DealStreetAsia.com has a good look at the growth of warehouses as real estate investments, With e-commerce booming, warehouses are now worth more than office buildings.
Colliers looked at 14 North American markets (all but one, Toronto, in the U.S.) and found that such warehouses sold last year at an average capitalization rate of 5.8 percent. That’s comfortably lower than the 6.7 percent cap rate for U.S. office space, including suburban and rural properties, and neck and neck with offices in central business districts, at 5.7 percent. Cap rates, which measure yield, fall as asset values rise.
These are not the sleepy warehouses of old. Distribution centers today are hives of activity.
As e-commerce companies race to get….those packages…to your doorstep ever faster, they need sophisticated equipment to assemble orders and a swelling workforce to manage it all.
The report itself didn’t look at office properties, and markets dominated by offices aren’t always the same as major industrial markets. Still, the rise of the warehouse’s value is unmistakable nationwide, said Pete Quinn, national director of industrial services for the U.S. at Colliers.
Vacancy rates are at “historic lows,” Quinn said, and despite a lot of construction, warehouses are being leased as soon as the cranes come down.
For those looking to make value-add investments in warehouses across the Philadelphia area, this could be a great opportunity.
For those looking to invest in office buildings, this recent article, Why Mid-Rise Buildings Are the Future of Office Investment, by Tim Lee a VP with the Olive Hill Group on the National Real Estate Investor site (www.nreionline.com) has some excellent insight on the benefits of considering mid-rise office buildings as a real estate investment strategy.
The article makes some excellent points, especially with the look at how you can re-work these older office spaces to meet today’s tenant demands for additional amenities and the ability to potentially add a co-working space to further increase NOI and reduce vacancy outside Philadelphia.
Because of the increasing demand for creative office and co-working space, today’s office owners and investors can charge premium rents for office spaces that offer the latest and greatest in creative office and co-working amenities. Many of these amenities are much better suited for low- to mid-size office product rather than high-rise office buildings.
The office campus type feel that many companies and firms look for in their office space is essentially impossible at a high-rise building.
Examples of such amenities include:
(These outdoor amenities are often located on the ground floor.)
In a high-rise, these amenities become exponentially more difficult and less convenient to access for a tenant on the 25th floor.
Renovations to turn a property into creative office space can become increasingly time-consuming and costly at a high-rise development.
Smaller office product is also simply easier to manage and to create a sense of community in. By fostering this feeling of a tight-knit office community between tenants, owners can foster loyalty to a property, which increases tenant retention and NOI.
This interaction between multiple companies and firms leasing office space at the same property is virtually impossible to achieve at a high-rise development.
As this demand for inter-office connections and for the community feel becomes increasingly popular, more and more office investors will turn to mid-rise properties as the best product for providing this environment.
The whole article is definitely worth a read, but as a real estate investor looking for strategies to improve suburban office building investments through creative value-add strategies like adding a co-working space, thinking outside the box is going to be a key.
A growing opportunity for investors in warehouses and industrial properties is the potential to offer cold storage, to meet a rising demand. BisNow has a recent article, about the growing demand for cold storage facilities, Grocery Delivery, Cold Storage Demand Grows Across The U.S.
As the grocery delivery market continues to expand, that boom could drive up demand for cold-storage spaces by 35M SF over the next seven years, CBRE reports.
“As e-commerce expands further into the grocery business, the resulting growth of the food supply chain and demand for new, climate-controlled warehouse space could very well be the new opportunity that investors and developers have been seeking,” CBRE Global Head of Industrial & Logistics Research David Egan said in a statement.
Online grocery sales are expected to increase from 3% to 13% of all grocery sales by 2024.
There could be a great potential for those looking to invest in strategic warehouse properties which can be fitted to be cold storage facilities. Likely, the greatest demand will come around Philadelphia and the suburbs. Areas like Lancaster County or in Southern New Jersey, like Salem County, could see increased demand for warehousing and cold storage.
In addition to suburban areas, which should see increased demand, we could see value-add plays in and right around Philadelphia, with real estate investors looking to meet the e-commerce need for last mile delivery.
Jim Walsh of The Courier-Post has some insights into PREIT’s year-end reporting, Loss rises for operator of South Jersey malls. It definitely has been a tough year for retail property investors and owners, especially those who own and operate malls.
PHILADELPHIA – The owner of the Cherry Hill and Moorestown Malls has reported an annual loss of $61.3 million, but asserts it has faith in a turnaround effort.
The financial results, including a sharply lower deficit for 2017’s fourth quarter, “confirm that our strategy … is yielding successful results,” said Joseph Coradino, CEO at Pennsylvania Real Estate Investment Trust.
“We’re in a strong position to drive revenue into the future,” Coradino said in a conference call with investment analysts Thursday afternoon.
He noted the Philadelphia firm has responded to a “contracting retail environment” by selling off 17 low-performing properties and diversifying away from traditional mall anchors.
We’ve seen more reports of malls like the Burlington Center Mall potentially closing, and continually hear stories of more retail tenants going bankrupt. While it looks like the strongest malls like King of Prussia just outside Philadelphia will continue to do well, there are definitely areas where mall owners will need to start becoming more innovative.
Many times when doing one-off events, small business owners neglect to think about the insurance ramifications. It is especially important to consider the liability if people are going to be on your property or you are hosting an event.
This can be especially true for real estate investors who are looking to use guerrilla marketing techniques to get the word out about their business or new property.
Innovative entrepreneur Neil Patel (Quicksprout, Crazy Egg, KISS Metrics, NeilPatel.com) has a great article in Forbes with some excellent ideas for how to market a small business, from using handwritten notes to hosting/organizing events.
