Category: US/Texas CRE News

However You Describe it, There’s No Cooling Down the Texas Land Market

Posted on by Sarah

“White hot.” “Very active.” “Extremely strong.” “Unparalleled.”

Ask Texas land brokers about what the market is like today and you’ll get colorful descriptions that boil down to one thing: competitive conditions even those with decades of experience haven’t witnessed in their career.

“I’ve never seen the market as a whole have this much momentum in synergy and velocity,” says broker Rex Glendenning, Owner of REX Real Estate. “Over the past four decades, certain sectors of the market have been extremely hot, but I’ve never seen all the different sectors of the real estate industry have the type of momentum we have here right now.”

Glendenning, who started REX back in 1987, thinks the post-pandemic development cycle may have pushed markets such as Dallas-Fort Worth and Austin a whole cycle ahead.

“What may have taken six to eight years has happened in two or three years,” he explains. “Families are moving to Texas. New companies and corporations are building their headquarters here.” Click to read more at www.rednews.com.

Prologis Closes $26 Billion Acquisition of Indianapolis-based Duke Realty Corporation

Posted on by Sarah

Prologis and Indianapolis-based Duke Realty Corporation have completed their $26 billion merger agreement. In this major deal, Prologis will acquire Duke Realty in an all-stock transaction.

Both companies announced today that their boards of directors have unanimously approved the transaction.

“We have admired the disciplined repositioning strategy the Duke Realty team has completed over the last decade,” said Prologis co-founder, chief executive officer and chairman Hamid Moghadam, in a written statement. “(Prologis) has built an exceptional portfolio in the U.S. located in geographies we believe will outperform in the future. That will be fueled by Prologis’ proven track record as a value creator in the logistics space. We have a diverse model that allows us to deliver even more value to customers.”

How big is this acquistion? Proglois now acquires 153 million square feet of operating proproperties in 19 major U.S. logisics locations and 11 million square feet of developments in progress, about $1.6 billion in total expected investment.

Prologis is also acquiring 1,228 acres of land owned and under option with a build-out of about 21 million square feet.

“This transaction is a testament to Duke Realty’s world-class portfolio of industrial properties, long-proven success and sustainable value creation we’ve delivered over the years,” said Duke Realty chairman and chief executive officer Jim Connor, in a written statement. “We are confident that this transaction – including the meaningful opportunity it provides for shareholders to participate in the growth and upside from the combined portfolio — is in the best long-term interest of Duke Realty shareholders.”

Following personal dialogue between the executive teams of both companies, Prologis first sent a letter to Duke Realty on Nov. 29, 2021, regarding a potential transaction. On May 3, 2022, Prologis modestly increased the proposed exchange ratio – representing a 34% premium to Duke Realty’s stock price at the time– in a final attempt to engage privately to reach agreement on a mutually beneficial transaction. Duke Realty rejected the Prologis proposal that same evening.

The negotiations are now over, and the acquisition will move forward.

Greysteel Arranges Sale of 196-Unit Multifamily Property in El Paso

Posted on by Sarah

Greysteel arranged the sale of Casa Barranca, a 196-unit multifamily property located in El Paso. Greysteel Senior Director Jack Stone, based in the company’s Dallas and Fort Worth offices, negotiated on behalf of a premier development company in El Paso.

Casa Barranca is a 196-unit multifamily property located at 151 S. Resler Drive. The property was nearly fully occupied and consisted of two and three-bed options. It’s also centrally located next door to Whole Foods and numerous other retail options.

“It’s an incredible milestone for us,” said Senior Director Jack Stone, “marking our 13th multifamily transaction in El Paso in the last three years, totally over 2,200 units.”

One Retail Sector That’s Thriving Today? The Ghost Kitchen and the Ghost Franchise

Posted on by Sarah

Ordering food from a delivery app? The odds are it might come from a ghost kitchen. And if you don’t know what these are, you will soon. Industry
analysts say that these kitchens – which prepare foods either from online-only restaurants or from several traditional restaurants in an area – are becoming a big part of the U.S. restaurant business.

