Google Drives Real Estate

I recently read a NY Times article from 2010 about Google’s autonomous (driverless) car project and was struck with how much this could affect not only my profession, but millions of Americans.  The world really.  Here I am, sitting in a city with more miles of roads per capita than any other city in the nation.  Who else better to benefit from a reduced dependency on people actually driving cars.  Follow me on this:

I’m guessing I spend at least 5 hours per week in my car, to and from the office and showings.  Imagine instead I could step into a car and be transported anywhere in the city with the push of a couple of buttons.  Plus, now I can use my computer, make phone calls, grab lunch on the go, etc.  I have just become 12-13% more effective.

But think now about how this affects real estate.  Maybe now I don’t mind having my house be an hour from the office because I can eat breakfast, read the news, and shave all before I hit the front step.  The “value” of highway visibility goes way down since I’m no longer forced to keep my eyes on the road, so now retail properties can locate further out without a major hit in sales.  My industrial clients become less focused on the exact location and more on building layout.  Traffic patterns become fundamentally different from what they’ve been for the last 90 years.

With a city surrounded on all sides by corn fields, maybe it’s a good time to speculate on some impending sprawl and buy up some rural land sites.

 

Horizons Developer Optimistic About New Construction

NAIOP hosted a luncheon yesterday on the topic of the soon-to-be-developed Horizons development in Riverside, MO.  Nathaniel Hagedorn, master developer for the Horizons project and the highly successful Briarcliff development, gave an overview and explained they were current negotiating on 2 million square feet of industrial users as well as 200,000 square feet of office users.  The draw for the area being a centralized Northland location in between the airport and downtown  KCMO, as well as some sweet incentive packages and design features that they hope will allow them to stand out from competing sites.

One of the most interesting morsels I gathered was that Nathaniel regularly takes his development team to other mixed use developments around the Midwest.  One of those developments that provided the inspiration for the lakes and canals planned at Horizons is New Town at St. Charles.  New Town is primarily a residential community, but the canal systems added a sense of community that Nathaniel is betting will flow over to an industrial and office development.

From my perspective, Horizons is akin to Corporate Woods in Johnson County (which I might add has done very well over the course of time), except with kayaks instead of runners circling the campus on weekends.  I sat next to Chad Meyer with ARCO during the luncheon (they will be handling the vertical construction portion) and he confirmed they look to be very busy in 2012 on this project.

 

Lee & Associates National Conference 2011

Having been back in the office for a week now, it’s given me some time to reflect on the Lee & Associates national conference dubbed”Lee Summit 2011″. 

First let me say, what an amazing company.  The business model is unlike any other real estate firm in the nation, where the brokers themselves are the shareholders who are also the managers.  It creates an alignment of interest that doesn’t exist in a typical publically-traded brokerage houses.  At one point it was described by the COO as the “New York Yankees” of CRE companies because the attractive commission split allowed for the attraction of top talent in each market. 

Meetings were held detailing the exciting new website and back-end system to be unveiled shortly, as well as break-out sessions by specialty type.  Perhaps the most interesting and value-packed panel was the Top Brokers panel where we heard from 5 of the top Lee & Associates brokers around the county.  These were some of the take-aways I wrote down:
- Break all brokerage actions down into three silos: prospecting, winning, and transacting business;
- Set six priorities each day;
- Call 5 new companies every day, 5 past clients;
- Regularly author publication articles;
- Take two new classes every year and never stop learning;
- Working in teams is recommended to highlight strengths of each broker;
- Rely on your assistant to help manage your workload.

 

SIOR Commercial Real Estate Index

The Commercial Division of the National Association of Realtors released a report titled “Commercial Real Estate Remains Soft but Favors Business Expansion” on Friday.  They cited vacancy rates leveling off in some sectors, but rent discounts and moderate levels of landlord concessions in most every market.

The Society of Industrial and Office Realtors, in its SIOR Index, agreed that vacancy rates are “beginning to level” but that rents remain depressed and sublease inventory is high.  Their index improved 2.8 points to 41.0 at the end of the 2nd Quarter, it’s third consecutive quarterly improvement.  However, with market equilibrium equal to a 100 on the index, we have a long way to go.

You can read the full article at http://www.realtor.org/press_room/news_releases/2010/08/commercial_soft

 

Jackson County Industrial Market Update

Below are a few graphs that track some key factors affecting the Jackson County, Missouri industrial sale market.  Data provided by The CoStar Group.

