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Connecticut Industrial Real Estate Market (2007). “A View From the Street”. We are a spoiled bunch!. Would we have even thought of numerous 100,000-200,000 sf deals 3-4 years ago??!!??
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Connecticut Industrial Real Estate Market (2007) “A View From the Street”
We are a spoiled bunch! • Would we have even thought of numerous 100,000-200,000 sf deals 3-4 years ago??!!?? • Would we have even thought of $100 million industrial deals 3-4 years ago??..How about 2 years ago???…How about REITS in our market???
Things are good!!!! So then why is everyone so worried?!?
Where are we today? Activity Continues!!!
Big “USER” Deals Continue. • New Breed – North Haven – 520,000 sf • RBC Bearings – Torrington – 130,000 sf • C&S Wholesalers - E. Windsor – 277,000 sf • Travelers Insurance – Windsor - 137,000 sf
Big “USER” Deals (con)…. • Federated Department Stores – Cheshire – 258,000 sf. • Indeco – Milford – 88,000 sf. • Visual Controls – Milford – 146,000 sf.
Big “INVESTMENT” Deals Continue. Cash Flow AND Vacant
Cash Flow… • HRPT purchases the “Winstanley Portfolio”… • Hampshire Group purchases US Steel package in Meriden – 560,000 sf. • Block & Kahn purchases 141 South Street, West Hartford – 113,000 sf. • Preferred purchases (and is ready to sell) Cheshire & North Haven facilities…
Cash Flow (con)… • Benerofe Properties - 25 Research Parkway, Wallingford – 242,000 sf. • Elm Street - 60 Dodge Avenue, North Haven – 114,000 sf. • JMG Milford Realty – 80 Wampus Lane, Milford – 168,000 sf. • First Highland’s Lamberton Road, Windsor reportedly under contract…
…And Vacant. • Griffin Land – 61 Chapel Road, Manchester – 307,000 sf. • S&I Realty - 1690 New Britain Avenue, Farmington – 160,000 sf. • Blackhammer LLC - 283 Main Street, New Hartford – 220,000 sf. • New Boston – 777 Brook Street, Rocky Hill – 100,000 sf.
Land Sales Continue… • Walgreens purchases 130 acres at $100,000 per acre… • Out of state developer reported to be u/c in Rocky Hill… • Out of State company u/c in S Windsor on 105 acres…
…Speculative Development Continues… • Griffin Land continues Rainbow Road development. • Out of state developer to develop Rocky Hill land. • DeMattia Companies developing 200,000 sf in Bloomfield
…Speculative Development Continues (con). • 1070 North Farms LLC breaking ground on 42,000 sf (Bldg II) in Wallingford. • Rumor of up to 500,000 sf of spec development considered in Suffield.
…Design Build Construction Continues. • Walgreens breaks ground on 800,000 sf in Windsor. • DataMail completes 100,000 sf facility in Windsor. • IP/xpedx breaks ground on 85,000 sf on Middle Street, Middletown. • Siracusa Moving & Storage nearly completed on 50,000 sf in New Britain.
Where are we going tomorrow? “The Great Crystal Ball”
Corporate Product Continues to Come to Market… • Lego Systems - Over 1.0 mill sf available in Enfield. • Winchester Arms - 225,000 sf in New Haven. • Franklin Farms – 370,00 sf in Pomfret. • Hitchcock Chair – 110,000 sf in New Hartford.
However, Existing Space to Be Absorbed… • 75 Aircraft Road, Southington…rumored to be pending lease. • 250,000 sf tenant nearing terms in Hartford market. • CERC courting 120,000-200,000 sf freezer/cooler prospect. • PA based distributor looking for 200,000 sf of warehouse space.
Low Bay Space… • Continues to be “ugly step child” of high bay, BUT… • Depth of market… • Lack of Inventory… • Increase in manufacturing/assembly… MAKES IT LEASABLE!!! At a Price!!
Speculative Construction Continues to be Absorbed… • Griffin Land…Fed Ex, AAR, AW Hastings etc. etc.
Albeit, Possibly at Less than “Pro Forma”… • Over 500,000 sf being built in northern market…Look out for “Price Wars”. • Cost of Construction for TI’s putting downward pressure on net lease rate.
Albeit, Possibly at Less than “Pro Forma”… • Over 500,000 sf being built in northern market…Look out for “Price Wars”. • Cost of Construction for TI’s putting downward pressure on net lease rate.
Sale Prices May Have Peaked… • User Deals – Yes. • Cost of Construction, although high is somewhat stable. • Medium sized sales still challenged. • Small buildings still “slam dunks”! • Investment Deals • Probably still a little room left on the upside. Lots of investors chasing little product.
Land Prices Continue to Rise… • Even (and maybe especially) large tracks. • Small parcel sales…Still attractive.
THANK YOU Mark J. Duclos Sentry Commercial 860 983 5630
Connecticut Industrial Real Estate Market (2010) “A View From the Street”
It’s in the numbers! • 9.1% (State of CT unemployment). • 1.0 – 1.5 m national annual job growth (as predicted by NAR lead economist). • Corporate profits up…hiring “not-so-up” Unemployment of 8-9% through 2015. (normalized unemployment of 6%?). • 1.7% GDP, Q2 2010
It’s in the numbers! (con) • Cost of labor…cost of utilities…cost of (place line item here). • Where else is it cheaper to do business than CT? ”Anywhere”.
So, where are we today? • 13-19% vacancy rates (depends where you are in the state). • Average lease rates down 15-30%. • Average sale prices down 15-20%. • Available: Over 300 spaces, 50,000 square feet or larger.
Where are we today (con)? • Negative absorption: • Renewals, but smaller space. • New deals, but less space. • Only 30 +/- transactions, 50,000 sf or larger completed in 2010 (over 50% lease renewals), 80 completed in 2007. • Fastenal – 175,000 sf in Wallingford
Where are we today (con)? • Transaction timeline extended (extended decision making process).
Investments • Near Non-Existent • Trophy properties selling at reduced cap rates (again). • Value added properties struggling to trade. • Lenders are lending…at least they say they are!
Land Sales • Practically non-existent • South Windsor studio deal. • Rumored SW Sullivan Avenue land deal. • Conn-Comp - Land sales over 10 acres: • 2007: 58 • 2010: 12
Speculative Development • Practically non-existent.
Design Build Construction • Practically non-existent.
Where are we going? • Hit bottom…Headed Up…But no one is dancing in the streets! • Long recovery (1-2 years to get back to ground zero?). • Less corporate plant closings. • Unemployment continues to be a drag.
Where are we going (con)? • Uncertainty in the economy continues to drag on corporate investment. • Positive absorption (barely).
Challenges? • Corporate spending (FASB, taxes, health care, federal regulation etc.). • Consumer spending & Housing sales (less consumer products, less need for warehouse). • Job creation vs. “Saving Jobs” • Attitude, Attitude, Attitude.
Challenges? • Attitude, Attitude, Attitude.
Thank You Mark J. Duclos Sentry Commercial 860 983 5630 duclos@sentrycommercial.com