By Kane Morris-Webster, CCIM, Cynthia Shelton, CCIM, CRE, Chuck Smith, CCIM & Mike Doyle, CCIM
Florida is a great place to not only live and work but also invest, especially in retail. In fact, Forbes ranks Cape Coral the #1 fastest growing city, and Central Florida #2.
Florida took nine spots in the top 25, with Orlando projecting to be #1 in job growth (close to 4% – double the national average).
Florida hosted nearly 113 million visitors in 2016. Its “hot beds” including renowned theme parks, beaches and year-round warm weather attract investors across the globe.
But, as we see around most of the country, deal volume has decreased significantly from last year. For example Central Florida’s deal volume is currently down over 64%.
Pricing remains very aggressive on NNN assets with strong credit tenants and core assets. We believe this is from many factors, including:
• First is the aggressive pricing with CAP rates at an all-time low.
• Buyers are worried about the coming increases in interest rates.
• The state of the government has also played a role in buyers staying on the sideline.
• Sellers holding onto their pricing, due to uncertainty in the future and how/where to replace investments.
The economy has been in expansion mode for over ten years now. Many believe we could be headed toward an economic decline when compared to the standard seven-year cycle since the crash. If that is the case now is the time for Sellers to market their properties and take advantage of aggressive pricing still moving in the market. If not it could be another six to ten years before we get close to a “peak” again.
Data collected indicates an average sales price per square foot of building area for office buildings is increasing, with the highest per square foot prices associated with medical office buildings.
Capitalization rates have ranged from 6.50% to 8.50%, with the lowest cap rates associated with investment-grade office properties.
Numerous influences are stirring hospitality’s future forecast. Nationally, the good news is occupancy and average daily rates are trending up. The bad news: so are federal interest rates and new rooms under construction.
Data recently released by STR in June reports a 73.4% national hotel occupancy rate. Revenue per available room (RevPAR) grew for the 88th consecutive month. Transient visitors – booking less than 10 rooms – occupied most of the spaces, most likely in the form of tourists. Clearly, people are on the move again.
Our team is seeing most buyers looking for value-add product, which means many things to many people, but overall provides upside in the near future through lease up, improved management or rent growth.
This product is becoming difficult to find, but if interest rates rise faster we could potentially see more of this type of retail soon.
Overall retail is still a strong asset class for investors, and Florida continues to draw investors from all over the world.
The apartment market has officially gone where no market has gone before.
The average price per apartment unit was fifty-two percent (52%) higher than last year.
In Southwest Florida the 2016 record price of $169,000 per unit was just eclipsed by the sale of University Highlands apartments at $213,000 per unit.
Capitalization rates have remained stable due to the strong demand for this type of property by investor.