Category: Focus 2020

Industrial Age: Texas Cities Are Drawing Investors Looking to Capitalize on the Industrial Boom

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Industrial is far and away the hottest sector in commercial real estate right now and the hottest industrial markets are scattered throughout Texas,
each one creating a unique draw for investors and developers. Houston
The largest city in the Lone Star State also boasts the most absorption of industrial space so far in 2020: just more than 6.4 million square feet. According to CBRE research, nearly 3.9 million of that got leased up just in Q2. In that same period, though, about 8 million square feet came on the market, which boosted vacancy rates to 6.9 percent. About 18 million square feet of new industrial is under construction in the Houston market with the southwest (8.5M SF) and northwest (4.8M SF) sectors bringing in the most space. “Houston is very competitive,” said Alfredo Gutierrez, president of industrial-focused investment firm SparrowHawk Real Estate
Strategists. “Because of the setback in oil prices, some investors are perceiving a pullback in real estate by some of the energy companies. That
provides a window of opportunity to invest in industrial real estate in Houston.” He predicts this window will close in late 2021 as the energy sector rebounds, e-commerce increases and the benefits of trade with Mexico expand in Houston. Dallas-Fort Worth When it comes to new construction, it’s hard to beat the numbers coming out of the Dallas-Fort Worth area. CBRE reports that in Q2, more than 23 million square feet was underway. Thing is, that space is getting eaten up as soon as it hits the market. For example, DFW had about 3.4 million square feet incompletions and 2 million square feet of net absorption this spring, marking 39 consecutive quarters of positive net absorption. “I think Dallas is the strongest market in the United States right now,” Gutierrez said. “Dallas is just screaming hot.”

REDNews’ Texas Capital Markets Virtual Summit

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Emerging Trends in Logistics and

• We can’t be angry about the COVID pandemic and its interruptions of our business lives, and we have to accept where we are and move forward; some sectors are down, some are flat, and some are way up.
• The multifamily and industrial sectors for example are way up, and are very attractive to lenders, although underwriting is more careful and conservative than before; some trophy office buildings are able to secure financing as well; lower LTVs, some non-recourse loans still, but also loans with initial recourse that burns off as the project reaches stabilization; some lenders prefer Texas loans.
• There are lenders in the market still willing to look at all property types, and now that many have worked through their forbearance requests from earlier in the year, they are looking to put out money through new builds and acquisitions and refinancing…although much more conservatively than pre-COVID; new development loans tend to favor multifamily; some of the big national banks have dropped out of the construction loan market. Click to read more at www.rednews.com.

REDnews DFW Industrial Summit

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• As multifamily, retail and office “feel the pain,” industrial is holding up well, and accelerating, as e-commerce continues expansion; investors are transferring their attention to industrial from these other sectors
• Companies are bringing back manufacturing from Asia to the U.S. and to Mexico, which is much closer to DFW; companies are coming here from California; labor costs in Mexico now approximate those in China, as China’s economy has strengthened
• Distribution and heavy manufacturers seem strong, but some light manufacturers are seeing stress
• DFW is strategically located in the middle of the country, is in the central
time zone, is one day’s drive from Mexico and Port of Houston, and it is “the” hottest industrial market in the country, and some say “the world;” DFW has a super freeway network and good general accessibility
• Manufacturers wanting to “near-shore” from China to Mexico are hampered from the difficulty of business travel to MX during COVID
• After a pause with the onset of COVID, investment deals are do-able and cap rates are back to where they were at the start of the year
• Loans are available at an average of 60 percent LTV, with lenders requiring ample debt service coverage—however, low leverage requires more expensive equity and mezzanine money
Click to read more at www.rednews.com.

