Raleigh’s RTP – Live, Work, Play

Triangle Commercial Bits and Pieces…

RTP Getting New Mixed Use Development

The largest research park in America is changing things.  Wait, that’s not right, America is changing things for the largest research park.  A new concept mixed use development is hitting the park!  Durham, NC is welcoming Beacon Properties Group and the mixed use development that will lay right along the busy 15-501 corridor looking to capitalize on new restaurants, variety of office space, hotel(s), and apartments.  It will be a walkable mixed us district and the first of it’s kind in the area!  Multifamily continues to expand in the Triangle market.  Just this week there are several on planning board agendas throughout the region including one on Rogers Branch in Wake Forest, NC.

North Carolina continues to grow quickly and remains on the top or near the top of many lists of best places to live and work!  This is a reflection of that very thing.

RTP Durham

View of RTP from the south

Featuring 57,000 square feet of retail and 25,200 square feet of office along with 17,000 square feet for restaurants and 300 apartment units, the project name, Oakridge will have major impact in our market.  The first of several?  We will see.

DOWNTOWN Raleigh By the Numbers….

While residential builders are helping change the face of the market near downtown Raleigh, it is the commercial impact that truly will drive the traffic to these homes!  What came first?  Chicken?  Egg?  Smoke?  Fire?   Residential?  Commercial?  Twenty nineteen has been a good year for Raleigh.  Hemp stores, cocktail lounges, new restaurants, new office space, etc…..  Here it is by the numbers according to the TBJ.

37 – Number of businesses closed since Jan 2018.

64 – Number of new businesses since Jan 2018.

15 – Number of storefronts closed in 2019.

20 – Number of new storefronts in 2019.  (We call that growth)

Triangle Rental Rates Up

The second quarter showed a boost in Triangle area office rental rates.  With the expansion of local businesses and the growth of outside companies coming in to the market, it appears that vacancy rates continue their decline.  Average Class A office rental rates climbed in the second quarter to $29 per square foot.  That is nearly a 40% increase from earlier in 2019.  Rates were holding steady over the previous year as well.  Again, we call this growth.  The economy continues to flourish!  Class A rates exceeded $32 per square foot in submarkets like downtown Durham, Six Forks/Falls of Neuse, and Raleigh.  Where would you expect the first over $40 per square foot to be recorded??  Yep, you guessed it, Kane Realty announced earlier that Tower IV at North Hills hit $41.50.

Trending up.  What goes up must come down…right?  Not in the near future experts say.  There are several proposed projects in downtown (remember the smoke versus fire thing earlier in this post?) that are likely to ask similar rental rates.

By the Numbers: 

7.5% = Class A vacancy rate across the region

3.1% = Class A vacancy rate in downtown Raleigh

Massive Development Project – Johnston County

Whew, this one took some time.  After a year plus of preparation, planning, designing, talking, drinking coffee, more talking, more planning…you get the idea…a new 470 plus acre mixed-use development in Johnston County has officially begun construction.

A 2.8 Million square foot project that will encompass the land running from exits 97 and 98 on I-95 near Selma.  Retail?  You want retail?  Okay, this feature a massive amount fo retail, restaurant, office medical space, hotels, senior living, residential development etc….A total of 1 Million square feet will be created.  Wow!  This isn’t your parent’s Johnston County!!!

Locals will enjoy a farmer’s market, farm to table dining options and other ways to make the residents and workers feel “grounded”.

 

What Are You Looking For?

Our team here at Kima Commercial would love to earn your business.  Whether you need land to build commercial space on, land for residential development, office, industrial, leasing, etc… our team stands ready and welcomes your business.  Our partners are all encompassing.  In other words there isn’t a commercial real estate team member we cannot bring to the table for you.  Meaning if you need a reputable commercial builder to build or do an upfit or just quote one for you, civil engineers, architects, inspectors, designers, etc…we can help.  Please feel free to visit us at one of our two offices.  We currently run our day to day operations for our commercial business out of the Brier Creek location in Raleigh and also have an office in Wake Forest.  We have sold all across the state of North Carolina and have resources across the country.

How Long Can A Good Thing Last? – A Market Update

How Long Can A Good Thing Last? - A Market Update

How long can a good thing last?? Our nation has enjoyed a bull market for nine years—the second-longest stretch since World War II! With such a mix of things to consider these days—low unemployment, increased wages, the impact of new tariffs, new tax laws—individuals and businesses alike are figuratively holding their breath as they wonder how long it can go.