You can see above that total available listings FOR SALE have climbed steadily from around 100-150 listings in 2005, and are now hovering around 285 listings currently.  Yikes.

Jackson County industrial sale transactions have struggled in recent quarters, averaging only 10-11 sales transactions per quarter.  Doing some quick math tells us that if sales transactions remain stable at that rate, there is currently have about SEVEN YEARS of inventory currently on the market. 

Digging a little deeper into the data, we can see that the average Time To Sale in Jackson County - meaning the difference between the closing date and the original listing date - has also been increasing over the past few quarters.  Back in 2005 industrial business owners could expect on average that it would take 200 days (roughly 6 months) to close on a new listing.  But NOW, much to the frustration of building owners and brokers alike, the average gestation period for industrial buildings has grown to around 400 days (just over 1 year). 

The good news is that property owners who develop relationships with strong, quality brokerage firms will almost always outperform the market.  We have found this to be true with our clients, and we are always looking for more opportunities to help owners with their real estate needs. 

For more detailed market information or for a free analysis on your property, contact Russ Pearson or Nathan Anderson with Harbinger Property Group at 913.890.2000.

 

Johnson County Industrial Sale Market Update

Here is a quick glance at some key factors affecting the industrial real estate market in Johnson County, Kansas - data provided by The CoStar Group.

The above graph shows that total industrial listings have been trending upward from around 55 properties in 2007 to 130-140 properties currently for sale.  This is indicitive of a softening market possibly bordering on over-supply.

Actual closed sale transactions however, have remained relatively steady; averaging just 8-9 industrial properties per quarter.  This means there is currently about 14-15 quarters worth of inventory on the market (roughly 3 1/2 years).  At this rate it will be quite some time before we reach “balanced” market conditions.

Lastly, this is a very interesting graph showing the differential between the asking price on a property versus the actual sale price.  The general rule of thumb is that as brokers we expect this number – in a healthy market – to be roughly 5-10% because sellers will often price buildings with a little negotiation room built in.  You can see that most recently sales in 2010 Q2 have reached over 17% below the asking price.  Please note that these statistics do not take into account if there were any price reductions from the original asking price PRIOR to going under contract, so if anything these numbers might actually be higher in reality.

For more detailed information or a free analysis on your industrial property, contact Russ Pearson, Nathan Anderson, or Brent Peterson at 913.890.2000.

 

National Industrial Sales & Cap Rate Trends

Real Capital Analytics tracks the volume of national industrial property sales and offerings over time.  Interesting to note not only the fall in volume, but the “gap” between offerings and actual sales.

It’s important to note that RCA is tracking sales of $2.5M or greater, leaving the typical user building market unmeasured here.

Further, they track the cap rates over time.  Note the gap between offered cap rates and where they finally trade.

As cap rates increase, property values decrease due to the changing yield requirements by investors.

 

Construction Expected To Increase

“We’re really at the start of the next construction cycle” said Robert Murray, VP of Economics for McGraw-Hill in his opening address at the 2010 American Institute of Architects National Convention in Miami.  Murray is predicting a  10% gain in overall construction starts this year, and a 23% gain in 2011.  That’s good news for all the construction-related industries that have put their business on ice in recent months, and especially good news for those of us in the brokerage and development industries.

You can read a summary of his presentation here: http://www.aia.org/practicing/AIAB083390

 

HPG Dominates 2010 Industrial Leasing

Harbinger Property Group was involved in negotiating more of the top 40 industrial leases than any other commercial real estate firm in Kansas City by a decent margin, according to a First Quarter 2010 report published by the The CoStar Group.  One-fifth of the top 40 leases reported had a Harbinger agent either representing the Landlord or Tenant in the transactions.

 

Harbinger Nabs Several 2009 Top Sales Awards

Harbinger Property Group was the recipient of several recent top sales awards for the Kansas City market. 

For the second year in a row, Harbinger was named a “CoStar Power Broker” for being a Top 10 firm based on commercial real estate sales volume.  Not bad, especially considering the market turmoil that occured during those years.

In addition Nathan Anderson, SIOR, CCIM and Patrick Meraz, CCIM, were individually recognized as “CoStar Top Sales Brokers” for their 2009 sales production.  Both Nathan and Patrick are principals of Harbinger Property Group.

Russell Pearson also was recently awarded the 2009 REALTOR Rookie of the Year by the Kansas City Regional Association of Realtors.  A big honor; awarded to only one agent in the market based on criteria such as sales volume, transactions, ethics, cooperation, and continuing education.