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. Did you know that we often travel to places outside of Kansas City in order to provide much needed appraisal services? For instance, one of our MAIs, Jason Roos, frequently works in North Dakota, a state known for Theodore Roosevelt National Park, the flagship Scheels store, and the popular film and TV show Fargo! Jason himself is a great fit because he grew up there and has incredible knowledge of the market. Additionally, North Dakota has very few appraisers (only 8 MAIs within the state, compared to 81 and 127 in Kansas and Missouri respectively) because it has a small population density. In our new "On the Road" series, we'll explore all the unexpected places we visit for work. First stop -- North Dakota! What it is: Trains transport crude oil all over the country and unload it onto barges, tankers or pipelines for onward delivery. Where: Burke, ND. What it is: A tall structure used to support antennas for broadcasting. These structures are among some of the tallest man-made. Where: Bismarck, ND. What it is: Grand Cities Mall - Shopping Center. Where: Grand Forks, ND. What it is: A campground for recreational vehicles or caravans. Where: Williston, ND. We hope you've enjoyed reading about our work in lovely North Dakota! Click here to visit our website and see how we can work for you! Our contributor for this post was Jason Roos, MAI. Jason is an MAI designated member of the Appraisal Institute, and former President of the Appraisal Institute's Kansas City Chapter. He is a State Certified General Appraiser licensed in Kansas, Missouri, North Dakota, Nebraska, Illinois and Iowa. Jason is focused on providing clients with up-to-date, relevant and accurate market information as a director at Valbridge Property Advisors | Kansas City. Jason holds a degree from the University of North Dakota and enjoys cheering on their hockey team in his time off! Valbridge Property Advisors | Kansas City provides unbiased commercial real estate valuation for local, regional, and national clients. In business for over 39 years, the firm is led by six MAI-designated members of the Appraisal Institute. With the new year rapidly approaching, what can we expect for the CRE Market? We've taken a look around the internet and collected some of the possible market conditions for your reading pleasure!
Mixed-Use: Investors are starting to see mixed-use property types as a safer bet in this economic climate. However, this may require compromises from investors and tenants. REITs! REITs! REITs!: Because of the uprise in the work, live, play mentality, the demand for office space may decrease; however, retail, multifamily, and industiral demand should remain high. In addition to this, transactions may continue to decline and upward momentum in pricing is likely to slow down due to modest economic growth and ongoing political uncertainty. What investors are being cautious about are potential interest rate rises and credit availability going forward. Labor in the Construction Indusrty: Changes in the job market have put some pressure on the labor force of the construction industry. This worker shortage means a longer development timeline and more delays. Construction companies may also be more selective about which projects they choose to take on. Global Markets: Unforseen political issues and conflicts make for a less stable global economy. Implications could be economic deceleration and less investment in real estate. New Types of Goods/Services: We've written several posts about the growing virtual/sharing economy, and there's no doubt that it will play a huge part in the economy in 2017. With this burst of new economic growth will come new types of regulations; the implications of which are unforseen at the moment. Next year will hopefully give us a more solid look at the sharing economy and the impact on the CRE market. How do you think the CRE market will look in the New Year? Let us know in the comments below! Sources: Top 10 Emerging Trends Shaping Real Estate in 2017 The Future of Mixed-Use Development A Look at Coworking Spaces in KC, and Why it Matters to You 2017 Commercial Real Estate Outlook Fed Raises Key Interest Rate, Citing Strengthening Economy 10 Construction Industry Trends to Watch in 2016 The CRE 2016-2017 Top Ten Issues Affecting Real Estate How the Shareconomy Affects Commercial Real Estate We think of grocery stores as necessities in our neighborhoods, but how will these necessities change as technology increases? As we explore the future of grocery stores in this post, we'll uncover some interesting trends, and what you could possibly expect for the future!
