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A recent investor survey by Marcus & Millichap reveals that while CRE transactions may level out this year, investor sentiment remains strong.

The mid-year survey’s headline index value of 159 is “somewhat reminiscent of the trend we saw in 2016,”in which sentiment declined a bit as higher interest rates bit into the market, says Marcus & Millichap’s John Chang.

”But they’re not down by as much as people might expect,” he says.

In 2016, the index declined 12 points and the number of CRE transactions flattened. This year, the index has declined 11 points and that could deliver relatively similar results, in what Chang calls a “relatively modest softening.”

“Yes, the market is going through a recalibration as investors rework numbers based on the rising costs of capital, but the survey respondents aren’t telegraphing a significant market change,” he says.

According to the survey, the top two investor concerns are interest rates and inflation. About two-thirds said interest rate increases aren’t affecting their investment plans, and almost 9% said they’d buy more commercial real estate because of rising interest rates. On the sell side, 77% said the rate increases haven’t caused them to change plans and 11% said they plan to sell more.

Respondents were even more dismissive of inflation, according to the survey. Twenty-four percent of respondents said they’d buy less CRE but almost 12% said they’d buy more. The buying intentions with respect to more inflation-resistant property types like apartments, hotels and self-storage indexed higher, with about 14.4% of investors overall saying they’d buy more of those assets because of elevated inflation.

Cap rates are expected to rise as a result of rising interest rates as well, with 14% of investors surveyed saying they think cap rates will rise by 50 basis points or more over the next year. About 35% think they’ll go up by less than that, and 27% expect no change. And Chang says  since there’s still a lot of capital coming into CRE, yields and stability look compelling.

“Consider that the last 12 months ending in the second quarter of 2022 was by far the most active commercial real estate investment transaction year on record,” Chang says. “Even if activity steps back a bit over the next 12 months, it will still likely rank as the second most active year.”

 

Source:  GlobeSt.

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Whether inflation first entered your adult life in the 1980s, the late 2000s or the first few years of the 2020s, the aftermath is more or less the same: emptied wallets and angry consumers.

And while some inflation is good (like the Federal Reserve’s annual target of 2%), too much is obviously not.

Amidst all the commentary that usually accompanies inflated economies, you may hear the word “hedge” thrown around quite a few times. And while many asset classes can help you provide a hedge against inflation, how can you utilize commercial real estate specifically as a hedge?

How Inflation Degrades National Currencies

In inflated economies, your average consumer ends up having to pay more for everyday items and conveniences than what may be considered average due to decreased purchasing power. Purchasing power, in this regard, refers to how much value of something you can extract with a single unit of currency (such as a single US dollar). In inflated economies, this decreases, and vice versa for deflation.

Illustrating Decreased Purchasing Power

This fall in purchasing power can be simply illustrated with a simplified example. Let’s say John Doe usually pays $100 a month for groceries in a regular economy. And let’s say that a large-scale financial crisis has just crippled that economy. As a result, consumers, now driven by fear of the unknown, start spending less and saving more.

Businesses in John Doe’s country, however, still need to make a profit, but this decrease in consumer demand is ultimately shrinking profit margins. So, these businesses start raising their prices to compensate. And these price increases accelerate even more when those businesses start paying more for raw materials and labor as a result of this financial crisis, creating a domino effect.

All of this creates an inflation rate of, say, 9%. This means that, if something cost $1 last year, it now costs $1.09 today. Each unit of that economy’s currency has lost 9% of its purchasing power, and John Doe will now pay $109 a month for groceries for the very same things.

What Does Inflation Leave Behind?

Ultimately, what inflation leaves behind is your average consumer having to pay more for everyday goods and services at no fault of their own. And while inflation can come about as a direct result of high employment and strong economic growth, there are a myriad of things to factor in a large, complex economy like price gouging or consumers getting higher-paying jobs. More impactfully are the consequences of macroeconomic factors such as global conflicts, financial crises and large-scale natural disasters.

Hedging Against Inflation

To hedge against inflation, you store your money in assets that appreciate in value over a certain period of time. Store here is a synonym for purchase. Gold is probably the most popular example of a hedge against inflation. As the purchasing power of the U.S. dollar falls, an ounce of gold tends to become more expensive as more investors buy it.

