Investor and Occupier Opportunities in 2021

[Music] welcome to america's commercial real estate show your source for market intel forecasts and strategies hello i'm michael ball thank you for being with us well each year we do an annual holiday party and i try to to give you some gifts and special gifts and this year what i'd like to do is talk about some predictions from me on each of the property sectors and also provide some opportunities that you might want to think about related to each sector and what i thought i'd do is just do this briefly on each sector and i'll have to start with uh kind of the first and then go to the worst all right so what's first drumroll of course uh industrial right i mean industrial has just been incredible doing incredibly well and and i love it from my friends in industrial real estate you know i think of of all the past years where market values were pretty steady and rents were unfortunately pretty steady and you know they run around with the dirty shoes from being in the industrial buildings and boy now their shoes are shiny right i mean industrial's doing well and and we all know why you know with online sales but uh but i'd give you this to think about how many of you remember the jetsons the cartoon right and the family would go to the wall and push a button and they would get whatever they want well think about it now we do that and we don't even get out of the chair when we get off the couch we don't have to even touch a button we just tell the device what we want and we get it and it's going to we're going to continue to love doing that we're going to want things sooner and sooner so things like last mile and large industrial buildings medium small you know industrial's just going to keep doing well what are some opportunities there i think just to continue to develop and invest in industrial properties and i like any other thing that's at the pretty high market value uh it could be the time to take some chips off the table to potentially sell so let's go to the next sector uh that's doing extremely well and that's single tenant netly's investment properties you know the single tenant properties think about the the drug stores the dollar stores the auto parts stores the quick service restaurants and the ones that have been really doing well are the the national credit uh triple net deals where the leases are over 10 years and i think we have probably 18 of them under contract with buyers at the moment and we're seeing the cap rates are are compressed right now you know here we are at the end of 2020 going into 21 and investors like that safety and if you look at the single tenant net lease market historically in downturns uh the values have improved and and that's just what we're seeing right now as far as opportunities to think about in single tenant net lease well i think one of the opportunities is to think about if you own them especially if you have over 10 years left again you might want to look at this time is a great time to sell you might not get a higher price for them for a long time another opportunity on the acquisition side you know if you're coming out of a more volatile property type you know right now we still know we have the 1031 exchange right and so you might want to think about trading into more stable uh properties like single tenant and net lease properties which have a historically very low default rate so think about that some other opportunities when you think about single tenant net lease investment properties 10 years plus great values you start getting below 10 years about the values will start dropping a little bit less than five years they drop some more you get into the last year year or two or three and the values really drop so as an investor if you don't mind the renewal risk then looking at properties with with short lease terms left can be an opportunity one of the things you want to know when you do that what what are the renewal risks for this tenant and most of these tenants don't report sales so you don't really know how well they're doing well there's a number of ways to decide which of these property types are great to buy let me give you one today and that's using smartphone traffic to determine how much how much traffic they're getting how many visitors to the store are they getting and you can actually track those numbers and demographics to stores that you have that you know are doing well that maybe just have renewed or they're building new they like the demographics there so i'll give you a link you can go to vista property report slash cre show and actually get 10 free reports now i have no benefit of sharing really any of this information with you but i'm just telling you it's a really cool tool so check it out and then you know the last thing i would say about singleton and that lease uh is it's it's it's a very stable of those properties we have under contract we have i started to say should i even tell you i represent buyers that are buying these cap rates but these buyers want safety right we are selling some properties that the cap rates are as low as four percent uh then we have some five at six and seven percent cap rates um so i think it's a very safe market all right let's look at the next one multi-family you know multi-family is like that energizer bunny right it just keeps going and going and going and it seems to really even surprise that the biggest market players and the economists and analysts that track the market is like it's still doing well it's doing still doing well and there's a lot of reasons multi-family is doing well but i'd like to throw one out for you to think about that is the stigma is gone from multi-family as as as a user as a tenant right think about 10 15 years ago um someone said uh you know where do you live and and if someone said they lived in an apartment what did you think right uh they're not doing well poor poor soul right and think about now uh you ask somebody where they live and they say they live in an apartment and you're like gee um you mean your weekend's free and you know all these chores you have to do you lucky it's all right and you also think about a lot of the younger generation uh saw in the great recession you know their parents have a tough time with single family homes is that uh when that bubble bursts so i think the the stigma is gone and uh and there's a lot nicer apartment communities now so you have a lot of different age folks that are like the apartment world i think there's opportunities from from class a just in our shop alone we have a 70 million dollar class a in the southeast it's a beautiful beautiful project and it when you look at the reports and the demographics it looks like rents will continue to rise uh and then and then and more even growing markets we have one in another southeast city that's smaller that's around 20 million so there's still opportunities in class a because when you look at the numbers and the demographics we're not really building enough in these markets so they're even though they're really low cap rates for these multi-family class a nice properties they're going to continue to grow so good opportunities there's also opportunities in the smaller you know b and c and smaller