Analysts say that in spite of deal flow slowing and properties remaining on the market for longer periods of time, the market supply of net lease assets increased in the fourth quarter. In the first quarter of 2022, cap rates for retail, office, and industrial properties were all close to historic lows. However, when borrowing costs rose throughout the year, retail and office cap rates soared. Office cap rates increased by 25 basis points from Q1 to Q4, while single-tenant retail cap rates increased by 20 basis points. According to industry analyst findings, the spread between industrial cap rates only increased by 5 basis points.In the fourth quarter, the supply of net-leased properties grew by over 10%. Cap rates on recently built facilities leased to Dollar General increased by 40 basis points over the previous quarter. Additionally, 7-Eleven (+25 bps), DaVita Dialysis (+25 bps), and Starbucks (+15 bps) also saw cap rate growth.
According to analysts, based on 2022 Q4 results, transaction volume for the net lease sector will continue to lag behind the robust transaction levels of 2021 as increased borrowing costs and a diminishing number of 1031 exchange investors limits transactions. Net lease investors will closely follow the Federal Reserve’s future meetings since its monetary policies will continue to affect the market.
Our Orange County commercial real estate brokers will help you every step of the way in finding the right multifamily investment property, contact us for details.
Orange County is one of the most sought-after places to invest in commercial real estate. With its vibrant economy, abundant entertainment, and diverse landscape, Orange County is the ideal place to invest in commercial real estate. Whether you are an individual investor looking to purchase a commercial property or a business owner looking to expand your operations, Orange County offers a wide range of commercial properties for sale.
Orange County is home to many different types of commercial properties for sale. From office buildings and retail spaces to industrial and warehouse properties, Orange County has something for everyone. The region has also been experiencing a surge in investment activity in recent years, making it an attractive destination for investors.
When it comes to investing in a commercial property in Orange County, there are a few key factors to consider. First, it’s important to assess the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.
Second, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.
Third, it’s important to assess the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation. Finally, it’s important to consider the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation.
When it comes to investing in commercial real estate in Orange County, there are many benefits to consider. First, the local economy is strong and growing, making it an attractive destination for investors. This can translate into appreciation potential and rental income potential.
Second, the area is home to a variety of businesses, making it an ideal place to invest in commercial properties. There are a variety of different types of properties available, from office buildings and retail spaces to industrial and warehouse properties.
Third, the area has a vibrant entertainment and cultural scene, making it an attractive destination for businesses and investors alike. This can help to drive up property values and attract tenants. Finally, the area has excellent transportation links, making it easy to reach from other parts of the country.
When it comes to finding a commercial property in Orange County, there are a few key steps to consider. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.
Second, it’s important to analyze the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.
Third, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.
Fourth, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.
Finally, it’s important to evaluate the financials of the property, including the cost of acquisition and the cost of holding. This will help you determine the best investment strategy for your needs.
Before investing in a commercial property in Orange County, it’s important to consider a few key factors. First, it’s important to evaluate the financials of the property, including the cost of acquisition and the cost of holding. This will help you determine the best investment strategy for your needs.
Second, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.
Third, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.
Finally, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.
When it comes to finding the right commercial property for sale in Orange County, there are a few key tips to consider. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.
Second, it’s important to analyze the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.
Third, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.
Fourth, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment
Finally, it’s important to evaluate your own financial situation and determine what type of investment strategy best suits your needs. This will help you make an informed decision when it comes to investing in a commercial property in Orange County.
When it comes to financing a commercial property in Orange County, there are a few key considerations. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.
Second, it’s important to assess the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.
Third, it’s important to evaluate your own financial situation and determine what type of investment strategy best suits your needs. This will help you make an informed decision when it comes to financing a commercial property in Orange County.
Finally, it’s important to consider the types of financing available. Many investors turn to traditional lenders, such as banks and credit unions, to finance their commercial properties. Other investors look to private lenders or alternative financing options. It’s important to evaluate all of your options and choose the financing option that best suits your needs.
Investing in commercial real estate in Orange County can be a great way to build wealth and generate passive income. However, it’s important to do your research and consider all of the factors before making an investment. It’s important to understand the local market, evaluate the potential for appreciation and rental income, assess the location of the property, and evaluate your own financial situation.
With the help of SVN Vanguard, you can find your ideal commercial investment property in Orange County. Our team of experienced real estate professionals can help you find the right property for sale and provide the guidance you need to make an informed decision. Contact us today to get started on your commercial real estate journey.