As such, the owner of that gold has successfully hedged against inflation. They can sell off that asset and receive more dollars in compensation than they originally invested, compensating for the drop in that currency’s purchasing power.

How Commercial Real Estate Can Hedge Against Inflation

Commercial real estate operates in a similar way to gold in inflationary environments. As the purchasing power of a currency drops, average property values tend to increase alongside new and existing commercial rentals as lease renewal rates increase. This is largely the case with properties that are already developed and have been around for some time. It’s likely that the interest rates on any loans taken out to purchase those properties were lower before inflation hit.

Once the Federal Reserve begins raising interest rates to combat inflation, the cost of owning the property for the owner stays the same while its value grows. This is not so much so, however, for properties currently or planning to be under development. Inflation often leads to increased costs for labor and materials, slowing down property development as a result. This means that demand for existing properties rises while demand for new ones falls, placing the odds all the more in favor of existing commercial real estate property owners.

Timing Matters

Commercial real estate as a short-term hedge against inflation usually doesn’t bode as well as its long-term alternative. Your investment needs time to mature, and purchasing CRE when it’s too late will not protect your portfolio in the same way.

This is largely due to the rising costs of goods, services and labor that come with inflation, most especially when it rapidly accelerates. By the time you start considering putting some cash in CRE in an inflated economy, not only will it be more expensive, it’s usually too late.

Instead, you should approach investing in CRE as a long-term hedge. As we get out of these inflationary times, now is a good time, as soon as you’re able to, to look into investment strategies and talk to the right professionals to help you get started; the last thing you want to do is wait too long.

Selecting The Best Property Type

Selecting the best commercial property types as a hedge is where market specifics really come into account. Take the Covid-19 pandemic, for example; the virus put many retail outlets out of business but led to a flaming hot housing market. Those invested in retail felt the aftershocks of the pandemic as retail values plummeted, while those invested in multifamily and industrial real estate saw quite the opposite.

This is extraordinarily important information to keep in mind moving forward into a post-pandemic economy. The retail market has forever changed, and while consumers still enjoy shopping in person, there is no denying the cold lessons the pandemic taught us about e-commerce. In the end, do your research and stay diligent when investing in CRE.

 

Source: Forbes

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South Florida’s apartment buildings have traded at record prices as rents continue to climb.

However, there will likely be fewer apartment building transactions this year compared to last year, according to a recent report from Cushman & Wakefield.

The report; authored by Calum Weaver, director of Cushman & Wakefield’s multifamily group in Florida; stated that sales volumes slowed this summer “and will likely be 20 to 30% lower than in 2021.”

That’s because higher interest rates have impacted the profitability of multifamily deals.

Despite the headwinds, multifamily sales activity remains strong as foreign and domestic buyers continue to “pour into South Florida,” Weaver said.

“Investors view it as a safe, stable, and strong asset class,” he added. “Especially compared to turbulent stock, Bitcoin, or exotic NFTs.”

South Florida’s apartment buildings traded at record highs in the first half of 2022, for an average of $345,000 a unit in Miami-Dade, $300,000 a unit in Broward, and $379,000 in Palm Beach County.

The deals add up to $4.96 billion in multifamily transactions, in “the second-highest six-month sales total in history.”

Forty-two percent of South Florida’s 367 multifamily transactions between January and July took place in Miami-Dade, while 34% were in Broward, and 24% were in Palm Beach County.

First-time investors made many of those purchases in a trend that’s expected to continue, according to the report.

Landlords’ net rental income, or effective rent, isn’t rising much as it did in 2021. But their profits continue to increase, the report stated. Over six months, rents increased 7.5% to $2,186 a month in Miami-Dade. In Broward, rent rose 5.3% to $2,326 a month during the same time.

In Palm Beach County, the rent increase was flat, with an increase of less than 1% to $2,326 a month.

It’s the first time average rents in all three counties exceeded $2,000 a month, Weaver wrote.

South Florida has led the nation in rent hikes since the pandemic as well-paid remote workers and executives moved to the region from other parts of the United States, brokers and developers have told the Business Journal.

There are signs, however, that rent increases are slowing down.