properties and i think in those properties there's always opportunity to manage something better than than the last company did right or the last owner uh so i think multi-family is good and course multi-family market is hot the prices are still strong for the most part uh activity's been strong we do a lot of work in the southeast a lot of demand so it's also a good time if you want to take some chips off the table to sell multi-family all right let's talk about another property type that's really interesting right now and that's senior housing you know senior housing properties uh have had trouble leasing in 2020 due to covert right they they've been shut down and it's hard to do tours and interviews and and and get onboarding new residents so you know they've had vacancy issues um and so that has made senior housing a good opportunity to look at right now if you can find sellers who will sell uh it's a good opportunity and look the demographics are there i mean the the senior housing is just going to continue to do well and i'm laughing because you know i think about uh my parents and not my parents they didn't do this but people their age think about the 60s what these people were doing they were they were having a lot of fun right and those a lot of those folks are going to need senior housing they're going to need memory care um and there's just a lot of baby boomers getting of age so i think senior housing is a great opportunity and there's opportunities across the spectrum from small to medium-sized to large operation where you operate the property the business and everything and you own it all to net lease properties we we just took out a property to market that's around 80 million dollars that's three single tenant triple net lease 23 year lease term with annual escalation so talk about mailbox money in a tenant that it's memory care they're beautiful buildings about two or three years old so they're stabilizing great markets that's just mailbox money in a big way so there's across the spectrum opportunities you know in senior housing to think about all right let's talk about office you know office i think is one of the more interesting opportunities out there right now and you know some office is doing well we in our shop took out a 42 million dollar medical office property during covet in nashville and it had multiple competing offers now there were some players out uh reets some of the reits and things were out of the picture uh at that time but we got multiple competing offers and it sold it a cap rate that was pre-covered it sold for the same value price so some of these medical properties still doing really well also government lease properties i'm on a team and we sell government lease properties we sold five during covid and these aren't small properties one was over 400 000 square feet so the those markets are doing well but let's look at regular office you know and there's a lot of companies that think that maybe they don't need office space anymore they need a lot less of it there's a lot of subway space that's that's come on the market so office is really you know really out of vogue but think about this you know if you're like us we've been very busy during cover doing lots of work and transactions what's it been like for you to work with people that have people work from home you know for the most part i'm hearing from from me and my people and people the clients that it's tough and the the the level of service and and the productivity and the speed and the quality is just downhill so i think what's going to happen is we're going to have a period of time here where the vaccines are here they're starting to be uh people starting to get the vaccines and people start feeling more comfortable and look no one wants uh to pack a bunch of employees in small office space and cram them in you know with covid going on so i think as as that vaccine comes out people will start moving back to these in these in these buildings now yes there'll be some businesses that that don't need it or think they don't need it but i think here's what's going to happen a lot of these businesses are going to have problems and i'll i'll list the challenges is what they're going to see recruiting onboarding retention training innovation career growth with the for the employees themselves efficiency productivity customer service and and profits so these companies are going to realize that they're going to do much better and they're compete much better when they have all the benefits of people working together and look we're social creatures we're we're going to want to get out of our cocoons at home and get back out in the world and do business and and be around people and an exciting atmosphere and another thing to think about is look at some of the big companies out there and what they've been doing during covid you think about amazon facebook uh apple google i mean they're all talking oh well can work at home everything but what are they really doing they're going out and buying headquarters leasing lots of space you know really smart companies looking forward and long-term understand the value of great office space so i think that demand is going to my prediction is demand is going to be slow for 2021 and it's going to gradually pick up and i think depending on the economy i mean there's been a lot of shutdowns a lot of industries really severely hurt it's going to take a while for the economy to rebound but from all aspects i see in the economists and analysts we have on this show and that we read and hear about it should rebound fairly quickly if we don't have burdens put on us that otherwise keep us from rebounding so i think in the window for opportunities in office and i'll give you a few of those opportunities it's 2021 i wouldn't look past that for opportunities although some of the markets may take another year or maybe even close to 36 months to for demand to increase i think it will start increasing in a year so in 2021 what might you think about an office one if you're a user you lead a company think about your lease and your space this is a real good time to get a deal on office right maybe you want to acquire a building be your own best tenant or maybe you want to look at your leases that have expirations in the next three four one three four five years depending on the size of your business and think about hey can we give the benefit to our landlord to come back in and and strengthen our lease and our use and maybe get some benefits now think about uh investor if you're if you are investing you know office is a little bit out of vogue right now so it may be a good time to look at acquiring properties in in 2021 and again some of these properties are really doing well so you want to look at each individual building and tenant we just took out a property in west palm beach for 8.6 million um nine out of ten tenants are are non-profit they're all doing fine these non-profits and it's a suburban and i think the office in west palm beach and so i think the there's also a difference between the high-rise elevator office buildings you know in some of the suburban office buildings um we have i think 14 suburban office buildings under contract in southeast cities