We are ready to assist investors with Santa Ana commercial properties. For questions about Commercial Property Management, contact your Orange County commercial real estate advisors at SVN Vanguard.
According to Freddie Mac’s 2023 Multifamily Outlook study, multifamily fundamentals’ present trajectory shows that it is on pace for a decent 2023, however, it may be a stronger second half compared to the first half.
Rents are anticipated to grow, albeit at a moderate pace, with the first few months of the US economy as a whole bearing a significant influence.
According to Freddie Mac, Vacancy rates will grow as a result of slower demand brought on by economic uncertainty and the massive volume of new supply being added to the apartment market. Until interest rate volatility can be reduced, allowing for price discovery, the volume will be restricted.
However, it is anticipated that housing prices will drop in 2023, and data sources indicate that more new multifamily supply will enter the market at a time when demand would be waning. The situation of the labor market during the course of the upcoming year, in our opinion, poses one of the largest threats to the performance of the multifamily market in 2023.
Overall, timing will be very important.
Given the anticipated increase in cap rates, Freddie Mac predicts that real estate values will remain stable but “may see minor decreases in the year ahead.”
This will result in a decrease in transaction volume through the end of 2022 and into 2023.
Freddie Mac anticipates volume in 2022 to be in the $460 billion to $470 billion range, down 5.5% year over year, and volume in 2023 to be down around an additional 4% to 5% to $440 billion.
According to its study, we anticipate fewer transactions given the negative leverage scenario, which supports the notion that investors are waiting for the market to return to an equilibrium
Given their anticipated low note rates and the robust recent market performance, we believe many financed properties are well positioned to cover their loan obligations. As a result, debtors are less under pressure to sell real estate at a cheaper price and might instead wait for better investment possibilities, which would also reduce overall business volume.
The business stated that these projections are predicated on slower increases in Treasury rates and inflation.
The timing of this affects the anticipated volume rise in 2023, according to Freddie Mac. We might see a greater volume in 2023 if this occurs sooner and investment demand rises sooner. We could anticipate lesser volume if it takes longer, especially if the economy enters a recession, as the price discovery and negative-leverage condition are protracted.
Now that the mid-term elections are over, it’s time to review the situation with rent control nationwide. The National Multifamily Housing Council (NMHC) is closely monitoring 23 states that are considering similar legislation.
Tenant advocates are pressuring President Biden to issue an executive order requiring rent restrictions on mortgages backed by Fannie Mae and Freddie Mac, according to the NMHC, which notes that the idea is gaining steam at the federal level this year.
California, Maine, and New York City were the only regions that supported the “flawed policy” which failed in 2022, according to NMHC. It is predicted, however, that Massachusetts will be the biggest danger to its passage in 2023.
NMHC says the Biden administration will continue to be urged to issue an Executive Order (which would not require Congressional approval). and thus “we anticipate major activity in state legislatures in the next year.”
Regardless of whether or not they are implemented, these regulations will receive public attention and as a result, at the very least constitute a reputational danger to the apartment industry.
The cities and states that are proposing rent control measures that fall into the Tier 1, 2, and 3 categories have been tracked by NMHC.
Florida: Has statewide rent control preemption. However, the preemption statute includes a provision for an exception in the event that a local ballot initiative is approved and permits a one-year rent restriction. The real action may occur at the local level, despite the fact that NMHC anticipates bills to be submitted in the legislature to repeal preemption due to the way the law is now constructed.Orange County, St. Petersburg, Tampa, and other cities and counties may once more look into rent control preemption remedies.
Illinois: The state legislature seems to debate rent control every year there. Although attempts have so far failed, they are expected to try again.Maryland: Efforts to implement rent control are expected to continue at the county level, where the actual activity lies.
Massachusetts: Boston Mayor, Michelle Wu, declared reversing the state’s statewide preemption of rent control a key part of her campaign platform in 2021 and has since been working to convince lawmakers to do it.
Nevada: When incumbent governor Steve Sisolak lost to Republican Joe Lombardo, supporters of rent control suffered a setback. Nevertheless, NMHC anticipates a significant push in the state legislature, which only meets every other year.
Washington State: At the request of Seattle’s local representatives, state legislators frequently offer bills to end the preemption of rent control.