Ken H. Johnson, an economist at Florida Atlantic University, has theorized that asking rents will drop as some remote workers return to their points of origin due to employers’ demands that they spend more time in the office.

There is some anticipation that rent increases will stabilize as more apartment units are built in South Florida. A recent report from property technology company Yardi projected that 19,000 apartment units will be finished by year-end.

Weaver’s report noted that year-to-year vacancies increased in Broward to 4.4% from 3.5%. Vacancies also went up in Palm Beach County, to 6.4% from 4.5%.

However, vacancies remain “at historic lows” in Miami-Dade County, at 3%, the report stated.

As more multifamily units are built, vacancies are expected to marginally increase in South Florida.

There are now 39,216 units being constructed in South Florida, including 9,192 apartments that recently broke ground in Miami’s Brickell Financial District and downtown areas, 3,657 units in Hialeah and Miami Lakes, as well as 3,611 units in West Palm Beach, Weaver wrote.

There could be a decrease in new projects as it becomes more difficult for developers to obtain construction loans, the report noted.

But demand for rentals is expected to remain high as home prices rise in tandem with rents.

The median price for a single-family home in South Florida rose to about 13% to $542,878, the report stated, adding that “average home values are increasing at a greater rate than rents, making ownership for many even tougher.”

Meanwhile, South Florida’s population grew by 47,000 people year to date.

“This was more than the 42,842 population increase for all of 2021,” the report declared, adding that the population hike was “equally split among the three counties.”

South Florida’s population is expected to continue to grow, according to Cushman & Wakefield.

“Household formations in South Florida are expected to increase to over 37,000 each year in the next five years,” the report stated.

If half of these new households are renters, “that represents over 18,500 new renters a year in South Florida.”

Rising rents may be a boon for landlords, but they could dissuade some professionals and companies from moving to South Florida, some experts have warned.

Their costs are rising, too, as insurance cost hikes “continue to be a challenge” with premiums per unit ranging from $1,000 to $1,800 a unit, the report stated.

However, Weaver’s report noted that South Florida is home to a strong job market, with unemployment at 3% or lower and salaries increasing by 6% over the last 12 months.

 

Source:  SFBJ

 

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For more than a decade, the commercial real estate industry has enjoyed a zero or near zero Federal Funds Rate, and with it, a historically low cost of debt. That unprecedented run has officially come to an end, as the Federal Reserve increased its Fed Funds Rate four times in response to inflation. Fed Chair Jerome Powell has signaled more increases to come later this year.

The Fed’s action caused the commercial real estate industry to pause and assess the new market conditions. According to Cliff Carnes, EVP at Matthews Real Estate Investment Services, that pause lasted a mere six weeks.

In this interview, Carnes explains why investment appetite has completely returned, what’s driving the price stabilization in spite of higher rates, and how the near-term outlook is even more promising, with predictions of strong real estate returns and an upward trend in pricing.

Click here and press play to hear all of Carnes’ insights on investment activity, interest rates and inflation, as well as advice for investors pursuing acquisitions in this market.

 

Source:  GlobeSt.

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A building that makes “no sense” to most investors could be a diamond in the rough to another — and knowledge and information is key in the current rising rate environment, according to one industry watcher.

“You can’t add value to bonds — and unless you own a VC firm or you’re Warren Buffett or Elon Musk, you really can’t create value by owning stocks,” says Marcus & Millichap’s John Chang. “Other than owning a company or a franchise, only real estate allows investors to roll up their sleeves, either physically or metaphorically, and create value in an investment.”

And Chang says this happens in one of three ways: repositioning, management, or knowledge.  Repositioning can be as simple as upgrading common areas and as complex as transforming high-rise office towers into apartments (a trend that’s happening at a rapid rate in some major metros).  It can also fall somewhere in between those extremes: think moving a Class C property to Class B or repurposing an outdated shopping mall into a mixed-use asset.

Creating value in management can also run the gamut, Chang says.

“At the simplest level, an investor may see some high value but basic operational things that can be done — perhaps just cleaning up a property, adding professional management and moving the rents to market,” he says. “Something more complex may be re-tenanting a building. An office investor I know bought a very large property with an enormous vacant space. He already had a major tenant lined up so he bought the building, restructured the space a bit and then plugged the new tenant in. Boom: the building went from 25% occupancy to 90% occupancy and the property value changed dramatically.”

