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Supply chain problems, labor shortages, and the housing shortage are all fueling inflation to eye-popping levels – and for CRE investors, that will mean greater competition for assets.

Headline inflation is up 7.1% from last year, the biggest uptick since 1982. And that rising inflationary pressure is forcing the Fed to switch gears and tighten policy. This will in turn put upward pressure on interest rates, raising the cost of capital for CRE investors, says Marcus & Millichap’s John Chang.

Supply chain is the first contributing factor to inflationary pressures: “It’s hard to move products from the manufacturers to the customers,” he says, pointing to shortages in raw materials, limitations on foreign port capacity, shipping container shortages, backlogs at domestic ports like those in Los Angeles and Long Beach, and a shortage of trucks.

“Basically, people want to buy more stuff than our supply chain can handle right now, so there are shortages and that means prices go up,” he says.

Retail sales are up 16% over 2019 numbers, while the amount of product moved by trucks in the US is down 5.1% over the same period.

The second issue? Labor shortages, which continue to stoke inflation.

Quite simply, “the US has never experienced a labor shortage like this,” Chang says, “at least not in the last 22 years, when records have been kept. As a result, companies are competing for personnel, and that’s driving up wages.”

Average hourly earnings are up 5% over last year, and sectors like accommodations and food services have seen labor cost increases of more than 15%. And “rising wages create broad-based long-term inflation,” Chang says.

The third challenge is the housing shortage: there are not enough houses to buy or apartments to rent right now, and the problem will likely continue at least in the near term. There are currently about 1 million houses for sale in the US right now, about two months’ worth of supply; typically, four to six months’ worth of supply is required to maintain stability in the market.  Housing prices shot up 14.9% last year in response to the shortage.

In addition, there are only about 480,000 apartments available for rent, a vacancy rate of 2.6%, the lowest on record. Rents rose 15.5% last year.

“The Fed will be taking action to curtail the rising costs,” Chang says.

He notes that Fed Chairman Jerome Powell has already announced plans to accelerate the end of quantitative easing that was put in place during the pandemic, and says this will likely put upward pressure on long-term interest rates. The overnight rate is also on track to increase three times or more this year, which will put upward pressure on short term interest rates.

As a result, Chang says, interest rates are likely to continue to rise. The ten-year Treasury rate is already up about 30 basis points from the beginning of December to a little over 1.7%.

For investors, this will equate to more competition.

“Commercial real estate is viewed as one of the best places to invest money during periods of high inflation, especially properties that can increase rents with the market, like apartments, hotels, and self-storage properties,” Chang says. “Rising interest rates, and increased investor demand, implies that levered yields will compress this year. Basically, more commercial real estate buyer competition will push cap rates lower while the cost of capital, or interest rates, rise. That means CRE levered returns may tighten.”

But several property types still offer higher yields, like well-positioned office assets, retail assets, medical office buildings and some hotels, he says – and properties in softer markets harder-hit by COVID restrictions could also offer higher yields and stronger multi-year returns.


Source:  GlobeSt.

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Miami-Dade County tied with six other markets with populations over 250,000 for having the strongest commercial real estate market conditions in the nation, according to a study released today from the National Association of Realtors.

Miami-Dade tied with census metro divisions covering Tampa, and Fort Myers in Florida with an index of 76, the highest score achieved by communities of more than 250,000 people. Also scoring 76: Charleston, South Carolina; Durham, North Carolina; Kennewick-Richland, Washington; and Nashville, Tennessee.

Gay Cororaton, senior economist and director of housing and commercial research for NAR’s research group, said index points are awarded when an area outperforms the national average on criteria such as job growth, employment, salary growth, inventory absorption, and low vacancies/rent increases in apartments, offices, retail, and industrial. The highest possible index score of 100 is only awarded when a metro area “outperforms” the nation on every single indicator, Cororaton added.

Although not scoring 76, several other Florida metro areas with large populations, including Broward and Palm Beach counties, had high index points. Palm Beach County scored 72, which tied it with Florida regions that included Jacksonville, Naples, Port St. Lucie, and Orlando. Broward County had an index of 68.

Additionally, the vast majority of Florida’s metro divisions above 250,000 people received indexes higher than 50, Cororaton said. Exceptions were the Tallahassee and Panama City areas, which each received indexes of 48; and Sebring, which scored 47.8.

“If you are over 50, you are performing ahead of national conditions,” Cororaton said. “Florida is doing really well.”

In the past year, Florida was second only to Texas in population growth, rising by 211,196 residents to more than 21.78 million people from July 1, 2020 to July 1, 2021. Local real estate analysts credit the migration of people and businesses from other parts of the U.S. – in search of lower taxes, minimal regulation, and better weather – for South Florida’s uptick in residential and commercial rents, which are higher than the national average.

This migration has contributed to making South Florida an even less affordable place to live. In the fourth quarter of 2021, Miami-Dade renters spent an average 22.9% of their income on rent, Broward renters spent 23.4%, and Palm Beach County renters spent 27%. Across the U.S., renters spent an average of 16.3%.

