st. louis - Newmark Grubb Zimmer

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project, Sealy & Co Industrial Portfolio, and the OPOP Tower and. Lofts. ... Source: Newmark Grubb Zimmer Research,
Research ST. LOUIS 1Q 2017 CAPITAL MARKETS

Sluggish Start for Investment Sales Volume in 1Q 2017 The year 2017 is off to a slow start as investment sales volume in the first quarter lags behind 2016 with a 26.1% decrease compared to this time last year. Several factors may be in play including uncertainty from the result of the 2016 Presidential election and anticipated interest rates hikes. The Federal Reserve announced a 25 basis point increase in the federal funds rate amid rising confidence that the economy is poised for more robust growth. The Fed also announced that this would be the first of several increases in the coming 12 months.

Current Conditions

Transaction Volume – First-quarter 2017 closed with $487.5 million in investment sales transactions located within the St. Louis metropolitan market, a 26.1% decrease compared to first-quarter 2016. Investment Demand – For class A institutional quality product capitalization rates registered 7.0% in first-quarter 2017, a decrease of 30 basis points compared to first-quarter 2016. Average Asking Rent (Price/SF) $20.00 $16.00 $12.00

Despite increases in interest rates from lenders as a result of the Fed’s increase in the federal funds rates investors have continued to chase yields keeping cap rates relatively steady if not slightly lower over the last 12 months compared to last year at this time. Investors looking to deploy capital have remained aggressive with their acquisition strategies and have paid up for good quality product. Cap rates for Class A institutional product in the first quarter of 2017 saw a decrease of 30 basis points in comparison to the first quarter of 2016. With the Fed increased rates once during the quarter and signaled possibility of additional increases, we anticipate steady investment activity in the near term and a likely increase in cap rates for Class A institutional quality product.

$8.00 $4.00 $0.00 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 Office

Industrial

Retail

Vacancy (%) 17.50% 15.00% 12.50%

Multihousing and industrial assets led the way in the first quarter of 2017 and over the last 12 months accounting for over 56% of total sales volume. This large volume can be attributed to several large transactions including the sale of the The Boulevard mixed use project, Sealy & Co Industrial Portfolio, and the OPOP Tower and Lofts. Office and retail lagged behind with $506 million and $461 million respectively over the last 12 months. Overall market dynamics are still strong and healthy with average asking rents for all property types continuing to grow at a slow and steady pace and vacancy rates steadily decreasing. Net absorption in the first quarter remained strong with just under two and a half million square feet of office, industrial, and retail product absorbed staying on pace with the quarterly average over the last 12 months.

10.00% 7.50% 5.00% 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 Office

Industrial

Retail

Net Absorption (SF), in millions 5.00 3.75 2.50 1.25 0.00 -1.25 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 Office

Industrial

Retail

Research ST. LOUIS 1Q 2017 CAPITAL MARKETS www.ngzimmer.com

Significant Sales Transactions | First Quarter of 2017 Sector

Building

Submarket

Sale Price

Price/SF

Retail/Off/Multi

The Boulevard (5 Bldgs)

Industrial

Sealy & Co. Portfolio (3 Bldgs)

Retail

Square Feet

Clayton

$53,000,000

$123

429,380

North County

$39,000,000

$42

926,290

Lincoln Place Centre

Metro East (Illinois)

$35,400,000

$130

272,060

Multihousing

OPOP - Tower & Lofts (2 Bldgs)

Downtown

$35,000,000

$128

273,060

Office

One Chesterfield Place

West County

$27,500,000

$192

143,470

Office

Park 270 I & II (2 Bldgs)

Mid County

$25,500,000

$93

274,650

Office

Railway Exchange Building

Downtown

$20,000,000

$17

1,200,000

Multihousing

Maryland Park Apartments

Mid County

$19,232,400

$91

212,388

Industrial

St. Louis Commerce Ctr I & II (2 Bldgs)

St. Louis City

$16,900,000

$35

487,150

Industrial

Wentzville Distribution Center

St. Charles County

$16,790,000

$42

400,070

Retail

Walmart – Mid Rivers Mall

St. Charles County

$12,610,200

$296

42,600

Multihousing

The Magnolia Apartment Homes

West County

$10,450,000

$71

147,120

Sales Volume by property Type

Multihousing and industrial properties have had the largest investment volume over the past year, totaling over 56% of activity in St. Louis.