Chang also draws on another anecdote, this time in the multifamily space, to illustrate this point further. He says an investor he knows with a great apartment management team bought several small- to mid-sized near the ones he already owns and leveraged that team across multiple units.

And finally, there’s knowledge, which Chang says is “all about finding market inefficiencies and exploiting them.” This could include acquiring assets based on emerging demographics or population migration, or could come on the heels of a major employer changing its HQ location or in advance of a tax or policy change. Chang says there are ample opportunities to “capitalize on information where the pending changes are not baked into an asset’s price.”

Several recent examples bear that out: the global supply chain dilemmas plaguing virtually every sector of the economy have prompted many companies to consider re-shoring or near-shoring to mitigate those types of risks in the future.

“These and more opportunities are out there, and a lot of them will make sense regardless of rising interest rates or other factors affecting the market,” Chang says.

 

Source:  GlobeSt.

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“Follow the money” has for decades been a popular phrase in investigative journalism. But for far longer it’s been a de facto principle in business and investing. A new Marcus & Millichap video addresses the increasing movement of capital between the states.

“Investment into smaller cities has risen sharply and the volume of interstate investment has surged,” says John Chang, senior vice president and director of research services. 

In other words, investors are spreading their money out geographically for a number of reasons, including diversification, the search for higher yields, state tax policies, and retirement strategies, “to capitalize on unique market dynamics like migration and demographic trends.”

The firm suggests looking beyond gateway cities at secondary and tertiary markets. In 2011, 46.6% of the dollar volume of capital went into these areas. In the first quarter of 2020, before the full onset of the pandemic, that amount had climbed to 53.1%. Now, the share is 58%, the largest ever, leaving 42% in primary markets.

Concentrate that much money into existing markets and a number of things will happen. One that Chang mentions is that the increased flow is a component of yield compression in the secondary and tertiary markets. The cap rates edge that these markets have over primary markets is only 1.1 percentage points, “the tightest spread since 2009.”

Marcus & Millichap saw its clients in 2021 acquire almost $26 billion in commercial real estate outside their home state. The dollar pace has picked up in the first half of 2022 (though it’s good to remember that dollar comparisons can be misleading given that CRE prices rose, making properties more expensive and potentially totaling higher even if the volume were roughly equivalent). And it means that local buyers increasingly are facing competition from other states. The considerations of out-of-state buyers might include moving to a state with low or no personal taxes, meaning they can likely afford a price premium.

Texas has seen the highest inbound volume of capital going to purchase CRE properties. The firm said the amount it saw customers putting into Texas over the last 12 months was more than four times higher than in 2019, which was previously the peak year. Northeast, Southeast, and Mountain regions saw almost double the amount of inbound capital compared to 2019.

The biggest region for buying out of state was the Mountain one, tripling the amount in 2019. California, too, saw a tripling of moving capital out of state over 2019, reaching $11 billion. Another $7 billion came out of the Northeast, with $4.1 billion hailing from New York.

All the data is from Marcus & Millichap, so can’t be seen as statistically representative of national investment trends.

 

Source:  GlobeSt.

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Ron Osborne, Managing Director/Broker of SperryCGA | RJ Realty, has completed 3 major transactions within the automotive real estate sector.

After working through a variety of property and title issues for more than a year, The Taverna Collection, an entity managed by GianMarco Taverna, purchased the Ted Vernon Specialty Automobiles location at 8301 NW 7 Ave. in Miami (pictured above) from TAM Investment Properties, LLC, Both the dealership and property were owned and operated by Ted Vernon. The properties consist of approximately 38,961 square feet of buildings and a total of 3.53 acres of land. The transaction closed at $6,500,000. Xavier Cossard PA assisted in the sale. In a separate transaction. Ted Vernon Specialty Automobiles will be relocating to Greater Orlando in the near future and the purchase will complete its 1031 exchange. This subsequent transaction, which was facilitated by SperryCGA/Flint Brokers, an affiliate office, closed on August 2.