Residential rents continue to rise, too. The average effective monthly rent for 4Q 2021 in Miami-Dade was $1,997, an increase of 19.6% from the previous year; in Broward it was $2,075, up23.2%; and in Palm Beach County $2,273, a hike of 31.9%. Nationally, the average monthly rent in 4Q 2021 equaled $1,543, an increase of 12.2%.

At the same, sales transactions of multifamily buildings, and prices, are rising faster than the national average, the report noted. Additionally, all three counties had apartment vacancies lower than the national average of 4.6% with Miami-Dade’s vacancy rate at 3.5%, Broward’s at 3.1%, and Palm Beach County’s at 4.1%.

The NAR report noted that all three South Florida counties had job creation in the 4Q of 2021 stronger than the national average. Miami-Dade posted a 6.2% increase in non-farm jobs, a 4.3% increase in Broward, and a 5.1% increase in Palm Beach County than the year before. The national average was 4.1% higher than the prior year.

It was more mixed within South Florida in terms of unemployment and salaries, though. NAR reported that Miami-Dade’s wages increased 6% from the previous year to $1,004 a week, and recorded an unemployment rate of 5.1%. In Broward, wages went up 2.8% to $1,019 a week with an unemployment rate of 4.3%. In Palm Beach County, average wages went up 1.8% to $970 a week while its unemployment rate was 4%. Nationally, average wage growth went up 4.8% to $1,080 a week, while the unemployment rate was 4.2%.

In non-residential commercial sectors, the NAR report stated that the office, industrial, and retail markets of South Florida’s three counties were stronger than the national average, with each posting lower vacancy rates and higher absorption rates in all three sectors than the averages of the rest of the United States. The report did note that industrial and retail sales transactions in Miami-Dade didn’t rise as fast as the rest of the nation, while in Broward and Palm Beach industrial and retail traded at a faster rate. In Palm Beach County, offices traded more slowly than the national average.


Source:  SFBJ

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JP Morgan sees an array of sectors in the US that are benefiting from high user demand and will perform well in 2022, according to its 4th annual Global Alternatives Outlook.

The report is based on the opinions of CEOs, CIOs and strategists from JP Morgan’s $200 billion-plus alternatives platform. It provides a 12- to 18-month perspective on the trends influencing their respective markets, as well as their most promising investment ideas and their thoughts on the underappreciated risks investors may face.

Logistics, Multifamily, Outdoor Industrial Storage Top the List

Logistics properties (particularly infill logistics assets in the so-called last mile between urban storage facilities and consumers); suburban multi-family and single-family housing in Sunbelt states; campus-like clusters (or nodes) of amenity-rich offices for the technology sector; and industrial outdoor storage facilities (including truck terminals, parking and equipment storage) in key urban locations, are set to flourish.

Deeper into 2022, JP Morgan believes that “contrarian investment opportunities in stressed corporate and retail subsectors may start to emerge,” according to the report. “Leasing markets for offices are likely to recover slowly, potentially creating refinancing challenges for asset owners. If declines in asset values overshoot the intrinsic development costs associated with these properties, opportunistic investments in offices may become highly attractive.”

Although contrarian plays are already apparent in retail, this sector is very different, JP Morgan’s report stated.

Core US Real Estate in ‘Sweet Spot’

Economic growth and inflation create a “sweet spot” for core real estate in the US, the report said.

Cash flow-generating assets are likely to become increasingly expensive in 2022 as the real estate market becomes more crowded, according to the report.

At the same time, long-term megatrends, such as the surging popularity of e-commerce transactions and, in the US, population migration to Sunbelt states, continue to drive demand for niche real estate assets, according to the report.


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For the last 2 to 3 years, people have been asking, “When is the next downturn?” “How much longer can this Seller’s Market last?”

Traditionally, the real estate market experiences a downturn every 10 to 12 years, however, at this time, due to the increase in migrations from cities and states with high income and sales taxes, (NY, PA, CA, Washington, D.C) this cycle has been delayed.  Both companies and investors are relocating to South Florida.   No one can say when this will change, but this is the time to take advantage of the market. We usually don’t realize historic change is happening until it’s already has taken place, and by then it’s too late.

Fortunately, real estate shifts rarely happen overnight. We believe that there is still time to take advantage of the seller’s market.  I share with you my thoughts for 2022:

Six to twelve months from now, we will all look back and identify Q2 2021 and the Q3 of 2022 as the point where the market peaked and stabilized.

To be clear, I’m not saying values will crash. But I am certain they will have stabilized and will correct, in late 2022 or 2023 and beyond.

Now, I don’t really think this is a bold prediction, I think we all intuitively know it. We have seen this happen during the Jimmy Carter years with 18%+ interest rates and high inflation, the Days of the RTC and, of course, 2007/2008 when the market crashed, which we saw end in 2010, We are now 12 years since the last recovery.

I think it is important that we ask ourselves, out loud, “What actions are we taking in light of this new reality?”

