Cap rates for the single-tenant net-leased retail sector remained unchanged in the third quarter of 2014, at a historic low rate of 6.5 percent. Cap rates for the office sector compressed by 37 basis points to 7.4 percent, while those in the industrial sector rose by a mere three basis points to 8 percent. There were no major contributing factors to the leveling of retail cap rates, as supply and demand remained near levels from the previous quarter. During the third quarter, the 10-year Treasury yield dropped to its lowest point of the year (2.55 percent) in late August. However, by the end of the quarter, Treasury rates had risen, ending near levels similar to the end of the second quarter. With little movement in the capital markets, retail cap rates have plateaued, as buyers cannot meet acceptable return thresholds at lower cap rates due to the low interest-rate environment.
During the third quarter, the supply of office and industrial properties increased significantly — by 30 and 21 percent, respectively. Owners of these assets have attempted to take advantage of the current low retail cap rates by enticing investors with higher yields offered by office and industrial properties. The supply of retail properties increased by only 3.1 percent between the second and third quarters, as new construction remains limited with the exception of the dollar-store sector.
According to Marcus & Millichap, the national self-storage sector steams into the second half of 2014 following several quarters of strengthening property operations. Space demand is growing significantly in conjunction with an expanding economy, while restrained supply growth persists. Recently, the exceptional property performance posted by self-storage REITs has brought greater attention to the sector and raised its stature among commercial real estate investors. Self-storage has long been cited as a sound portfolio diversifier by large multifaceted investors and is a source of livelihood and wealth creation for small local investors. Improving economic conditions will support a favorable climate for transactions, while the near-term outlook for further strengthening in vacancy and rent growth is promising.
To date, the robust performance of self-storage properties is primarily driven by growing space demand. After hunkering down during the recession, U.S. consumers are clearly back in an accumulation phase, buying new things that will inevitably relegate older possessions to self-storage spaces around the country. On a year-over-year basis, sales of items such as sporting goods, apparel, furniture and appliances increased nearly 3 percent. U.S. consumption continues to grow at a healthy pace despite only modest gains in disposable income and a lower reliance on credit-card debt. Further strengthening in the job market and low inflation will sustain retail spending and enable consumers to continue to purchase more items.
Hotel occupancy, room rates and tourists’ spending are on the rise in the city of Beaufort, according to the Beaufort Regional Chamber of Commerce. “A lot of this has to do with the economy coming back, for one,” said chamber tourism division director Robb Wells. “That makes people less nervous about traveling and spending.”
He said an additional day for military graduations has also helped. In January 2012, Marine Corps Recruit Depot Parris Island expanded family days to include the Thursday before recruit graduations.
Targeted advertising to prospective tourists in areas such as Greenville, Atlanta, Charlotte and Augusta, Ga., is also working, Wells said. As an example, a customer at the Beaufort Inn brought an advertisement from an Atlanta publication, telling hotel staff that the ad prompted the visit, he said.
The timing of those ads is important because it can smooth out the lulls in the tourism season. The chamber brought in travel writers in March and April, which resulted in articles about the city being published into June. This summer, hotel occupancy rates averaged about 60 percent, a 7 percent increase over last year, according to the chamber.
The Inn at the Crossroads has maintained a commanding presence on Main Street in the not-so-sleepy little city just 20 miles south of Florence since construction began last year on the new hotel.
A glimpse through one of the oversized windows fronting Main Street suggests the hotel is far from complete, but inside the three-story brick-faced structure, final details are underway. Extensive wood trim nears completion on the main stairway, furniture begins to occupy rooms and floor-by-floor the building is transforming from the organized clutter of an active construction zone to the serenity of a getaway destination.
According to Steve Moore, project general manager with the management company overseeing current operations, Strand Development Company, everything is expected to be ready to receive guests for their first large group of reservations scheduled for Oct. 17. A grand opening ceremony is planned for the coming holiday season, though a date has yet to be set.
Original plans called for an aggressive construction timetable and an opening date in time for the second year of ArtFields, held in April in Lake City. Once begun, however, several unexpected factors pushed back construction — more extreme than usual weather including winter storms and high levels of rainfall — and a tentative opening date was set for Sept. 15.
In Greenville and Spartanburg counties, private developers have dozers clearing sites for 100,000-square-foot and larger industrial spec buildings that will add jobs and benefit community tax coffers. Even with construction just starting, the pricy, high-ceiling projects already have relocating and expanding businesses lining up as prospective buyers or tenants.
“This is due in large part to Greenville’s attractiveness and existing development. The developers understand the value of our community,” said Kevin Landmesser, interim president and CEO at Greenville Area Development Corp.
Landmesser said the new private spec building projects in Greenville County follow other successes such as GE Aviation, Gordon Foods and Roy Metal buildings.
In some other Upstate communities that don’t have supplier magnets, such as BMW, development of spec properties has been slow since the Great Recession. Hal Johnson, chief development officer at NAI Earle Furman, said investors and developers have been cautious, but with the economy strengthening he sees growing demand for new industrial property, a product in short supply. Johnson said developers need to see successes with spec projects in the other Upstate counties.
Housing construction dipped in August, driven by a 32% drop from July in the notoriously volatile multifamily sector.
But beyond the month-to-month noise, the trends haven’t changed. Apartment construction over the past year climbed to a new 25-year high.
Single-family housing permits through August are running exactly in line with last year’s pace, the Commerce Department reported Thursday. Hopes for a big pick-up in single-family construction, which some economists at the beginning of the year had said would propel the economy to the ever-elusive 3% annual growth mark this year, haven’t materialized.