The second transaction involved the sale/leaseback of 500 N. State Road 7 in Plantation. The property sold for $1.7 million. The seller, 500 Ventures, LLC, sold the property and a related company, Car Net Auto Sales, Inc. The tenant leased the property back for 5 years on a triple net basis. The combined value of the transaction was approximately $2.4 million. Osborne stated that the location being situated on a hard-lighted corner along with having legal conforming zoning for auto sales drove the value. The transaction marks the third transaction Osborne has completed with the same buyer, GCDC 3, LLC, for automotive properties in the South Florida area.

The third transaction was the leasing of 770 N. State Road 7, an auto repair facility located in Plantation, owned by GCDC 2, LLC. The lease is a true triple net lease transaction with an approximate lease value of $650,000 for the 5-year term. Osborne supervised the renovations of the property after it was purchased back in December 2021 for $1,450,000.

770 N. State Road 7 Plantation-After Renovation

Osborne believes strongly that any automotive property in a prime location with legal conforming zoning and an active dealer and repair license will only increase in long term value. He has multiple clients that are always looking for automotive related properties in prime location in the tri-county area.

 

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U.S. commercial real estate investment volume rose 10 percent year-over-year in the second quarter of 2022, to $167 billion, with industrial and logistics investments providing nearly $32 billion of the total and office $24 billion, according to a recent CBRE report. Trailing four-quarter volume totaled a record $881 billion.

The industrial sector saw its investment volume drop slightly, down 1.3 percent year-over-year from $31.6 billion in the second quarter of 2021. The office sector saw a bigger decrease—down 9.5 percent—from the second quarter of last year, when office investments reached $26.6 billion. Multifamily was the leading sector, with the total at $78 billion, a 32.4 percent year-over-year increase from $59.1 billion in the same time frame last year

“While we expect sales volumes in 2022 to end the year at a healthy level from a historical perspective, we do see some weakening in the remainder of the year amid higher interest rates and uncertainty as the macroeconomic landscape evolves,” Darin Mellott, senior director of capital markets research for CBRE, told Commercial Property Executive.

While portfolio transaction volume increased 41 percent, entity-level transactions fell by 17 percent year-over-year in the second quarter, largely due to higher borrowing costs. The Federal Reserve began raising interest rates in March, the first rate hike since the pandemic began—with a 25-basis-point increase, followed by a 50-basis-point increase in May and the three-quarter percentage point increase in June, the largest since 1994.

On a trailing four-quarter basis, New York was the top market, with $67 billion, up a strong 104.3 percent year-over-year. Los Angeles followed with total investment volume of $65 billion, up 61 percent. Rounding out the top 5 were Dallas-Fort Worth, at $50 billion, for an increase of 91.9 percent; Atlanta, at $40 billion, up 88.3 percent; and the San Francisco Bay Area, with just under $40 billion in volume, up 44.4 percent year-over-year.

Houston had the biggest year-over-year increase in trailing four-quarter volume, at 150 percent, with about $29 billion in total investment volume. Other markets with big year-over-year increases in trailing four-quarter volume were: Orlando, Fla., $15.4 billion, up 136.8 percent; Las Vegas, Nev., $11 billion, up 132.5 percent; South Florida, $34 billion, up 117.3 percent; and Nashville, Tenn., with $12.1 billion in total investments, up 116 percent.

Prices, Cross-Border Investment Up

Institutional investors were net buyers last quarter, while private investors, REIT and cross-border investors were net sellers, according to the CBRE report. Private investors accounted for $102 billion, or 61 percent of the total. It was a 19.3 percent increase from the private investors’ volume of $85.4 billion during the same quarter last year. Institutional investors had a total investment volume of $39.9 billion in the second quarter, down 7.9 percent from $43.3 billion in 2021. REITs and public companies clocked in at $9.2 billion, a 5 percent decrease from $9.7 billion a year earlier.

Inbound cross-border investment volume increased by 16 percent year-over-year, to $6.5 billion, but was down by 9 percent from the first quarter of the year due to the strengthening of the U.S. dollar. Multifamily was the leading sector for inbound cross-border investment, at $3 billion, followed by industrial with $2 billion and office at $1 billion.