Predictions for the continuation of the bull market were carefully made in LPL’s March 5, 2018 and March 12, 2018 publications. (Note: These predictions were made just as the tariffs on steel were being announced, and before the announcement of trade tariffs on competing countries, so the market fluctuation experienced in the past few weeks due to these tariffs are NOT considered in their analyzation. It will be interesting to see how these changes play out among the indicators by the time of LPL’s next analysis.) To make their predictions, LPL analyzed and explained what they call the “Five Forecasters”: the Conference Board’s Leading Economic Index (LEI), the US Treasury’s Yield Curve, market breadth, market valuation, and the Purchasing Managers’ Index (PMI).

The LEI is a grouping of ten different economic indicators, “including data on employment, manufacturing, housing, bond yields, the stock market, consumer expectations, and housing permits”. In part because it is so diverse, it gives a solid snapshot of the economy’s general health, and has proved to be quite reliable in predicting early warnings of a recession. As of the latest reading, conducted in January 2018, LPL asserts there is a “low probability” of the US going into a recession over the next twelve months.

The US Treasury’s Yield Curve is said by LPL to be “one of the most reliable leading indicators” of an impending recession, as for the last 50 years, the curve has batted .1000 in this arena. When the Federal Reserve raises the short-term interest rates above the long-term interest rates, it creates what’s known as an “inverted yield curve”, and every time this has happened in the last 50 years, a recession has begun within 5-16 months. Right now, the curve is still “fairly steep”, and the estimation is that it could be at least two years before the Feds could raise the short-term rates high enough to trigger the inversion, suggesting the bull market may have quite a ways to go before it is finished.

Market breadth is measured by the number of stocks climbing in value as opposed to falling. As of LPL’s latest analysis in early March, there were no “major warning signs or any concerning divergences” between the breadth and the NYSE Composite Index, which is the comparison for this particular analysis tool.

The Purchasing Managers’ Index (PMI) is based on the “front lines” of manufacturing, despite the fact that manufacturing does not make up a large portion of our economy when measured by GDP. Why? Because the “demand for manufactured goods has been a timely barometer for all types of economic activity in recent decades. In the past, the peak of manufacturing has preceded recession by a period of nearly four years. LPL attests the PMI shows there is “no sign yet of a meaningful peak” in manufacturing, indicating the bull market is still running strong.

Market valuation—though not effective as either short-term or intermediate investment timing tools—have been “solid indicators of long-term stock returns”, and are therefore strategically quite useful. This indicator is the ONLY one of the five indicates a bear market may be coming soon. The reasoning is that price-to-earnings ratios are typically high at the end of a bull market, and that is the case at this point in time. However, as earnings estimates rise—as they have done “significantly” in 2018—this ratio becomes more stable and nearer the long-term averages, thus removing any cause for an earlier-than-anticipated end to the bull market.

Now, what does all of this financial mumbo-jumbo mean in terms of commercial real estate? If you’re a CEO or a Developer, it means you need to strongly—and perhaps quickly—consider your growth plans. Although purchase prices are up from the “dirt cheap” prices of years past, the market is still on an incline and property values have not yet hit their high point, so it’s reasonable to expect prices to continue rising until the market officially shifts to a bear market. All things considered, it’s still a reasonably good time for land transactions.

We look forward to working with you!

Wake Forest and Apex to Get New Sporting Goods Store

Academy Sports + Outdoors to Enter Triangle Market

The Texas based sporting goods retailer, Academy Sports + Outdoors has decided to give Triangle residents options when it comes to buying new bats, basketballs, workout clothes, shoes, that new driver, or that treadmill you have been meaning to buy.  The burgeoning towns of Wake Forest and Apex are the targets for the fast growing retailer.

Academy Sports

Academy Sports + Outdoors

For you Apex residents how does a 64,000+ square foot building sound?  This is planned to be next to Costco Wholesale (new) on US 64 at Nichols Plaza.  Our friends on the north side of the county in Wake Forest may recall the possible future development of the former Parker-Hannifin manufacturing site.  This is located near the Wake Forest Plaza off of Wake Union Church Road.  While the former plans came to halt it appears that a new plan is in place and Academy wants to be an anchor there.  That part of Wake Forest continues to peak the interest of major retailers and there are rumblings of other major news to be released in 2017 possibly.  Exciting times for commercial real estate development in Wake Forest NC for sure.

Academy Sports + Outdoors, while new to the Triangle market is not new to North Carolina.  Having six stores there already and looking for expansion opportunities now the footprint will continue to grow.  Apex officials report, via the Triangle Business Journal, that the proposed Nichols Plaza store is moving along through the process of approvals.  Final construction drawings have been submitted and it is anticipated that construction should begin soon.

Impact?  What impact will the new stores have?  Let’s start with the fact that it will bring approximately an additional 100 jobs to each store.  It should alleviate traffic.  How?  Well in the case of the Wake Forest store it should take many of those drivers heading to Dick’s Sporting Goods in Raleigh off of Capital Boulevard southbound.   Nichols Plaza continues to draw residents in Apex and is quickly becoming a destination.