Two Texas Markets Prove to be Elite When it Comes to Industrial Real Estate

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There’s been a lot of talk that the industrial market—particularly that segment serving e-commerce companies—is proving to be resilient to the economic damage wrought by COVID-19. Two Texas markets are helping lead the way as the country forges a path forward during the pandemic. New research by Transwestern suggest that there remained strong demand for large scale industrial space across the country during the first half of
the year. This demand is revving the engines of development, investment and leasing activity. Transwestern indexes the health of the national industrial market by tracking deal velocity and construction activity in 11 growth regions. Dubbed the “Elite 11,” these markets are perennial targets
for both global investors as well as the most sought-after locations for big-box distribution users, lastmile logistics, e-commerce and manufacturing
companies. Two Texas markets, Dallas-Fort Worth and Houston, make Transwestern’s Elite 11, along with Atlanta, Chicago, Lehigh Valley (PA), New Jersey, Northern California, Seattle, South Florida, Southern
California and Washington/Baltimore. These core markets are proving that this is one asset class that can’t be beaten by the pandemic. “Many sectors of the real estate market have been put on pause since March—but not the industrial real estate sector, which continues to flourish,” said Transwestern’s Matt Dolly, director of research. “Prior to the pandemic, the core markets led investment activity, and this movement has only intensified in recent months.” Click to read more at www.rednews.com.

New Class A+ Industrial Warehouse Sells Near Dallas

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JLL’s capital markets team has closed the sale of Park Row Logistics Center, a new, 155,425-square-foot, industrial warehouse in the Dallas-area community of Arlington, Texas. JLL represented a joint venture between developer Stream Realty Partners and LaSalle Investment Management in the sale to Clarion Partners, LLC for an undisclosed sum. The Class A+ Park Row Logistics Center is fully leased to Mochila Fulfillment, which provides order fulfillment and warehousing services to e-commerce brands. The single-load building was completed in late 2019 and features a 32-foot clear height, 180-foot truck court, 28 trailer parking spaces, 22 dock-high doors, 60 loading bays, one oversized door, one drive-in door, and low office finish. Situated on 9.23 acres at 3301 E. Park Row Drive, the property is in the Great Southwest/Arlington Industrial submarket, which is known for its central location within the Dallas-Fort Worth metroplex. This location has access to major interstates and highways, including Interstates 20 and 30 and highways 183, 161, and 360, which provide the tenant easy access to approximately 58.6 million customers within a one day’s drive. The COVID-19 pandemic and the shelter-in-place policies that ensued have accelerated e-commerce growth and the need for warehouse space across the nation. JLL expects e-commerce sales could hit $1.5 trillion by 2025, which would increase the demand for industrial real estate to an additional 1 billion square feet. JLL reports that strong fundamentals and ongoing demand for space in the DFW market will continue to push rents higher along with new speculative construction well into 2021. The JLL capital markets investment advisory team representing the seller was led managing director Dustin Volz, senior director Stephen Bailey, and analysts Zach Riebe and Austin Ross.

NorthMarq Finalizes $8 Million Refinance of Crownridge Centre in San Antonio

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Bryan Leonard, senior vice president/managing director of NorthMarq’s San Antonio office arranged the $8 million refinance of Crownridge Centre. The 41,590-square-foot office property, located at the intersection of IH-10 and Camp Bulls in San Antonio, is leased to a diverse tenant base including financial, medical and oil/gas tenants. The transaction was structured with a fully amortizing, 20-year term. NorthMarq arranged the permanent-fixed loan for the borrower, a long-time San Antonio sponsor, through its correspondent relationship with a life insurance company. The transaction was a refinancing of the existing construction debt. “The property is extremely well located and was developed by an experienced longtime local sponsor. Interstate 10 construction in front of the project has concluded and there are excellent neighborhood amenities at the nearby RIM and LaCantera developments to support office development,” said Leonard. “We were able to secure competitive long-term permanent in a difficult pandemic environment to support ownership’s business plan for the asset. NorthMarq was able to capitalize on the value created in this asset by the borrower to attract competitive capital and the lender achieved a solid investment.”