One thing that immediately jumped to mind is that for many of the ideas it would be important to check or change your small business’s insurance coverage.
Many real estate investors are often reluctant to branch outside their market and this is often for good reason. No matter if your preferred method of real estate investing is buying houses quickly for cash in Lancaster or investing in commercial properties, once you have a good system it’s hard to take the risk in an unknown market.
If the fundamentals in your real estate market are starting to change and you are considering looking into new markets. This article is a great read for any real estate investors looking to branch into a new market, How to expand your real estate investing business into a new market.
It wasn’t all that hard for me. This is essentially the same plan I executed back in 2003 and 2004 when I felt this market just didn’t make sense anymore. The difference is that I’ve learned a lot of lessons since then, and I’ve grown much more confident in my abilities and investment criteria.
About a year ago, I actively started to lay the groundwork for my plan to start buying properties outside of our local market. These homes would be long rental properties and the target markets would have better returns and the prices more in line with local economic activity — for example, median household income and job growth.
One area that could be interesting for Philadelphia real estate investors looking to buy a coastal home is his opinion on buying coastal investments and the difference in insurance costs. It is also important to note on the maintenance costs of owning a beach home, you are likely to incur higher maintenance costs, the closer the home is to the water. So the length of the vacation rental season can be an important consideration.
Now there is a downside to this property. It’s in a coastal county, so the insurance is higher. You have to get a separate wind and hail policy even though it’s more than 10 miles from the coast.
The wind and hail more than double the price of the insurance costs. Eighty dollars might not sound like much, but it’s nearly 12 percent of my gross monthly income. That’s a big hit. Many markets have their own little unique surprises, and that’s a major danger of taking your investments out of town.
All of these expenses are key expenses that an investor has to account for. Many times they’re just best guesses. I relied heavily on the costs I was accounting for on my existing properties in the area.
Though costs can definitely be much higher, it is possible to find good investment properties along the coast from the Jersey Shore to the Outer Banks. As we’ve highlighted before it can be possible to buy a beach house that is cash flow positive or even own a beach home and look to minimize taxes long-term.
The Courier-Post Online has an update on what’s happening at the Burlington Town Center, Burst pipes shutter Burlington mall, but will it reopen?
The Burlington Center Mall opened in 1982 amid much excitement from local residents.
It brought jobs, a wide array of retail stores, and several strong anchor stores, such as Strawbridge & Clothier and Sears, and a wonderful food court.
Its location between Interstate 295 and the New Jersey Turnpike with proximity to routes 130 and 38 was another attraction.
It closed on Jan. 8 – although Sears remains open – after damage from burst water pipes, and township officials say they can’t say whether it will reopen. The ailing mall was down to about five remaining stores with about 90 vacancies.
Corter reiterated, however, that township officials have not been given any official word that the mall is closing permanently.
A quick look at Google shows the mall had been struggling for awhile.
If the mall is indeed closed, one has to wonder about the redevelopment opportunities.
Though are a number of malls across the country has closed for good, some innovative real estate investors have found great opportunities in redeveloping the properties into something more desired by today’s shoppers. One local mall redevelopment that is being undertaken, in the Delaware County real estate market, is the Granite Run Mall. The former Granite Run Mall is being turned into the Promenade at Granite Run.
With a completely different feel than malls of old, Town Centers are attractive to both shoppers and tenants. Will be interesting to see if something similar is undertaken at the Burlington Center Mall in the future.
BillPenn.com has some great info on the changes coming to i-95 and the area around the airport, Flowers, forests, bike lanes: Major upgrade coming to PHL Airport surroundings.
The inside of Philadelphia International Airport has seen substantial renovations over the last year. In 2017, Terminal B was redesigned for a hefty $900 million, including the addition of new restaurants and iPads at passenger gates. Plus, curated art exhibits are regularly updated to give passengers something to look at while they navigate the terminals.
Up next for PHL? An upgrade for the outside.
On Thursday evening at the Philadelphia Flower Show, four landscape design teams presented their ideas to revamp the land around the airport — both directly outside and along I-95 leading up to the terminals.
As great an addition it will be to those traveling and living near the airport, it could also present a great chance for real estate investors looking to invest in Southwest Philadelphia real estate.
For those looking to sell a home quickly in Southwest Philadelphia, our team is standing by.
For those looking to invest in the changes to the retail landscape, industrial properties continue to be an interesting opportunity. It seems that now strategically located industrial properties are increasing in demand due to the growth of online grocery sales. BisNow has an excellent look at this continuing trend, Online Grocery Sales Skyrocketing Despite Dearth Of Warehouse Space.
The demand for home delivery of groceries ordered online is skyrocketing. Everyone wants what they want and they want it now, said Michael Roe, an account executive with warehouse operations firm DMW&H.
According to a recent report by the data measurement and analytics company Nielsen, online grocery sales reached $20.5B in 2016 and are expected to climb to $100B by 2025 and make up 20% of total grocery retail sales.
The logistical side of this trend is still in the infant stages, Prologis Investment Officer Darren Kenney said at the NAIOP CRE.Insights: The Last Mile conference in Seattle.
Kenney spoke at the conference with Roe and JLL Executive Vice President Matt Powers. “We think grocery is the least-penetrated of the e-commerce game,” Kenney said.
Savvy real estate investors, will be on the lookout for off-market industrial real estate investments across Philadelphia and strategic locations across the suburbs like in Delaware and Montgomery County.
Owners of older industrial properties looking to sell for cash may also find this an opportune time to sell their real estate quickly.
Warehouse logistics are undergoing a seismic shift, Kenney said. In the past, warehouses were for storage. That meant remote locations were fine as long as they were close to a freeway.
“The whole supply chain has changed,” he said. The new goal is to be as close to urban centers as possible.