Canada was the top country for U.S. inbound cross-border investment, with $24 billion in investments. Singapore followed, with $14 billion, and South Korea at $5 billion.

Prices were up across the board in the second quarter, the report showed. The RCA Commercial Property Price Index increased by 18.5 percent year-over-year. The industrial sector marked the biggest increase, up 27 percent year-over-year, followed by multifamily, with a 24.3 percent increase. Office property prices rose 10 percent for the second quarter year-over-year.

Read the full CBRE report.

 

Source:  CPE

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Some of the oldest flea markets in South Florida are being snapped up by investors.

But the buyers aren’t interested in the income generated from the rent paid by vendors offering goods, services or entertainment to bargain hunters.Instead, they’re preparing to build more lucrative projects that will serve the people and companies flocking to the region.

It’s a trend emblematic of South Florida’s changing landscape as money and interests from all over the world claim old apartment buildings, offices, shopping centers, golf courses and even churches to construct new residential buildings, office towers and industrial parks.

But the trend is not unique to South Florida.

“Unfortunately, flea markets across the country, especially in the Sun Belt, are big pieces of land that fall victim to redevelopment,” said Rick Landis, president of the National Flea Market Association.

In the past year, current owners of three local flea markets filed applications to redevelop them into something else – namely as places to store stuff.

New York-based Link Logistics acquired the 43.8-acre Opa-Locka Hialeah Flea Market at 12691 N.W. LeJeune Road in northwest Miami-Dade County as part of an $80 million, 72-acre land deal back in July 2017. Link wants to replace the flea market, founded in 1985, with a 740,000-square-foot industrial park.

“Our proposed development project would represent more than $90 million in new investment and generate an estimated 1,000 construction jobs and 765 permanent high-quality jobs for the community,” a Link spokesperson told the Business Journal.

Fifty miles north of Opa-Locka, Delray Beach-based developer Anthony Pugliese plans to build a 16-pump gas station with a convenience store and car wash, plus 140,140 square feet of self-storage space at 5283 Atlantic Avenue in unincorporated Palm Beach County. He’ll also demolish the 30-year-old Big Apple Shopping Bazaar that occupies part of the 4.53-acre site.

Yoan Machado Torres, a project manager with West Palm Beach-based engineering firm WGI, said Pugliese will make far more revenue leasing the 4.5-acre property to a storage company and a convenience store than he does from 50 or so flea market vendors. (Pugliese has owned Big Apple since 2000.)

North Miami-based real estate investor IMC Equity Group is advancing blueprints to replace the 382,000-square-foot Festival Marketplace, at 2900 W. Sample Road in Pompano Beach, with 773,000 square feet of industrial space.

IMC, which paid $56 million for Festival Marketplace’s 23.8 acres of land, did not respond to phone calls from the Business Journal.

Already gone

At least two other South Florida flea markets have recently closed.

IMC knocked down Flea Market USA in Miami-Dade’s West Little River to make way for Northside Town Station, a proposed 11-story building with 370 apartments and about 46,000 square feet of retail at 2963 N.W. 79th St. IMC paid $13.5 million in May 2019 for the 15.45 acres of land.

Another recent victim of progress: US1 Discount Mall at 18901 S. Dixie Highway in Cutler Bay. Built in 1987, the 49,959-square-foot building is shuttered and awaits its replacement: a seven-story, 236-unit apartment building. Mdist Wholesale paid $6.67 million for the 4.25-acre property in June 2021.

Land rush

Jonathan Kingsley, executive managing director of office services for Colliers in Broward County, said flea markets are being sought for redevelopment because land is scarce and skyrocketing in value.

“Much like those years where we saw the conversion of older trailer parks to either [multifamily] residential or industrial, we are now seeing the same effect to flea markets,” he said.

Multifamily apartment buildings are lucrative properties, especially since rents have been climbing at record rates since the onset of the pandemic, but they can’t be built just anywhere.

“Residential is usually your highest and best use, but the area still has to make sense,” said Louis Archambault, an attorney with Saul Ewing Arnstein & Lehr who represents real estate investors. For example, a flea market that’s surrounded by intense industrial uses probably won’t work as a place for multifamily redevelopment, he said.

