Southeast Real Estate Business

OCT 2016

Southeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Southeast United States.

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Page 42 of 56

42 • October 2016 • Southeast Real Estate Business By David Wigoda, SIOR Global markets were shocked with the results of Great Britain's June 23 referendum. The British pound slumped to its lowest level against the dollar since 1985, Great Britain's for- mer Prime Minister David Cameron resigned and banks lost a third of their value. U.S. markets experienced the biggest two-day fall in nearly a year, before stock levels mostly returned to normal within a few days. As the fall- out from Brexit continues to stir, un- certainty in the commercial real estate market is a concern for many who are waiting to see what will happen next. "Delegates at the first SIOR Inter- national European Conference in London were surprised with the out- come," said Matthew Leguen de Lac- roix, president of the SIOR European regional chapter. The organization held its own mock election voting for the Untied Kingdom to stay in the Eu- ropean Union — by 84 percent. The results were in stark contrast to the of- ficial vote that took place the same day with almost 52 percent of the elector- ate voting to leave. Matthew added, "Friday's investor panel discussion was thus animated, to say the least, and the response for Brexit was imme- diate." With the British economy already reeling, the major credit rating agen- cies adjusted their evaluation of the UK's debt. Standard & Poor's took the nation's rating down two notches, to AA; with that, the UK had lost its last remaining coveted AAA. Matthew added, "My SIOR colleagues in the UK have suffered too, with the real es- tate transactions being put on hold or cancelled until local and foreign inves- tors feel stability in the market again." Investments in Britain's commer- cial real estate dropped by half in the run-up to June's referendum as poten- tial buyers shunned away from deals. That was on the concern that leaving the European Union (EU) would en- courage businesses to relocate, lead- ing to higher vacancy rates and lower prices in the UK. According to data from New York City-based research firm Real Capital Analytics (RCA), investors spent 16.9 billion pounds ($22.5 billion USD) on offices, stores, warehouses and other commercial properties from January through May, down from a record 33 billion pounds a year earlier. "Real estate of all categories in Eng- land will take a hit," said Ed Miller of Colliers International's Tampa office. "The effect on the EU in general will be measurable but more muted, affect- ing some countries that trade heavily with England, like Ireland and Bel- gium, more so than others. Surprising- ly, anticipated effects on the U.S. and world economies after the dust settles are minimal or nil." Uncertainty, at least in the short term, is the general mood for com- mercial real estate markets in the UK and for those who've invested there. According to Mat Oakley, head of commercial research at real estate ser- vices firm Savills, the prospects for the commercial property markets depend heavily on the macro-economic situ- ation that prevails over the next two years. Lower investor demand will have an impact on pricing, and we ex- pect to see a softening in commercial property yields over the course of 2016 and 2017. This will be a short-term re- action, and the strengthening investor demand in the second half of 2017 will limit the rise in yields. Many believe that once the dust of the initial fallout of the referendum settles, markets will return to normal. Maria Juncadella of Fairchild Partners' David Wigoda, SIOR Senior Vice President, JLL FLORIDA'S COMMERCIAL REAL ESTATE MARKET BENEFITS FROM EARLY BREXIT SHAKEUP see FLORIDA, page 54 BROKERING DEALS IN A LANDLORD'S MARKET BROKERS from page 1 when they did a deal they dictated the terms," says Darren Butler, managing director of NAI Brannen Goddard. Butler has been an industrial broker for 11 years in the metro Atlanta area. "Landlords are motivated to get the right deals done, and they're setting the terms and the rents," adds Butler. Butler pursues manufacturing and distribution tenants on behalf of landlords for several industrial parks underway in the greater Atlanta area. In the north I-85 corridor, NAI Bran- nen Goddard is the leasing agent for Hamilton Mill Business Center, located at the intersection of Satel- lite Boulevard and Buford Highway. Two new tenants have signed leases at Hamilton Mill — Display It and Gezolan, both of which will use the space for manufacturing. "There's a limited amount of avail- able space in the north I-85 corridor," says Butler. "We have four prospects for the remaining space in Building E at Hamilton Mill Business Center." Timing is Everything When pursuing deals on behalf of landlords, Butler has noticed that tim- ing has become paramount because of the increased competition for new industrial space. Part of the education process for industrial tenants looking to expand in the metro Atlanta area is quick decision making because land- lords aren't having to wait like they did in years past. "Atlanta's industrial market is very much a landlord's market now. From the tenant's perspective, it's not about getting the cheapest deal, it's about securing the space," says Butler, who has personally seen deals fall by the wayside because tenants didn't show a sense of urgency. "Tenants need to understand that if you don't step up to the table to renew quickly, they risk the chance of losing that space. It's happened on three or four deals the past six months," says Butler. "It's about managing expecta- tions, especially with the tenant." In addition to urgency, Butler has noticed that companies with an exist- ing industrial presence in the Atlanta area are looking to expand their foot- print in the market, which is a sign of growth and helps drive up demand for higher-end space in the market. "We're seeing a lot of companies ex- pand their existing footprint into the market," says Butler. "The increased demand for their business calls for more space." One of the companies expanding its presence is Jaipur Living Inc., for- merly known as Jaipur Rugs. The Nor- cross, Ga.-based rug manufacturer has purchased 23 acres of land in north Atlanta for a new 350,000-square-foot build-to-suit development. NAI Bran- nen Goddard brokered the land sale, and Pattillo Industrial Real Estate is developing the asset for Jaipur, ac- cording to Butler. Mastering Relationships An old cliché of commercial real estate is that it's a "relationship LT Apparel Group is the anchor office tenant of Revolution Mill, a $100 million mixed-use redevelopment of a historic flannel mill in Greensboro, N.C. Revolution Mill features Class A loft office space, artist studios, apartment residences, performance and event space and dining options.

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