and we went through the inspections in the last few weeks and this suburban one two story outside separate entrance in suburban markets uh in the southeast cities that we work are doing well these tenants were occupying the buildings they were open for business and very vibrant in those suburban smaller uh outside entry buildings so there's still some real good opportunities uh especially in those kinds of properties uh where they might be a little out of vogue they may have lost a tenant here and there uh that you can have an opportunity as a user or investor to come in and acquire those properties but when you go in the high rises the mid rises with elevators uh in the major markets um it's kind of spooky seeing the non-use of some of these companies that have crammed so many people and and and small square footage per person and they don't they can't have them working there right now well that's going to start to change so there's there's uh there's some opportunities in the office market now let's keep going down the spectrum of kind of current performance and go to retail you know and some retail is really doing well remember you always got to look at specific property and building and market and sub market but obviously shutdowns have just really been hurt in retail in a big way but here's what i would keep in mind about real estate and there might be some opportun retail or there might be some opportunities and that is most retail real estate is good real estate i mean it's good property right it's well located it has good access it has good visibility it may be fairly flat it may be very accessible so think about repurposing and changing use in these properties and some of the uses we're all familiar with it might change but think about you know adaptive reuse think about last mile distribution um there's going to be more and more that again we're the jetsons of 2021 we want things now right another use for some of these retail properties is mixed use development we're seeing a lot of that in metro atlanta where we're headquartered multi-family again multi-family doing well and these are good locations so in some of these areas the zoning can be tough to do but you know i think these municipalities they're going to be looking for income they're going to be looking for tax dollars they're going to be looking to make their communities vibrant so when where they thought you might not get the rezoned a few years ago you might be able to do now so think about multi-family think about medical think about self-storage again these these retail properties can have lots of uses so i think there's a lot of opportunities in adaptive reuse and then the other opportunity uh is for users just like in office to get great deals and and get buying least great space i think for retailers it's a good opportunity to potentially get in a space that you couldn't have gotten in before you know we had a tenant really mad at us the other day because the landlord wouldn't rent to them they were mad at us well we couldn't make the decision for the landlord but now as a retailer you might be able to get in some locations that you couldn't get into before and might be able to strike a much better deal monetarily and in the lease terms so i think there's some opportunities there well last i think i'll cover is hotel obviously hotels have been really hit hard by the lack of travel the the conventions being shut down events being shut down you know we have a hotel division here as well and they're they're predicting it could be three or four years to get back to pre-covet occupancy in rates now i'm a little more optimistic i think people are going to want to go to events and and travel i think there's going to be a lot of pent-up demand and it's going to also vary uh per market and you know the large convention hotels obviously have been hit really hard when you think about the pent-up demand i i speak uh public events around the country and i haven't done much in 2020 but i did just speak publicly for the first time in 2020 about a week or two ago and the place was back everyone was so excited to be out networking and be it at an event and i think there's going to be that type of demand for people to get back out so the opportunities there are buying hotels obviously if you're in that industry also buying notes for hotels we're actively selling notes for banks and for clients buying notes so notes in hotels another thing to think about for some of these hotels is again adaptive reuse for the hotels some of the uses that i think about self storage you know they're they're little they're little boxes right um office suites you know uh a lot of the tenants are really wanting this hub and spoke and getting some locations that they don't have to go into the central business district um and or maybe they they're working from home now in their offices maybe they're not going back to their office but they want a space away from fido and the kids and and so leasing or selling maybe those office suites is an idea to think about also some hotels might work well for assisted living and another use could be kind of micro apartments or affordable apartments so i think you know when you look at any sector you look at any cycle there are opportunities look at each property and market and property individually and there could be a lot of opportunities so there's good news here as 2020 has come to an end the vaccine is here hey right everything's going to start getting back to normal you know economy we will rebound everything will be okay you know let's relax everything's going to be okay we're going to have a great 2021 and in that spirit of relaxing i'm gonna leave you with a holiday song and uh on that my friend um is on the piano carl testa and then on vocals well well let's just see on vocals if you recognize the singer all right so happy holidays to you i hope you have a fantastic 2021. [Music] jack frost [Music] folks dressed up [Music] helped to make the whole season bright [Music] and tiny tots with our eyes [Music] is [Music] let's see if reindeer really know [Music] until and though it's been said many times many ways merry christmas to you [Music] [Music] on his sleigh [Music] know how to fly [Music] from kids from and though it's been said many times many ways merry christmas to you [Music] all that's been said many times many ways merry christmas [Music] to [Music] [Music] if you appreciate the show think about the opportunity to do business or refer business to our sponsors bull realty for customized asset and occupancy solutions visit bullrealty.com commercial agent success strategies for incredible commercial agent training visit commercialagentsuccess.com vista property reports use smartphone location technology for commercial real estate due diligence visit vistapropertyreport.com cre show core.green use ion technology to create a safer environment for your real estate visit core dot green for more commercial real estate intel forecasts and strategies visit [Music] creshow.com you

Channel: America's Commercial Real Estate Show

Views: 443

Rating: 5 out of 5

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Id: ESMCL-qHdA8

Length: 27min 34sec (1654 seconds)

Published: Wed Dec 23 2020