Industrial, on the other hand, is a hot commodity, thanks to the rise of e-commerce companies and the perceived need to hoard materials due to ongoing supply-chain issues. As such, flea markets, as well as obsolete offices and retail centers, are being replaced by industrial parks, said Brian Smith, an executive managing director and South Florida industrial lead for JLL.

“When you have a market like industrial that is hot right now in South Florida, people are reassessing their [property’s uses],” he said.

Uncertain future

Rick Landis, president of the National Flea Market Association, said it isn’t just land speculation and development that’s been hurting flea markets; it’s competition.

“I’ve been doing this for 51 years. What’s changed is that there weren’t any discount retailers. There was no Amazon or online competition. So, you can’t [always] get the best bargain at flea markets anymore,” said Landis, who owns two flea markets in California.

But flea markets fulfill another niche that Amazon can’t: the ability for customers to socialize and haggle, Landis said.

“Flea markets are the last bastions of free enterprise,” he said.”The guy with the best deal and the best product wins.”

Indeed, flea market fees are comparatively lower than the rising retail rents at typical shopping centers, several vendors told the Business Journal. Flea markets are also more flexible.

“You’re not locked into a multiyear lease,” Landis said. “This is all bare bones.”

And without low overhead and flexible terms, many mom-and-pop flea market businesses won’t survive, said Maria Icheva, assistant director of planning and operations at Florida International University’s Jorge M. Pérez Metropolitan Center.

Flea revival

Yet, some entrepreneurs have faith in the flea market model.

Dan Whitebook said he sees an opportunity to keep the spirit of the Opa-locka Hialeah Flea Market alive.

Last month, Whitebook, president of Atlantic Hosiery, turned part of his 200,000-square-foot warehouse and wholesale retail outlet at 13499 N.W. 49th Ave. into a flea market, about a half-mile from the original flea market. He said as many as 250 vendors from that venue have expressed interest in moving into what he’s named the Opa-Locka Hialeah Indoor Flea Market.

Whitebook charges vendors between $350 and $600 a week, similar to the fees they paid at the Opa-Locka Hialeah Flea Market. And the additional customer traffic will help his store’s business.

 

Source:  SFBJ

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Despite strong overall demand, rising interest rates are changing the fundamentals of industrial sales deals with retrading becoming ubiquitous.

Lately, 100% of the retrading activity has been for that reason, according to NAI Global brokers during the July Logistics Conference Call.

One broker said that institutional investors are putting everything on hold for 5 to 6 weeks to see how interest rates shake out, according to NAI Global.

However, the group noted that there is upside to some of the retrading activity. According to some of the broker comments, sales that are dropped during the due diligence period—and most often to institutional investors—is allowing local and usually smaller regional investors who have been “boxed out” the opportunity to buy in what has been one of the most competitive environments for industrial property sales in history.

BJ Turner, founder of Dunleer, a Los Angeles-based private real estate investment and development firm that focuses on industrial and multifamily sectors, tells GlobeSt.com that there are definitely more and more re-trades happening in the marketplace.

“Deals that were put together 45 to 60 days ago have wrapped up due diligence and now it is time to remove contingencies,” Turner said. “Their lenders are either pencils down or telling them the rate for debt financing is 100 bps to 150 bps higher, so something has to give—and in most cases, it’s the buyer saying to the seller they still like the deal, but due to the cost financing, they can’t afford to pay the same price they did before. In many cases, there is some form of a meet-in-the-middle solution that works for both the buyer and seller and deals get done. In the deals that don’t get done, there are opportunities for users to put deals into escrow they couldn’t compete on three to six months ago.”

Demand, No Less, Remains Robust

Doug Ressler of Yardi’s Commercial Edge said despite those growing weary of a possible recession around the corner, demand for industrial space remains as high as ever.

He said that in June, the average in place rents grew 4.9% year-over-year, the vacancy rate fell to 4.6% and the average cost of a new lease signed in the past 12 months was 88 cents higher per foot than the overall average.

“Supply of new industrial space cannot maintain pace with demand, a problem more pronounced in areas where geography limits the amount of land available for development,” Ressler tells GlobeSt.com.

 

Source: GlobeSt.