Competing directly with the large sporting goods retailer, Dick’s Sporting Goods … Academy Sports + Outdoors currently operates approximately 225 stores and is growing quickly.  Dick’s has over 600 stores currently open and also is continuing to grow both it’s brick and mortar footprint in addition to it’s online sales exposure.  It will be interesting to see where the residents of the greater Apex area chose to spend their money…at Nichols Plaza or the established Beaver Creek Commons?  The same could be said of the Wake Forest population…will they continue to flock to the Triangle Town Center store or will the new Academy Sports + Outdoors attract them to stay in Wake Forest?

On a side note, the new Panera Bread Company location in Wake Forest is open for business.  Word is that it is being well received as the coffee is flowing, the soups are bubbling and the pastries continue to be an attraction.  Located in the same location as the ever popular Carolina Ale House, Panera is filling the parking lot for breakfast and lunch while the lunch, evening and weekend crowds at the Ale House continue to make find a good parking spot a challenge!

Kima Commercial, Llc of Keller Williams Commercial is a locally owned and operated commercial real estate firm with offices in Raleigh and Wake Forest.  Our team is prepared to assist you with all of your real estate needs.  Please do not hesitate to call or contact our team, Lisa Thomas, Paul Eitel, Jonathan Williams, and Peter Kima.  www.KimaCommercial.com

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Keller Williams Preferred Realty, 7920 ACC Blvd, Suite 210, Raleigh, NC

919-336-1700

Peter@KimaCommercial.com

We look forward to working with you!

Industrial Real Estate ’17: Continued Growth

Industrial Real Estate ’17: Continued Growth

 

Industrial real estate pros expect the sector to continue posting solid results for developers and investors.

 

Last month, NREI (National Real Estate Investor) released the results of it’s third annual survey of the industrial real estate sector. Year-over-year comparisons reveal where outlooks changed and where they haven’t. Many respondents expect continued improvements in occupancy rates and rents. Here’s what you need to know:

graph kckwCap Rates Will Rise 

For the first time in the NREI survey’s history, the majority of respondents expect industrial real estate cap rates to rise. In the past two surveys conducted by NREI respondents noted cap rate compression. In this year’s survey, the average cap rate came in at 6.1 percent, compared to 6.4 percent in 2016 and 7.1 percent in 2015.

In this year’s survey, 58 percent of respondents expect an increase, while 27 percent expect no change and only 17 percent expect to see further decreases.

Equity & Debt Availability Will Remain Steady

As it relates to equity, 52 percent of participants responded that the availability of capital was unchanged from a year ago, 28 percent said capital was more widely available, meanwhile 10 percent said they were unsure. Similar numbers were received regarding debt. 53 percent said debt availability was unchanged, 23 percent said it was widely available, 16 percent said it was less available, and 8 percent said they were unsure.

Participants were asked how they expect various lending factors to change in 2017. 88 percent responded that they expect interest rate increases and 44 percent responded that they expect a rise in the risk premium. As far as loan-to-value ratios and debt service coverage ratios, respondents don’t expect much change. As that translates to investment activity, 55 percent of respondents said they plan to hold in the sector in the next 12 months. Only 13 percent plan to sell, while 33 percent are looking to buy.

Build Baby, Build  

The outlook among survey respondents is that the level of development is about right for the sector, and there is very little fear that too much space is being built. 58 percent of respondents feel that the level of development is the right amount (probably developers), 21 percent feel there is too little development occurring (probably builders and architects), only 11 percent said too much development is taking place (probably the EPA), and the remaining respondents said they were unsure (probably politicians).

According to a Cushman & Wakefield report, 232.9 million sq. ft. of industrial product was delivered in 2016. Currently, there is an additional 215.6 million sq. ft. of industrial product under construction. NAI Global reports that 15 markets saw net absorption increase, 13 saw construction rise, and 19 experienced increases in asking rental rates; Overall, 10 markets saw increases in all three. In addition, 19 markets recorded positive absorption, with 14 also seeing drops in vacancy, indicating a national trend for industrial space surpassing supply.

Survey participants were also asked to estimate how much additional supply their markets could absorb: 72 percent said their markets could absorb additional supply equal to between 5 and 19 percent of current inventory. 12 percent estimate the market can absorb new supply equal to 25 percent or more of current inventory. Experts at Kima Commercial are reporting a demand for additional supply, in some cases speculative in nature. As a result, another factor affecting supply in some markets is the conversion of old industrial boxes into other uses. Overall, 70 percent of respondents said this activity is taking place in their markets. Kima experts have witnessed this in Raleigh-Durham and several of the surrounding rural markets where large old industrial boxes are common and available.