Michigan: Democrats now have control of the legislature and the governor’s office after switching the State Senate and State House. During previous sessions, Democrats sponsored legislation to eliminate the preemption of rent control.
New Mexico: In 2022, the Albuquerque City Council rejected a resolution requesting that the state legislature repeal the preemption of rent control.
Rhode Island: A law that attempted to cap rent increases at 4% annually but was unsuccessful in 2022 may be resurrected in 2023.
North Carolina: Republicans presently hold control of both houses of the legislature, and the state still upholds statewide rent control preemption.
Pennsylvania: It is difficult for rent control proposals to pass in a Republican-led Senate. The last attempt included implementation of statewide rent control starting in 2022 and cap rent increases at the lower of five percent plus changes in the cost of living or ten percent.South Carolina: Given the conservative makeup of the state government, it is unlikely that defeated legislation from 2022 will be passed in 2023.
California: Voters in Pasadena, Richmond, and Santa Monica approved rent control initiatives on the ballot for 2022. Further adoption of similar initiatives is expected.Maine: Portland voters in 2022 adopted a rent control initiative. Rent regulation is also anticipated to be discussed by the South Portland City Council in 2023.
Minnesota: In response to a ballot measure for 2021, St. Paul introduced rent control this past year. However, the city rapidly noticed a sharp reduction in growth, which compelled officials to change the policy. Minneapolis voters also granted the city council the authority to enact rent control in 2021; however, this has not yet been done by local authorities.
New Jersey: This year, the City of Perth Amboy implemented rent control. In 2023, additional cities might start addressing the problem.
Kingston became the first city in upstate New York to implement rent control. A State Supreme Court judge, however, prevented the city from implementing it.
Oregon: Despite passing statewide rent control in 2019, the state’s legislators are still looking for solutions to the state’s housing affordability issues.
We are ready to assist investors with Santa Ana commercial properties. For questions about Commercial Property Management, contact your Orange County commercial real estate advisors at SVN Vanguard.
Based on acquisition financings, they were rather overpriced, according to Urgo. Bridge lenders entered the market because they thought that having a shorter-term perspective on what lease trade outs would entail made sense when the SOFR (secured overnight financing rate) was 30.
The allocations for Fannie and Freddie for 2023 have recently been lowered by $3 billion to $75 billion by the FHFA. Each GSE must conduct at least half of its transactions in traditionally underrepresented markets with respect to affordable housing.
The agency acknowledged that the market has slowed as higher interest rates continue to restrain demand for mortgages by reducing the allocations for the upcoming year.
The agency stated in a statement that the 2023 caps reflect an anticipated downturn in the multifamily originations market in 2023.
Our Orange County commercial real estate brokers will help you every step of the way in finding the right multifamily investment property, contact us for details.
The US will have a divided Congress for the next two years, with Republicans holding onto a narrow majority in the House of Representatives and Democrats securing a narrower control in the Senate.
Additionally, industry experts suggest that barring a serious crisis, a split Congress means there will be gridlock— which translates to very little getting done. What does that entail for investors in commercial real estate?
Experts add that while federal government action can be highly crucial in times of crisis, these big policy changes can restructure the economy. From the CRE perspective, we are seeing that now is one of those moments. In actuality, historically speaking, commercial real estate has benefited from an outlook with few changes on the horizon.
For instance, in 2017, when revisions to tax laws were being discussed, progress stagnated. Potential changes can divert investors and impede dealmaking; in addition, when Congress is divided, the returns on CRE tends to be larger.
From 1981 through 1986, when Congress was divided, yearly returns were 12.8%. Congress was run by a single party from 1987 to 2000, and turnout was only 6.8%. Returns increased to 8.2% from 2001 to 2002 when Congress was divided once more, while they decreased to 7.8% from 2003 to 2010 when one party controlled both houses. From 2015 to 2018, these trends persisted, reaching 14.2% returns from 2021 to 2022.
However, we know past success does not always guarantee future success. That being said, if you think that the next two years’ divided Congress will lead to inaction, then you very much have two years where the status quo is unlikely to change. Keeping this in mind can definitely help investors lock in a strategic commercial real estate plan tailored for them.
According to recent research from leading commercial real estate firms, retail rents are currently 15% higher than pre-pandemic levels in markets all across the Americas.
