The third quarter brings continuous activity in three sectors

0


[ad_1]

David DeLise

As we close the third quarter of 2021, activity in most major areas of commercial real estate remains high. Equal amounts of interest are generated by both investors and occupiers. Three sectors of commercial real estate in particular have outperformed the overall market since the outbreak and continue to garner the most interest from investors and developers.

From an investment perspective, multi-family assets, especially apartment communities containing 10 or more units, continue to attract the highest level of investor interest in this space. The availability of attractive financing options for the acquisition and repositioning of apartment communities enhances its appeal to owners / operators. Local lenders, credit unions, regional banks and CMBS providers all remain active in this sector. From a national perspective, multi-family continues to outperform most other asset classes, a trend that had accelerated in the months leading up to the pandemic. After several months of justified caution and apprehension, activity in this sector has remained fairly sustained. It may be even stronger now than in the months leading up to the pandemic. The current cost of new construction (including the acquisition of land, materials and labor, as well as the time required to obtain permits and approvals) continues to provide attractive opportunities for investors to acquire existing assets with less cash flow than replacement cost.

The second sector we are watching closely is the industrial sector, including multi-tenant contractor bay properties with 14 ‘walk-in doors, high floor loads, 24’ ceiling heights, modern HVAC systems and energy efficient control and monitoring systems. Newly constructed and well-located industrial assets attract significant interest from tenants, developers and investors. There was a noticeable increase in activity at New Hampshire industrial properties (existing and construction land) during the first months of the pandemic. Many New England businesses, especially those in Massachusetts, have expressed a strong desire to locate in southern New Hampshire – our phones were ringing every other day from these businesses or their advisers.

Our team has experienced great success in this area on behalf of our clients for decades. We have secured several exclusive “for sale” listings in this area over the past year, all of which have generated a lot of interest. With proper pricing and advertising the properties generated a lot of activity and for most of them we received several offers above asking price. All sales of these assets had short due diligence periods and were closed within 30-60 days of acceptance of the offer. One of our recent transactions involved a large, well-maintained warehouse / manufacturing facility that attracted both investors and owner / occupants. He was put under contract within a week of the assignment. The buyer requested a minimum period of due diligence and the offer did not contain any possibility of financing.

In the industrial sector, we are seeing demand for new construction of multi-tenant industrial / flexible properties. We recently filled 33 bays in one of these parks fairly quickly and are currently renting out phase 1 of a similar building in another city in southern NH. We haven’t seen the level of interest in this product drop at all recently. This type of property remains particularly interesting, as the demand for modern and equipped facilities currently exceeds the supply. The enigma remains the price of the land and the costs of the new construction. There is a significant amount of industrial properties throughout New Hampshire. A large percentage of these properties are considered functionally obsolete due to age, ceiling height limitations, lack of modern / sophisticated building systems and controls, proximity to major travel routes, or simply because that the property no longer calls for the requirements and equipment of today.

Finally, the self-storage sector remains active not only in New Hampshire but throughout New England. Local developers and national storage operators continue to seek land to build modern self-storage facilities. Industry fundamentals remain strong, demographic trends remain favorable and despite the effects of the pandemic, actual nationwide year-over-year rental growth figures remain attractive relative to others. types of assets, putting the growth in rents at the same level as those observed. both in the industrial sector and in multi-family asset classes. A well-located New England-based multi-building portfolio recently traded at a cap rate of less than 5 based on net operating income in place. The portfolio consisted of older but well-maintained facilities that were not highly optional, as well as newer, air-conditioned multi-story facilities with in-car accessibility and high touch point operating features. . The sale of this portfolio at the capitalization rate within 4 – a new threshold for existing storage in New Hampshire – seems to strengthen the long-term attractiveness of this asset class.

Multi-family apartment communities, newly constructed modern industrial / R&D facilities and well-located self-storage assets present attractive investment and development opportunities. Of course, there remains the possibility of additional headwinds resulting from economic pressures, socio-economic developments and regulatory implications. Given the immediate investment horizon of 6 to 18 months, there are and will continue to be great opportunities in each of these highlighted sectors.

A good real estate investment requires significant insight, proven expertise, and skillful financial analysis. This goes hand in hand with an experienced and sophisticated review of due diligence activities, property level operations and management functions. In a rapidly changing investment environment, it is especially crucial to use underwriting metrics and valuations that provide meaningful and quantitative insight. Successfully crossing the headwinds mentioned above, we remain firmly convinced that the current environment for investment and development is ripe in these three (3) highlighted sectors.

If you want a commercial real estate professional to help you underwrite a potential investment or development opportunity, determining whether the timing is appropriate for the disposal of a single asset or a multi-state portfolio and multi-property, team of experts Berkshire Hathaway Verani Realty advisors are ready and able to help you exceed your real estate goals.

Call me directly to discuss your goals for investing, developing or managing commercial real estate assets. For more than 53 years, we have proudly served northern New England.

David DeLise, MiCP, is a director at Berkshire Hathaway Verani Realty, Londonderry, NH

[ad_2]

Leave A Reply

Your email address will not be published.