Ghost kitchens, at their most basic, are commercial kitchens that don’t come
with storefronts. They also don’t come with any physical dine-in or drive-through restaurant attached. Instead, they are spaces that restaurant owners might rent to prepare food off-site so that they can deliver it more quickly to their customers. A single ghost kitchen space, then, might prepare the food from several different restaurants in an area.

Then there are those restaurants that don’t have any actual dining or carry-out spaces at all. They instead rely on an Internet presence and several ghost kitchens across the country. These so-called ghost chains run no physical restaurants. Customers instead order food online where it is then prepared in a ghost kitchen near them. Click to read more at www.rednews.com.

No End to the Boom Times? U.S. Industrial Market Still Thriving

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The industrial market has thrived both before and during the COVID-19 pandemic. And this sector is showing no signs of slowing as companies continue to seek or build warehouse space across the Midwest and the country.

Midwest Real Estate News spoke with Alfredo Gutierrez, president and founder of Houston-based industrial real estate investment firm SparrowHawk, about what’s behind this continued surge in industrial activity and whether any slowdown is on the horizon.

We all know that the industrial sector is booming today. What are some of the factors driving this explosion in demand?

Alfredo Gutierrez: There is a lot going on. I am not in the camp that says it is all ecommerce driven. Ecommerce is a function of it, but it is not the driving force. Ecommerce was at plus or minus 16% of all retail sales in 2019. It popped up as high as 22% or 24%. Now it has settled back down at about 20%. It is a bit of a higher percent of sales than before the pandemic. We have seen an acceleration of consumers who might not have otherwise been interested in ecommerce embracing this way of shopping.

Look at someone like my mom. She never would have shopped online. The pandemic forced her to come into it. The growth of the younger generation that is pushing the growth of ecommerce will continue. But now many of the people in the more resistant generations are shopping online, too. Companies need more warehouse and distribution space to get the products to their consumers faster. But clearly ecommerce is not the only thing going on to fuel this demand we are seeing for industrial space.

What else is pushing the demand for industrial real estate?

Gutierrez: Manufacturers have discovered that while labor is cheaper in other countries, it is not as efficient. The United States is the most efficient labor market for employers. That is 100% attributed to the resources and technology we have that makes workers much more efficient. With labor being at such a tight, tight number, it has been forcing companies to invest in technology, artificial intelligence, those kinds of items. It was the only way for companies to continue to grow when it’s been so difficult to find labor. As they are doing this, companies are beginning to relocate their manufacturing back to the United States or near-shoring in Mexico. They want to get that manufacturing closer to home. They might not be saving on labor, but they will save on transportation and shipping. That was occurring before 2020, but it only accelerated during the pandemic, and is now having an impact on the amount of industrial space we need in this country.

The pandemic exacerbated the issue. The manufacturing and inventory components were strained. Now everyone is playing catch-up to get back to the stock levels of 2019. But they also want to add 5% to 10% on top of that. There isn’t enough industrial space now to accommodate that. In 18 months, we are going to be out of space. There is barely a year’s worth of vacant industrial space on the market. And that is assuming that every space works for every tenant. If you are saying we have just 18 months of supply, it is worse than that. We need more industrial space, and that, too, is causing an increase in the demand in this sector.

How much of a challenge are rising labor and materials costs today?

Gutierrez: Everything is getting more expensive. Transportation costs are absolutely on the rise. We all know labor costs are rising, too. Go to your local restaurant and they are looking for staff. I haven’t walked into any business in the last 12 months that says they have everybody they need. There are not enough people at any level to cover the demand for services from Americans. That is a problem, and it is putting further pressure on wage increases across the sector.

Nearly 60% of the inflation we are having is fuel related. That is putting a disproportionate amount of pressure on the industries that rely on fuel. If you are a company that is trucking product around, you are relying on fuel big-time. The cost of labor and the cost of fuel are the two biggest strains for companies in the industrial space today.