The data provided shows that rents in key retail locations around the world averaged a 13% decline from before the pandemic to their lowest point, but have since recovered to lie 6% below pre-pandemic levels. In areas like Asia-Pacific, where rents decreased by an average of 17% during the epidemic (and by 30% in localities like the Luohu district of Shenzhen, China, over the past year), rent growth has been more shaky.
But rents in the US, which were the main driver of retail rent rises in the Americas, are now significantly higher than they were before the pandemic. For instance, rents in Houston’s River Oaks neighborhood increased by a startling 90% since last year.
Global retail markets have recovered almost half of their losses overall since the pandemic’s peak, and the average rent is currently 6% below pre-COVID levels. But as the report acknowledges, the pace of recovery has varied. It can be argued that it has been strongest in the United States, partly as a result of fiscal policies that have been supportive. Other contributing factors are domestic migration patterns that have led to strong population growth in markets like Houston and Austin—and as a result, an influx of purchasing power into those markets.
Even though a doubling of rents in those Texas cities is both impressive and somewhat surprising, there are also clear drivers, analysts write, and the fact that these markets are at the less expensive end of the U.S. cost spectrum also had influence on the percentage growth figure, coming off a lower base.
According to the analysis, rents in high-end retail corridors in the US are now 25% higher than they were before COVID. And although the firm’s list of the most expensive retail markets still places New York City’s Upper Fifth Avenue at the top, Rodeo Drive in Los Angeles comes in at number two, followed by San Francisco’s Union Square, Las Vegas Boulevard in Sin City, Chicago’s North Michigan Avenue, and Boston’s Newbury Street.
In the future, consumer confidence will be crucial. As of midyear 2022, total retail sales were up 33% in the US over pre-pandemic levels, but consumers are apprehensive about the next 12 months due to the uncertainty of inflation and the strain on household spending due to increasing mortgage and rent, energy, and food costs, the research states. We anticipate and hope that consumer confidence will increase if there is some evidence that inflation is steady and declining. There is some preliminary evidence of this sentiment, however flimsy, as we observe several markets’ confidence bottoming out and in some cases even starting to recover.
Our Orange County commercial real estate brokers will help you every step of the way in finding the right commercial investment property, contact us for details.
A consistent theme among investors surveyed in this year’s Emerging Trends in Real Estate report by the Urban Land Institute (ULI) and PwC was an eye toward the positive long-term fundamentals of Commercial Real Estate (CRE) rather than the industry’s glaring short-term uncertainties. While the latest survey results construct a consensus about several looming risks to the industry — rising interest rates, availability of qualifi ed labor, and housing affordability, to name a few — future expectations have the dominant hand in steering current investor sentiment.
As discussed in SVN Research’s most recent Special Report, the Federal Reserve’s interest rate hikes and elevated recession risks are immediate risks to CRE values and transaction activity. However, beyond cyclical headwinds, CRE’s long-term fundamentals remain strong.
US labor market fundamentals lie at the foundation for CRE’s resiliency. Since the Fed began raising interest rates in March of this year, job growth has maintained an average increase of 350,000 new payrolls per month while the unemployment rate stands at 3.7%, moving just ten bps over the same period. Employment sentiment and outcomes strongly correlate with on-time rent payments for apartment renters. Meanwhile, high employment levels are keeping consumer spending levels robust, leaving their mark on the Industrial, Retail, and Office sectors.
Still, things are shifting. Swelling mortgage rates amid record home prices are reducing homebuying demand, moving more housing activity into the rental market. Further, inflation poses a real risk to purchasing power if left unchecked. While by some measures, US households maintain a modest rise in purchasing power relative to before the pandemic, a Chandan Economics analysis of BLS data suggests that since May of 2022, consumer prices have outpaced wages relative to their pre-pandemic levels.
Percolating beneath the Multifamily sector in recent years has been a fundamental shift in household formation and preferences. As discussed in Emerging Trends, even before the pandemic, the millennial generation kicked off an uptick in rent-by-choice and rent-by-necessity demand in the Apartment sector. The pandemic and ensuing spread of remote work added a new accelerant to rental demand, turbo-charging the sector’s growth.
While higher interest rates should calm sector tailwinds a bit, the pre-COVID demographic shift still exists, and workfrom-home migration — while likely past peak, remains a force. According to the 2022 State of Remote Work survey by Owl Labs, those who elected to work remotely in 2022 rose by 24% from 2021, while those working in a hybrid set-up increased by 16%. Furthermore, as the Fed’s quantitative tightening pushes capital toward risk-minimizing investments, residential real estate remains a favorable destination.
