or submarket. It calculates the residual demand based on current and projected growth and the amount of existing and future supply. In comparison, a marketability study focuses on how one particular property will interact within a market or submarket. Market studies are most commonly used in the multifamily space due to apartment projects being built on a speculative basis." Why Don’t Very Many People Perform Market Studies in KC? "Market analysis is part art and part science and requires an in depth analysis of the underlying fundamentals that drive supply and demand for a particular property type. The level of analysis included in a market study is not commonly utilized in daily appraisal practice creating a specialized niche within the valuation industry." Besides Here, Where Else Have You Performed These Studies? "I have recently traveled to Dallas, Richmond, Detroit, Jersey City, and New Orleans for market analysis. Traveling to an unfamiliar place and spending the time necessary to gain geographic competency allows you to learn interesting things about a particular city. After studying the urban core of Richmond, Virginia, my wife and I decided Richmond was a place that we would enjoy visiting and are planning to travel there in the near future." See Some of Daniel's Projects Below: We hope you were able to learn a little more about Market Studies! If you are interested in learning more or having a market study performed, click here to contact Daniel Kann. Since 2010 Daniel has specialized in all aspects of multiunit valuation, with an emphasis placed on marketability/feasibility studies and valuation for new construction. The last several years have been extremely active for multiunit housing. Daniel and the team completed valuation and consulting assignments totaling $2.3 billion in 2015 and $1.90 billion in 2016. Recent assignments in Kansas City include One Light, Two Light, Mission Farms, Woodside Village, Roaster’s Block, 51 Main, The Vue, Avenue 80, Prairie Fire Apartments, Union at Berkley Park, Heights at Linden Square, WaterSide on Quivira, and numerous loft and conversion projects in the urban core. Daniel is also active in the Section 8, Low Income Housing Tax Credit (Section 42), and senior housing space. By Madelyn Johnson A New Generation of Office Space One of the biggest trends in the office sector as of late; "Coworking" is a style of work that involves shared work spaces and promotes independent office activity. Kansas City is not immune to the rapidly spreading concept. As the city continues to be a hot spot for Millennials to work and play, perceptions of the nine to five are changing. Almost 40 percent of the generation is involved in freelance work, which allows for innovative opportunities and the freedom to work wherever. As the largest generation ever begins the cycle of entering the workforce, the economic landscape of office real estate will change. The Future has Arrived in Kansas City Kansas City will soon be home to the largest coworking space in the world thanks to Sustainable Development Partners-Kansas City and their partnership with Plexpod, a Lenexa based Coworking community. This project, Westport Commons, will involve the rehabilitation of 360,000 square feet of historic school buildings to include a massive Coworking space. Plexpod has begun accepting applications for office space and expects Phase One of the facility to be complete by the end of 2016. Currently, Plexpod is operating a Coworking facility in Lenexa where members can enjoy the use of conference rooms, game rooms, a cafe, a barber shop and much more, all in one building. Lenexa Plexpod acts as an incubator for creative companies and start-ups by offering a wide price range of facility memberships. For more information on Coworking, please read the articles we've referenced in this post:
Millennials Going to Kansas City, to Live and Work Freelancing in America: A National Survey of the New Workforce Prepare for the Millennial Migration, Says USC Development Group Announces Worlds Largest Coworking Facility Historical Building Highlight: Westport Commons Did we leave anything out? What do you think of Coworking? There have been exciting developments in the Kansas City office sector this past year. Cassidy Turley reports that most recent projects have been build-to-suit projects while the share of speculative building has remained quite small for the past four years. With relatively few large contiguous Class A spaces available in the Kansas City MSA, new construction has been primarily driven by large users. Burns & McDonnell plans to add 2,100 employees over the next decade. To accommodate this growth, the company is constructing a new office building in two phases at its headquarters located at 95th Street and Wornall Road, with 300,000 square feet, which is nearing completion and a future phase of 150,000 square feet planned. The Innovation Campus is expected to have 4.5 million square feet to include 3.8 million square feet of office space for up to 15,000 new Cerner employees. Construction began in 2015 and currently has 578,500 square feet under construction. Click here for more information on CernerTrails Click here for more information on Mariner Holdings New Headquarters Click here for more information on Van Trust's sites along the 435 corridor Did you know? We are office experts! At Valbridge | Kansas City, we can provide valuations, consulting, and litigation services. In 2015 alone, we completed 82 appraisals and a 10-property portfolio of office buildings in Omaha, NE. Director T.J. Hawks, MAI has valued over 20 million square feet of office space in his time here at Valbridge | Kansas City. Your thoughts? What other notable KC office projects come to mind from 2015?
We looked back through our Valbridge Advisor newsletter archives to find the most popular CRE articles of 2015. Take a look below to see the most prevalent in order: 1. 2015 and 2007: A Sense of Déjà Vu 2. Which Generation is Really Driving the MF Market? 3. Developers May Backfill Dead Metcalf Shopping Centers 4. Why the Apartment Cycle is Good for Five More Years 5. Kansas City's Office Market: A Look at the Latest Stats 6. Is Multi-family Rent Growth Hitting a Slowdown? 7. Time to Worry About Speculative Construction? Not Yet, Experts Say 8. Renner Commerce Center Sells for $13.15 Million 9. Walgreens in Shawnee Mission Sells for $7 Million 10. Land South of Kansas City Purchased to Prevent Future Development |
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