It can be difficult for tenants to find industrial space today. Do you see this changing anytime soon?

Gutierrez: It will remain challenging throughout this year. I strongly believe that companies and developers will struggle to find industrial space through 2023. The supply is not there. The time it takes to build buildings has expanded. The projects that were taking nine months from shovels in the ground to delivery are now taking 10 to 12 months. The ones that were taking 12 months are now taking 14 to 16 months. Everyone working in the development side of the equation has seen their lead times increase.

What type of industrial space is especially difficult to find today?

Gutierrez: From what I’ve seen, the smaller units are harder and harder to find. They are not being reproduced. There is not a lot of multi-tenant or small buildings in development because of economies of scale. Developers prefer to build a 6- or 7-million-square-foot building instead of a 200,000-square-foot building that accommodates four or five tenants. Commodity costs hit you more on that smaller unit. It is more expensive to build them.

Are there any markets across the country that you think are especially strong in the industrial sector?

Gutierrez: The Midwest markets and the coasts have the lowest vacancies. Everyone has low vacancies, but most of the Midwest markets have vacancy rates down at 3%. Some are as low as sub-2%. I am more excited about the Midwest product than I am about the product on the coasts. I think that our distribution mode and supply chain models are changing. If you are producing product in Mexico, you need to ship it right up the highway through Dallas and then up to Chicago. You’ll then hit the Midwest markets to distribute it to the U.S. population because of their location in the center of the country. I’m not saying that California will be dead. You will always have product there. But the growth of where the supply chain is going is coming from down south or in the southeast and then funneled through the middle of the country.

Do you have any predictions on when we might see the industrial market cool off?

Gutierrez: Vacancy rates will go up eventually. At some point, you are going to see developers building too much supply. We are not perfect. When developers start putting product out there that they are delivering in 12 months and demand starts to cool halfway through, they have to finish building that space. There is always an overhang. But I don’t think we’ll see a huge amount of overbuilding.

A Craze for Self Storage: New Development in Chicago More Than Triples in 2022

Posted on by Sarah

The pandemic heightened demand for self-storage as people squeezed gyms, play areas and office space into their homes. Now there’s a second boom as people choose to continue to work from home, return to the office, or a combination of the two, making self-storage a long-lasting business.

So much so, that over 131 million square feet of new storage space is planned and under construction around the U.S., a number that would increase existing stock by 9%, according to data from Yardi Matrix. Fifty million square feet are scheduled to deliver this year alone.

In order to gauge which areas are expanding their storage inventory the most, RentCafe looked at a couple hundred of the biggest metros and ranked them based on the total rentable square footage currently planned or under construction.

Chicago-Naperville-Elgin, specifically, ranks No. 10 nationally for new self-storage development, representing a little over 5% of its existing inventory, with 2.6 million square feet of space scheduled to come online. This is a 270% increase compared to 2021.

Ninety-one percent of the new self-storage facilities planned for Chicago are located in urban areas. This trend makes sense due to the lack of space that comes with city living, compared to suburban living spaces. The average size of an apartment in the city of Chicago is 750 square feet, according to RentCafe — well below the national apartment average of 882 square feet.

It helps self-storage, too, that people are having to downsize due to rent growth. The average street rate in Chicago is at $114, up 7% year-over-year. It’s a chain reaction. Rising rents leave many residents no choice but to downsize, therefore driving demand for storage outside of the home.

It was also found that Chicagoland expects to have a 5% increase in total supply once all development projects are completed.

Aside from Illinois, Texas’s population continues to grow exponentially, only driving demand for self-storage.

Dallas-Fort Worth-Arlington continues to add new self-storage space to its 72 million-square-foot inventory. Dallas is the third most active self-storage market in the U.S., based on the report, with its new supply pipeline counting over 5.4 million square feet.

Houston-The Woodlands-Sugar Land ranks No. 16 nationally for new developments, with close to two million square feet of planned and under-construction self-storage space to be added to its 68-million-square-foot inventory.