In my world of real estate sales brokerage, I can think of three big answers to that question:

1) Review your portfolio to identify any properties you may want to sell in the next one to two years. Then call me to explore your options to sell now or refinance and hold. Both are proactive decisions if you make them. Everyone has different circumstances that must be considered. We may miss the peak of values, but we are still at or near the top of the market crest and avoid Meaningful decrease.

2) Review your portfolio and identify any properties that may need to be refinanced, as the rates are still at the lowest they have been and, with the current inflation rate, mortgage rates will only increase.  I can help you with this through Sperry Capital.

3) Consider rent adjustment in your leases. Start putting in annual CPI or floor & ceiling of 3 to 7% increases into your leases. Most landlords are adjusting their new leases and have moved away from fixed rent increases.

Today, my friend, the future is staring us right in the face, telegraphing what is coming next. What will you do with that information?

Let’s schedule an appointment and review your properties to help you determine the right course of actions for your situation.  SperryCGA has offices though out the US and can advise you in multiple markets.  I have been helping real estate investor and owner/users since 1978.

Let us help you maximize the value of your investment.


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Ron Osborne, Managing Director/Broker of Sperry CGA-RJ Realty, negotiated the sale of an auto repair facility located at 770 N State Road 7 in Plantation, Florida.

Osborne represented both sides of the transaction, including seller, DOXATO LLC, and Buyer, GCDC 2 LLC, in the transaction. Osborne sourced the buyer from Argentina, an entity he had previously worked with.

The property consists of a 17,000-square-foot site with a 4,408 square foot fully functional auto repair facility with 3 overhead doors with room for 7- 8 lifts. The property was formally used as a transmission shop.

The deal closed December 29, 2021.

The total transaction has a value of $1,509,000, or $342 per square foot, which includes the real estate and chattel mortgage on the equipment.

“The Seller approached a neighboring property owner and offered him the property, who is a current client,” explained Osborne. “Knowing that I am the Automotive Property specialist in the area, he referred the owner to me. Our biggest challenge in the sale was tenant’s right of first refusal on the lease, however it was written that the tenant had to match the offer exactly.  Since our Buyer presented an all-cash offer with proof of funds for the purchase price and a very large deposit, that stipulation became a non-issue.”

The deal represented Osborne’s sixth automotive transaction in Broward County in 2021, with all of the sales or leases transactions closing at the top of the market.

Sperry CGA-RJ Realty will be leasing and managing the property.

“The current tenant will be vacating sometime late January and we should be able to deliver the space first of March,” Osborne said.

Offering rent will be $28.00 NNN.

680 NE 42 St, Deerfield

Ron Osborne, Managing Director/Broker of SperryCGA/RJ Realty, negotiated the sale of an industrial property located at 680 NE 42 Street in Deerfield, Florida.

Osborne represented both sides of the transaction, including the Seller, DAMANI INVESTMENTS, LLC and Buyer, ACHIM INVESTMENT GROUP LLC.

The sale includes an 8,342-square-foot building situated on a 17,437-square-foot lot. The 1970-built building features nine 935-square-foot bays was 100% occupied at the time of the sale.

“We received multiple full-price offers from investors and owner/users and ultimately selected a pre-qualified owner/user and closed the deal in under 45 days from Contract,” commented Osborne. “There are multiple owner/users as well as investors looking for 5,000 to 75,000-square-foot facilities.”

Osborne helped obtain an SBA Loan with full approvals within one week of contract, marking the fourth SBA Loan closing in 2021 that he has assisted with. Osborne also helped the Seller complete his 1031 exchange in NC though the local SperryCGA Affiliate office.

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During the 2nd quarter, Ron Osborne, Broker/President of Sperry Commercial/RJ Realty, closed on 3 transactions valued at a total of $4,725,000.

Osborne represented the sellers in each of the deals, which include:

  • The Boat Center, a 12,500-square-foot, single-story retail building situated on 1.06 acres at 1771 S State Road 7 in Fort Lauderdale within the State Road 7 corridor. The property sold for $2,650,000. The buyer accepted the property in “AS IS” condition knowing it needed to have the roof replaced.
  • A car dealership located at 3297 W Oakland Park Blvd in Lauderdale Lakes, which sold for $1,200,000.$37.74 per square foot of land value or $814 per sq.ft. of building area. The sale includes a single-story, 1,473-square-foot retail building situated on 0.73 acres.
  • 510 Building, a 1,250-square-foot office building situated on 33,817 square feet of land, located at 510 S State Road 7 in Plantation, Florida, sold for $875,000. The buyer is buying as long term investment, and plans to redevelop the property in the future.

“The multiple offers we received exemplifies how tight our market is,” commented Osborne.  “There are plenty of buyers out there fighting for quality assets.”


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Limousines of South Florida is extending its reach in Broward County by purchasing a car dealership in Lauderdale Lakes for $7 million.

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720 N State Road 7

Ron Osborne of RJ Realty completed another auto dealership transaction in the State Road 7 corridor in Plantation.

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RJ Realty is pleased to announce that it has been selected to market for sale Haims Motors Lauderdale Lakes dealership.  The property is located at 2000 N. State Road 7.

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