INDUSTRIAL - RETAIL - LAND - OFFICE - DEVELOPMENT - BUSINESS BROKERAGE
|
|
Solutions Newsletter June 2020
|
|
|
|
FROM THE DESK OF BRUCE BOSSOW
In the last issue, I talked about the inevitable uptick in business that occurs after a market pause due to things like pandemics. Although COVID is not totally behind us, we are starting to feel the bulge in the pent up demand starting to rupture. Some businesses and property owners have been hurt more than others by this quasi shutdown. But with interest rates at extreme lows (would you believe the SBA rate is 2.52% for 20 years and 2.60% for 25 years?), the stock market being so volatile combined with that pend up demand factor, there is every reason to anticipate strong commercial real estate activity thru the end of this year and beyond. Whether you are looking for a building to use for your business or an investment property, now is a great time to jump in.
|
|
Featured Listings Available Now
|
|
|
|
691 Lake Ave.
Woodstock, IL 60098
9,563 SF
|
Mixed Use Investment
Woodstock - 4 tenants, 2 buildings, 100% leased. Consists of long time veterinary clinic with new 5 year lease extension and 3 residential apartments. True 8.8% CAP rate. Ca;; for operating statement and rent roll.
Brokers: Bruce Kaplan & Kevin Kaplan
|
|
|
|
11806 Coral St.
Huntley, IL 60142
2,808 SF
|
4 Unit Apartment
Huntley - Fully leased 4-unit apartment building, recently rehabbed in 2017. 9.53% cash on cash return.
Broker: Joe Billitteri
|
|
|
|
1122-1124 Rose Rd.
Lake Zurich, IL 60047
|
Lake Zurich - 6,000SF pre-cast condo. Was former USDA approved Peapod facility and ideal for caterer/food prep/food processor. Considerable refrigeration in place plus some equipment.
Brokers: Kevin Kaplan & Bruce Kaplan
|
|
|
|
7625 Northwest Hwy.
Crystal Lake, IL 60014
17 Acres
|
Prime Development Site
Crystal Lake - ±17 acres strategically located near the intersection of Rt. 14 and Rt. 176 (behind Flowerwood Garden Center). Approximately 1,000' of frontage. Water/sewer nearby.
Broker: Mike Deacon
|
|
|
|
2200 Tech Ct.
Woodstock, IL 60098
7,500 SF
|
7,500 SF Industrial For Lease
Woodstock - 7,500SF includes 900SF office, 18-21' ceilings, 1 interior dock, 4 DID's.
Broker: Heather Schweitzer
|
|
|
|
804 Roundabout
West Dundee, IL 60118
5,278 SF
|
Professional Office Building.
West Dundee - 5,278 SF 2-story multi-tenant office building with full basement. Built in 1988. Second floor leased with g/u provider. $2,232/mo income.
Broker: Sharon Glasshof
|
|
304 Jackson St.
Woodstock, IL 60098
$225,000
Dual Agency: Bruce Kaplan & Kevin Kaplan
|
|
11419 S. Grant Hwy.
Marengo, IL 60152
$450,000
Seller's Brokers: Bruce Kaplan & Kevin Kaplan
Buyer's Broker: Heather Schweitzer
|
|
Industrial Property Investments: Long Term Fundamentals Punctuate Sector’s Silver Lining
The industrial property market has had quite the run for more than a decade, but due to the COVID-19 pandemic, today’s market is much different. However, experts in the industry have reasons to believe that this period will be relatively short-lived for industrial real estate in particular, giving way to more traditional patterns that have propelled industrial to a favored asset class among investors.
“Short-term there will be pain and uncertainty as we face unchartered economic waters with job losses, inadequate small business funding, and business disruption in all CRE sectors, not just industrial,” says Anthony Lydon, CSCMP, National Director, JLL. “The long-term perspective remains strong, however.”
Lydon, along with Jack Fraker, SIOR, Vice Chairman and Managing Director, CBRE Capital Markets, were participants in the third annual RCM/LightBox-SIOR
Industrial Investor Sentiment Report
, issued in Fall 2019. They provided updated perspectives this week considering the dramatic shift caused by COVID-19. Their comments illustrate that the industrial real estate market is as strong—if not stronger—than in 2019.
“There is no doubt this pandemic is a real and far-reaching tragedy,” says Fraker. “If you can even think about silver linings at this point, one of them is industrial real estate.”
Two benchmarks that brokers like Lydon and Fraker, in addition to industrial owners and investors, will be closely monitoring include:
- Continued e-commerce growth, including online grocery and consumer goods shopping. This is expected to increase .
- The leasing of “insurance space,” or space that allows US companies to have greater inventories on hand to avoid massive shortages. This is expected to increase demand for warehouse space.
These factors can dramatically impact corporate users’ space requirements, which ultimately could lead to higher rents and sale prices and provide the engine for additional construction.