You Guessed it: Millennials: Just like many of the recent CRE trends we've been posting about, this one has a lot to do with Millennials' life-style choices and preferences for convenience and efficiency. According to articles here, here, and here (as well as here, here, here, and here...this has been a well-documented trend), Millennials prefer not to leave home or take time out of busy schedules to grocery shop. E-commerce is HOT!: Because folks are so busy these days (and thanks to the internet), services like Amazon Fresh, Jet.com, Google Express, and many more are taking off at a record pace. If you could get your groceries faster, more cost-efficiently, and environmentally friendlier, why wouldn't you? Discount Chains are Gaining Popularity: We are seeing trends like increased student loan debts among the population and people have begun shopping more and more at discount chains like Dollar General to save money. Research suggests that even prosperous adults choose discount stores for home staples. Warehouse Development Is Increasing: Warehouse facility development is trying to meet the demands of e-commerce. In Kansas City we've certainly seen an increase in warehouses first-hand as of late! After reading this, it should come as no surprise that the future of grocery shopping will be driven by technology. Because of this we can expect new types of jobs, developments, and services to increase and possibly change our economic landscape. What do you think the future of retail will look like? Sources: How the Shareconomy Affects Commercial Real Estate Groceries & Millennials: They’re Buying Less, Shopping Online Why Do Millennials Hate Groceries? Millennials in the grocery store: Are they really that much different from older generations? Millennials Want More From a Grocery Store Grocers Feel Chill From Millennials 8 Shopping Habits of Millennials All Retailers Need to Know About If Time Is Money, Millennials Are Broke--And They Couldn't Be Happier Amazon Fresh Jet.com Google Express Online Grocery Shopping On Pace For 9.5 Percent Annual Growth Do Online Grocers Beat Supermarkets? Grocery delivery service is greener than driving to the store Increasing Student Loan Debt Affecting Millennial Renters Prosperous Young Adults Don’t Need To Shop At Dollar Stores, Do Anyway How Ecommerce Is Changing Warehouses for the Better Kansas City Will Benefit From the Shift to E-commerce When it comes to appraising commercial real estate, you never know what you'll get to work on! Our work on complex projects includes everything from space rocket facilities to RV parks, and everything in between. Listed below are some of the most unique projects we've been able to assist with and the challenges that came with them. Challenges like these are what we encounter on a daily basis, which is why we highly recommend hiring an experienced appraiser for special-use projects like these. 1. Crude-By-Rail What it is: Trains transport crude oil all over the country and unload it onto barges, tankers or pipelines for onward delivery. Challenges of this property type: - Estimating Construction Costs - Economic obsolescence -Market analysis 2. Steel Mill What it is: Steel mills are industrial facilities where steel is manufactured. Challenges of this property type: - Estimating construction costs - Economic obsolescence -Market analysis 3. RV Park What it is: A campground for recreational vehicles or caravans. Challenges of this property type: -Type of user (recreational versus work related) -Forecasting demand What it is: A structure used to hold airplanes in protective storage. Challenges of this property type: Typical leases on hangars include varying rents that depend on the amount of fuel that is purchased (which is business value as well), so finding a market rent due solely to the real estate can be difficult to identify. What it is: An industrial facility for manufacturing space rockets. Challenges of this property type: It is rare that these sort of buildings sell on the open market, therefore the identification of comparable properties for a specialized facility like this can be difficult. Our contributor for this post was Jason Roos, MAI. Jason is an MAI designated member of the Appraisal Institute, and former President of the Appraisal Institute's Kansas City Chapter. He is a State Certified General Appraiser licensed in Kansas, Missouri, North Dakota, Nebraska, Illinois and Iowa. Jason is focused on providing clients with up-to-date, relevant and accurate market information as a director at Valbridge Property Advisors | Kansas City. Valbridge Property Advisors | Kansas City provides unbiased commercial real estate valuation for local, regional, and national clients. In business for over 38 years, the firm is led by five MAI-designated members of the Appraisal Institute. You've probably heard the term "Shareconomy" floating around the lexicon, but do you really know what it is? The Sharing Economy (otherwise know as "Peer Economy," "Shareconomy," or "Collaborative Consumption") refers to the open-source nature of the ways we access goods and services. Essentially: AirBnB, Uber, or Snapgoods. As consumers we love the convenience and cost-efficiency of a Shareconomy, but how do these services affect the health of commercial real estate?
The Hospitality Industry Takes a Hard Hit, but Continues to Thrive: We all assumed that companies like AirBnB and HomeAway would be taking away business from hotels, what we didn't see coming was the $450 million that the hospitality industry lost to AirBnB. Despite the monetary hit, the demand for both hotels and AirBnBs are about the same . Zoning? What's That?: If your apartment doubles as an AirBnB, what should it be zoned as? Zoning, and many other regulations have come into question as building purposes become more fluid. In the beginning, Shareconomy services only made up a small part of the economy and had little impact on zoning and rental agreements. However as time goes on, this new way of making money challenges current rules and can step into legal gray-areas. Investors Can Now Bypass Traditional Lenders: Crowdfunding has made it much easier for people to raise money for just about anything, and that includes real estate. For instance, RealtyMogul is a crowdfunding source for real estate investors; an "online Real Estate Investment Trust ("REIT") designed for diversification, cashflow and appreciation," according to their website. With resources like this, people can skip banks altogether when it comes to investing. Shareconomy Innovation is Snowballing: If you thought the Shareconomy was just a fad, think again. We started out being able to temporarily rent houses for our vacations, and now people are able to rent commercial kitchen space, office space, and even someone's personal Wi-Fi connection. The more that the freelance mindset takes over, the more people feel they can be a part of it and begin to innovate with their own ideas for services. Bottom Line: The Shareconomy is the child of technology and the savvy mindset that resulted from the Great Recession. Technology will continue to get better, as will the Shareconomy; however, as new ideas come to fruition, so do new problems like taxation. The CRE world, much like the Shareconomy, must learn to innovate and roll with the punches. How have you seen the Shareconomy affect CRE? Let us know in the comments below! Sources: AirBnB Uber Snapgoods Homeaway The Impact of AirBnb on Hotel and Hospitality Industry Airbnb Is Thriving. Hotels Are Thriving. Uber, Airbnb and Consequences of the Sharing Economy: Research Roundup Airbnb has Removed 2,570 Illegal Listings from NYC, but Housing Advocates Say it's Not Enough RealtyMogul What You Need to Know About the Sharing Economy Can The ‘Airbnb Of Kitchens’ Give Local Food Economies A Boost? A Look at Coworking Spaces, and Why it Matters to You Fon Why Millennials Understand the Future of Work Better than Anyone Else All Eyes on the Sharing Economy Millennials: A Financial Mindset Shaped by Recession Top 6 Tax Tips for Sharing Economy Freelancers Street Culture: Startups Bring the ‘Sharing Economy’ to Commercial Real Estate 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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