St. Louis; 12-Month Totals

Hospitality 2.8% Retail 19.5%

Multihousing 29.8%

Office

Property Type

Volume

# of Properties

Multihousing

$707.1 M

44

Industrial

$629.5 M

63

Office

$506.9 M

47

Retail

$461.5 M

54

Hospitality

$66.2 M

7

$2.3 B

215

22.7% TOTAL

Industrial 26.5%

* Percentages based on total volume Source: Newmark Grubb Zimmer Research, Real Capital Analytics

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Research ST. LOUIS 1Q 2017 CAPITAL MARKETS www.ngzimmer.com

TOP REGIONAL Buyers

All Property Types; 12-Month Totals Southwest

West

Company

Volume

Company

Midwest

Volume

Company

Volume

Company

Northeast

Mid-Atlantic

Southeast

Volume

Company

Volume

Company

Volume

Blackstone

$4.8B

Blackstone

$2.0B

Anbang Insurance

$952M

Regency Centers

$2.1B

GIC

$1.1B

Citigroup

$1.9B

Anbang Insurance

$2.5B

Cousins Properties

$1.4B

American Realty Advisors

$743M

MAA REIT

$2.0B

Blackstone

$1.0B

Allianz

$1.8B

TIAA

$2.2B

MAA REIT

$1.4B

HNA Group

$674M

Cousins Properties

$1.4B

Korea Investment Corp

$966M

China Investment Corp

$1.7B

Invesco

$1.8B

Transwestern

$964M

Brookfield

$610M

Northwood Investors

$1.2B

MGM Resorts International

$904M

RXR Realty

$1.7B

CalPERS

$1.3B

Mirae Asset Financial

$822M

Davidson Kempner

$490M

Preferred Apartments

$805M

Unizo

$844M

China Life

$1.7B

Source: Newmark Grubb Zimmer Research, Real Capital Analytics

MOST ACTIVE BUYERS BY ASSET TYPE 12-Month Totals (in millions)

$144

$44 Somerset Partners Monarch FPA Multifamily Fireside Financial Aragon Holdings

$45

$42 $41 Ventas Lexington Realty Exeter DekaBank Cole Capital

$35

$44

$43

$40 $39 Amerimar Enterprises Hunter Newby Scott Properties Hudson Holdings Enterprise Holdings

Source: Newmark Grubb Zimmer Research, Real Capital Analytics

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$24 $23 $23

HOSPITALITY

$52

$63

$53

RETAIL

$79

$53

OFFICE

$95

INDUSTRIAL

MULTIHOUSING

$122

Marcus Corp Acadia Realty Rodin Global Prop Trust Condor Partners Edwards Realty Co

$22 $13 $8 $7 $7 MCR Development LLC Bucksbaum Retail Props Hawkeye Hotels Atira Hotels Sarabjit Singh

Research ST. LOUIS 1Q 2017 CAPITAL MARKETS www.ngzimmer.com

St. Louis, MO 8235 Forsyth Boulevard Suite 310 Clayton, MO 63105 314.254.4600

Newmark Grubb Knight Frank United States Office Locations

Kansas City, MO 1220 Washington Street Suite 300 Kansas City, MO 64105 816.474.2000 Lee’s Summit, MO 1485 SW Market Street Lee’s Summit, MO 64081 816.474.2000 Salina, KS P.O. Box 3224 Salina, KS 67402 785.342.9106

Mike Carlson, SIOR, CCIM Executive Managing Director, Principal St. Louis 314.628.0438 [email protected] Kevin McLaughlin, SIOR Executive Managing Director, Principal St. Louis 314.628.0436 [email protected] Michael L. VanBuskirk Executive Managing Director, Principal Investment Sales and Capital Markets Kansas City 816.512.1010 [email protected] Christopher S. Robertson Associate Director Investment Sales and Capital Markets Kansas City 816.512.1014 [email protected] Andrew J. Garten Director, Research 816.474.2000 [email protected]

Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.