Conclusion 

As of January 2017, the industrial sector has registered 27 consecutive quarters of net occupancy gains. It is among the strongest three-year periods on records, the most recent of comparison took place from 1997 to 1999. Industrial real estate professionals nationwide expect further gains in 2017. The national industrial vacancy rate for all product types continued to decline in the fourth quarter of 2016 and U.S. industrial asking rents have increased.

Given the information gathered by NREI and what Kima Commercial’s experts are reporting at the local level, it is safe to conclude that most will remain bullish on the industrial real estate sector. It is also important to note that when respondents to NREI’s survey were asked to rank the relative strength of their regions the South ranked second behind the West.

Earlier this year Kima Commerical brokered a historic land transaction in Youngsville, North Carolina for industrial development. The project consists of a 365,000 SF warehouse and manufacturing facility for K-Flex USA, an international manufacturer of elastomeric foam rubber.

 

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Keller Williams Preferred Realty, 7920 ACC Blvd, Suite 210, Raleigh, NC

919-336-1700

Peter@KimaCommercial.com

We look forward to working with you!

Growth in ’17: Coming to a Tertiary Market Near You

Growth in ’17: Coming to a Tertiary Market Near You

 

Over the past decade, as our economy has picked up steam, we’ve witnessed the big city make its long awaited comeback. Cities such as Austin, Denver, Dallas, Phoenix, and our own Raleigh have been prime examples. Capturing headlines daily, large commercial real estate projects are popping up everywhere. A new week, a new twenty story tower somewhere in downtown or mid-town Raleigh.

These trends and investments are no doubt exciting and uplifting news for all. Therefore, it’s no surprise they’ve held a firm grip on commercial real estate news headlines over the last several years. However, as these primary markets have continued to get all of the love and affection, what’s going on in our smaller, tertiary markets?

Where do they fit into the changing real estate landscape? Demographic shifts, technology advances, retail, and investment opportunities in tertiary markets have forced many in the industry, that are looking at buying or selling commercial real estate, to pause and reexamine their strategies.

Demographic Shifts

Millennials, the largest generation in American history, have fueled much of the demand in major downtown cores. The theory is that they dig many of the amenities of urban living, such as foodie spots, breweries, nightlife, and cultural events. But what happens as this generation ages and many couples begin to start families?

The urban boom won’t last forever. History shows us that people relocate when their lives and their needs change. Cost of living, housing availability and size, and school districts are major factors in drawing millennials, and many others to these smaller markets. Additionally, smaller, suburban town centers and continued employment opportunities are drawing people to these outlying areas.

A recent Urban Land Institute study titled “Demographic Strategies for Real Estate” predicts that nearly 80 percent of household growth will occur in the suburbs in the future. And while the projected number for rural growth comes in much lower, technological innovation may provide greater opportunities for those areas long-term.

Technological Advances

In addition to the many amenities offered by primary markets, they also offer the ability to live in close proximity to work. However, technology looks to be changing that. The expansion of high-speed internet and other telecommunication provides the freedom to many consumers and businesses to operate from smaller, less dense communities. People once predicted the end of small-town America because of technology advances that were only accessible in large city centers. However, the evolution of technology has done just the opposite. It allows those in smaller markets to be just as connected as they otherwise would be in any primary market.

Retail and Investment Opportunities

As we look at the big picture, the population increases and technological advances make tertiary markets much more attractive to investors and retailers. These markets offer value opportunities for investors and retailers that want to avoid highly saturated primary markets. Certain retailers may look at towns of 150,000 people or more, yet the highest yield opportunities might exist in towns of less than 50,000. These markets offer benefits such as more available land, lower development and redevelopment costs, and generally less competition.

For investors, such as smaller entrepreneurial developers, less competition generally means lower barriers to entry in tertiary markets. Prices are generally held lower than primary markets, which opens the field to a wide range of investor types.. As PwC and the Urban Land Institute pointed out in their recent “Emerging Trends in Real Estate 2017 Report”, most respondents, unsurprisingly, appreciate markets that can generate attractive cash-on-cash returns. This is much easier to accomplish in tertiary markets due to rising rental rates and the lower investment requirements.

As the economy continues its recovery, we’ll likely see tertiary markets play a more vital role in the real estate game. As populations shift and smaller markets grow, demand for retail expansion will follow suit. With that in mind, and the potential for high yields, we’ll likely see these smaller markets account for a significant portion of the investment sales in the coming years.

Kima Commercial’s team of knowledgeable real estate professionals have a presence the triangle’s many attractive tertiary markets. If you’re a business, investor, or retailer looking for expert advice related to these hot areas please contact us today.

 

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Keller Williams Preferred Realty, 7920 ACC Blvd, Suite 210, Raleigh, NC

919-336-1700

Peter@KimaCommercial.com

We look forward to working with you!