And despite the slide in the seasonally adjusted annual figure for multifamily construction in August, the picture looks different if you look back over the past year. The rental market is booming. Construction of new rentals hasn’t been this high since 1989.
Wait a minute, some might say. How do we know that all of these structures are necessarily rental apartments?
The town of Bluffton is suing a developer after it says more than 6,000 trees were cleared from land along the main road leading to Hilton Head Island. The Island Packet of Hilton Head reports that Bluffton has sued over the clearing of 107 acres along U.S. 278.
The lawsuit alleges that Indian Hill Associates LLC violated a development agreement requiring the company to comply with town landscaping ordinances and protect trees on the property known as the Willow Run tract.
The town wants the timber profits and monetary damages amounting to triple the value of the removed trees.
Willow Run property owner Paul Schlosser told the newspaper he has not been notified of the lawsuit and would not talk about it.
S.C. Electric & Gas Co. is seeking permission from state regulators to sell its office building and surrounding property at Lady and Marion streets in downtown Columbia. The company listed the fair market value of the parcel, located two blocks off of Main Street, at more than $1 million. The building, which has a physical address of 1400 Lady St., formerly housed a customer service center on the ground floor. The customer service center was moved in January to 1213 Flora St.
In documents filed with the S.C. Public Service Commission, the utility said building has continued to be used by SCANA Corp. and SCE&G business departments and personnel. Those tenants are in the “process of locating suitable offices for their business operations and will eventually vacate the premise,” the documents said.
Investor-owned SCANA is the parent of SCE&G.
The Lady Street property comprises about one-half acre of land and a three-story building with a full basement. The 32,000-square-foot building has 27,181 in “net rentable square feet,” documents said.
HFF recently announced that veteran HFF senior managing director Travis Anderson will relocate immediately from the firm’s Dallas office to the firm’s newly opened Charlotte, North Carolina office where he will co-head the office as well as lead HFF’s debt and equity placement platform in the Carolinas. Anderson will co-head the Charlotte office with senior managing director Ryan Clutter, who launched the Charlotte office less than one month ago and leads the investment sales platform for HFF Charlotte.
Anderson has nearly 10 years of experience as a debt and equity placement professional for HFF in the company’s Dallas office. During his tenure with the firm, he has successfully transacted more than $3.0 billion in commercial real estate financings for a broad range of property types including multi-housing, office, industrial, retail, hotels and land. He is a member of the International Council of Shopping Centers and holds a BBA from Texas Tech University.
Along with Anderson, senior real estate analyst Cory Fowler will also relocate and provide analytical and transaction support for the Charlotte operation.
Carrols Restaurant Group, Inc. today announced that on September 18, 2014 it exercised its right of first refusal to purchase 30 BURGER KING® restaurants in eastern North Carolina under the same terms and conditions of an existing purchase and sale agreement between the sellers and an unrelated third party. The total purchase price is approximately $20 million payable in cash at closing, and the assets to be purchased include 12 fee-owned properties. The Company anticipates that subsequent to closing it will market and enter into sale/leaseback transactions for 10 of the fee-owned properties for total estimated proceeds of $13 million to $14 million.
The University of South Carolina ended up the surprise high bidder for 300 acres of clear-cut riverfront property in U.S. bankruptcy court Thursday, after a nearby mining company decided not to ante up.
USC plans to put in intramural playing fields, a practice golf course and other amenities for students on the flood-prone land — perhaps by next school year, said Russ Meekins, director of the USC Development Foundation.
Early in Thursday’s daylong hearing before Judge David Duncan, it was clear that Vulcan Materials Co. had backed off the expected bidding war with USC for the land just a quarter-mile from its Columbia quarry. Meekins was surprised by the turn of events, he said.
He came to court expecting an auction for the property behind Gamecock Park, a tailgate destination off Bluff Road. Then he was informed Vulcan was sticking with its original $3 million bid, which USC had bested by $250,000.
Whole Foods Market will open its first Augusta store later this month.
The grocer’s grand opening of its new 41,000-square-foot store will be Tuesday at the Washington Crossing shopping center on Washington Road. Sneak-peak preview tours will be available to shoppers Friday and Saturday.
The store will feature a nine-hole putting green, patio, coffee bar, a large cheese selection and more, according to a press release.
“We are as excited as the community is to be able to announce our opening date,” Whole Foods Market Augusta Store Team Leader Nourredine Dahak stated in a press release. “We look forward to opening our doors in a few short weeks, bringing a fun, new and healthy grocery store option to our neighbors and team members here in Richmond County.” Whole Foods, a natural- and organic-food retailer, was founded in Austin, Texas, in 1980. Locations include the United States, Canada and the United Kingdom.
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A drive-in movie theater is planned to be built on a 67-acre site near the Columbia Metropolitan Airport. Martin Murray and Joe Barth paid $350,000 for the property at 1420 Old Dunbar Road in West Columbia, according to NAI Avant.
“The new owners plan to develop the property into a drive-in movie theater, the first one built in our local community in nearly 25 years,” the commercial real estate company said in a press release announcing the sale.
According to Cinema Treasures, about 360 drive-in theaters are operating in the United States, down from some 4,000 in the 1960s.
Barth also is the owner of Highway 21 Drive-In, a two-screen theater just off U.S. 21 about 1.5 miles from Marine Corps Air Station Beaufort. The Beaufort theater opened in 1978. It closed in 2003 and reopened in 2004.
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