E-Commerce
Prior to COVID-19, e-commerce growth had reached 14% annually and accounted for 11% of retail sales. Experts are predicting a jump to 20% or more in the near future.
“E-commerce has supercharged the American consumer’s shopping patterns. It is increasing significantly in acceptance and preference among people who weren’t already online shopping,” Fraker adds.
Further, an increase in
online grocery shopping and delivery services
is having a dramatic impact. Estimates say “last-mile” food service consumption doubled from 20 million people in February to 40 million people in March. Nearly 40% of those “last-mile” customers were first-time users who have experienced the safety and ease of the process and will continue to order online. Over the next five years this could lead to a 75-100 million square foot increase in demand for freezer cooler space, according
Insurance or Safety Space
Many experts expect that manufacturers and distributors are reconsidering the impact the pandemic will have on the inventories of products housed on US shores, and how that will affect demand.
“Every CEO/CFO in any fulfillment company whose operations are supply chain-centric is seeking risk mitigation, looking at what level of space/operational ’insurance’ is needed,” Lydon adds. “Companies will still source materials outside the US, but many are looking to establish backup operations here.”
This could boost demand for warehouse space by 5% as companies look to build a strong local supply and avoid supply chain interruptions. That translates to 500-700 million square feet of additional demand over the next five years.
The demand for grocery-oriented and safety space could add substantial inventory over the next five years. However, most agree it could be six to nine months before any substantial new industrial development and construction would begin. In the meantime, pent-up demand could easily push rents and sale prices up between 4-7%, depending on geography.
Last October when the RCM/LightBox and SIOR report was issued, there was great optimism because of
strong market fundamentals
, long range corporate growth projections, and the ongoing growth of e-commerce. Even with the unexpected changes due to the pandemic, experts believe that the industry will return strong in the long run.
Article written and published by
LightBox
.
|
|
Is a sale/leaseback good for you?
Bruce Kaplan & Kevin Kaplan
A sale/leaseback is a strategy in commercial real estate whereby a building owner/occupant sells the building to a third party and then leases it back from the new owner. There are different reasons why someone would consider this. We will discuss reasons from the perspective of both seller and buyer.
As a seller and owner/occupant of a building, you are running a business out of this building. You have a chunk of equity in the building that is essentially tied up in the real estate. Your business has a need for cash and you don’t want to borrow money from the bank. You know you can make a greater return on your money by putting it back into your business instead of waiting for the real estate to appreciate. It becomes an issue of the best alternative use of your money. So the solution is to sell that real estate to an investor and remain in the building and lease it back from that investor. You now have the working capital that you need without borrowing and you are still in your facility that works for your business. You might even be paying a lower total monthly cost than you were paying with a mortgage.
As an investor, you are interested in a certain cap rate or overall rate of return on your investment. You also want a stabilized cash flow for the foreseeable future, say 5-7-10 years out into the future. You want to know the seller (your new tenant) has a strong enough financial statement and credit history to make the risk worth it. You can buy the building and lock in a rent for possibly the next decade. This will allow you some cash flow and an opportunity to depreciate this asset to save more on taxes. There is also an opportunity for the real estate to appreciate in value over time. If leverage is used, returns can be augmented and income taxes can be minimized.
One creative way to do this is for someone in the company to buy the building and lease it back to the company. Many times this will be the owner.
We see this when the owner of the company buys the building on his/her personal balance sheet and then leases it back to his/her company. The owner might use this just like any investor, to create equity as a personal investment and get a required rate of return. It works for the company using the building because the owner of the business and the owner of the real estate are essentially the same person.
One recent transaction done by one of our senior brokers was in Crystal Lake where a long time well known publishing company owned a 50000 sq ft industrial building that had surplus warehouse space and a lot of office space. A buyer was found who needed the warehouse space for his business but not the office portion. That buyer bought the building and the publishing company (seller) leased back a portion of the office space. By doing so, all their equity was unlocked so that they could use it for other purposes.
If you know a business that is considering this option, we can do calculations that can help bring this possibility to light and look at the numbers to see if this is a worthwhile avenue to take. In today’s economy, many businesses are looking for working capital and a sale/leaseback provides an option.
|
|
|
|
Bruce Bossow
x 12 / C: 847-732-3462
Bruce Kaplan
x 20 / C: 847-507-1759
Heather Schweitzer
x 15 / C: 815-236-9816
Heide Casciaro
x 26 / C: 847-774-5660
Joe Billitteri
x 21 / C: 847-833-5004
Kevin Kaplan
x 13 / C: 309-261-0920
Sharon Glasshof
x 14 / C: 847-533-6974
Brian Cowell
x 18 / C: 815-529-7890
Angela Pletz
x 24 / C: 815-861-7124
Mike Deacon
x 28 / C: 815-814-6500
9225 S. IL Route 31
Lake in the Hills, IL 60156
847-854-2300
|
|
|
|
|
|
|
