A View From the Street We are a spoiled bunch Would we have even thought of numerous 100000200000 sf deals 34 years ago Would we have even thought of 100 million industrial deals 34 years agoHow about 2 years agoHow about REITS in our market ID: 658323
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Slide1
Connecticut Industrial Real Estate Market (2007)
“A View From the Street”Slide2
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???Slide3
Things are good!!!!
So then why is everyone so worried?!?Slide4
Where are we today?
Activity Continues!!!Slide5
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 sfSlide6
New Breed – North HavenSlide7
Big “USER” Deals (con)….
Federated Department Stores – Cheshire – 258,000 sf.
Indeco – Milford – 88,000 sf.
Visual Controls – Milford – 146,000 sf.Slide8
Big “INVESTMENT” Deals Continue.
Cash Flow AND VacantSlide9
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…Slide10
Preferred–Cheshire & N HavenSlide11
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…Slide12
Benerofe - WallingfordSlide13
…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.Slide14
Griffin Land - ManchesterSlide15
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…Slide16
…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 BloomfieldSlide17
…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.Slide18
…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.Slide19
Where are we going tomorrow?
“The Great Crystal Ball”Slide20
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.Slide21
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.Slide22
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!!Slide23
Speculative Construction Continues to be Absorbed…
Griffin Land…Fed Ex, AAR, AW Hastings etc. etc.Slide24
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.Slide25
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.Slide26
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.Slide27
Land Prices Continue to Rise…
Even (and maybe especially) large tracks.
Small parcel sales…Still attractive.Slide28
THANK YOU
Mark J. Duclos
Sentry Commercial
860 983 5630Slide29
Connecticut Industrial Real Estate Market (2010)
“A View From the Street”Slide30
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 2010Slide31
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”.Slide32
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.Slide33
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 WallingfordSlide34
Where are we today (con)?
Transaction timeline extended (extended decision making process).Slide35
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!Slide36
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: 12Slide37
Speculative Development
Practically non-existent.Slide38
Design Build Construction
Practically non-existent.Slide39
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.Slide40
Where are we going (con)?
Uncertainty in the economy continues to drag on corporate investment.
Positive absorption (barely).Slide41
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.Slide42
Challenges?
Attitude, Attitude, Attitude.Slide43
Thank You
Mark J. Duclos
Sentry Commercial
860 983 5630
duclos@sentrycommercial.com