Like Multifamily, Single-family rentals (SFR) are poised to benefit from post-pandemic migration patterns. Moreover, as many local markets face supply shortages of adequate housing and zoning reforms struggle to make traction, the glow of single-family assets has grown even brighter.
According to a review of American Community Survey data by the Joint Center for Housing Studies at Harvard University, one-in-three households spent north of 30% on housing costs in 2020. Using the latest data available, the national share of cost-burdened households rose from 28.4% in 2019 to 29.9% during year one of the pandemic.
A hot streak for home prices over the past two-plus years has priced many would-be homebuyers out of the purchase market. With mortgage rates recently climbing above 7%, several of these households are moving into the rent-by-necessity category. As detailed in Emerging Trends, when surveying current renters who also believe homeownership
is important, 67% cite their need to save for a down payment as a reason they continue to rent. 34% cite mortgage unaffordability as a reason. SFR has ascended as a reasonable alternative for individuals and families longing for the space and amenities provided by a single-family home without the expensive mortgage.
Despite goods inflation and supply chain disruptions, Industrial continues to benefit from robust consumer spending. According to MSCI Real Capital Analytics, prices in the Industrial sector grew by 18.1% in the year ending September 2022 — outpacing its peers. Recent growth is a reduction from the sector’s 2021 record-highs, but its sustained double-digit price growth indicates the structural repositioning of Industrial assets post-pandemic.
While rebounding in-person shopping was met with a pullback in online purchases, e-commerce remains the future. As analyzed in Emerging Trends, the number of shoppers who utilized same- or next-day delivery during the 2021 holiday season was relatively steady compared to the year before.
Despite an evident shift back to in-person shopping relative to during the pandemic, the convenience of shopping online remains. E-commerce’s staying power will keep it a key market driver for both Industrial and Retail assets.
As the work-from-home versus work-from-office wars rage on, the Office sector has seen the middle-ground scenario playing out: hybrid arrangements are now the norm. However, beyond the future of hybrid work, there is little consensus about where Office goes from here.
Emerging Trends singles out a few resilient sub-sectors in the face of recent headwinds to the asset class. Data Centers maintain high demand, seeing both organic growth before the pandemic and increasing growth since then as more of our day-to-day lives moved online. Vacancy rates have plummeted in many major markets in America, with the largest footprint located in Northern Virginia, followed by capacity in Northern California and Texas. The Phoenix, Chicago, Columbus, Northern New Jersey, and Atlanta metro areas also stand out as Data Center hotbeds, among others.
Medical Office has also established itself as a growth vehicle in the Office sector. The subset is backed by a growing healthcare sector that accounts for roughly 11% of American workers and almost one-fifth of spending as a percentage of US GDP. Medical Office Buildings (MOBs), which serve as facilities for outpatient services, tend to use longer lease terms and are more likely to renew due to the nature of their services. The asset class is also a reliable recession investment. According to Emerging Trends’ analysis, occupancy remained above 90% throughout the Great Financial Crisis of 2008–2009.
The term that captured Retail sector sentiment as described by Emerging Trends was “wary optimism.” For the past decade, a structural shift towards e-commerce has sparked some soul-searching in Retail real estate; however, during the pandemic, the more reliable subsets of Retail presented the most significant challenges to asset values.
In-person services such as gyms, restaurants, and entertainment venues felt the brunt of lockdowns and reduced economic activity. COVID stimulus efforts, including PPP loans and direct cash injections into consumers’ wallets, helped increase retail sales in 2021. According to an SVN Research analysis of MSCI Real Capital Analytics, deal volume surged by 88% in 2021 over 2020’s total.
While growth has slowed in 2022 in the face of inflation scarring, Retail’s post-pandemic rebound means that many of the sector’s sharpest challenges are in the rearview. Those surveyed in this year’s report gave Retail in 2023 its highest investment prospect rating since before the pandemic.
According to the Emerging Trends analysis, a multi-industry expansion in Retail space acquisition is taking place, with automotive, convenience stores, gyms, cosmetics, pet stores, and sporting goods — among others, planning space expansion. Meanwhile, aggressive expansion continues in the Grocery space, while dollar stores and discounters continue to play a vital role in driving Retail growth as it has over the past decade.
