Positive Notes Amid the Wall Street Din
August 16, 2011
ORLANDO, August 15 2011.
“Lowering the sovereign credit rating of the United States of America from AAA to AA+ creates another round of fear and uncertainty but soon it will be translated into another piece of good news for commercial real estate” said Sean Glickman, Vice-President of Investment Advisory Group, Coldwell Banker Commercial NRT.
Good news such as?
- A week ago Real Capital Analytics reported that the U.S. has regained it top position as the most
active country for commercial property transactions in the second quarter and even after the downgrade, investors proved that U.S. debt is still considered the safe-haven investment of choice. Immediately after the downgrade treasury notes rallied and brought the 10 Year Treasury benchmark to as low as 2.24%. “If the markets instability continues and treasuries remain so low, cash flow from long-term leases on quality retail assets will become more and more attractive and investment activity will only increase.
• Forbes.com foresees a bright Orlando future: Forbes.com ranked Orlando number 10 in a report listing U.S. cities as the boom towns of the future.
• The residential foreclosure market here showed significant declines in June: When compared to 2010, area foreclosures showed the following declines: Seminole County, 70.5% decline; Osceola County, 66.4%; Orange County, 62.6% decline.
Glickman concluded that properties will continue to stabilize in 2011, retail vacancies will decline and rents will inch up modestly. “Retail operations have only recovered slightly,” he said, “but store closures dropped from 4.7 million square feet to 2.7 million from the previous 12-month period. “
• Multi-tenant property investment is also recovering. “More deals were executed over the past 12 months than in any year-long period since the recession started,” Glickman said. Best-in-class grocery-anchored shopping centers trade at cap rates in the mid-7% range. Cap rates start at 8.5% for lesser-quality properties. The shopping center market in Orlando consists of 1,300 projects with an average vacancy rate of 12%. The power centers market consists of 23 centers with an average vacancy rate of 7.8%.
• Retail property sales increased to $474 million; rents rose. “Sales volume of retail properties increased by 459%,” Glickman said, “compared with the previous 12 months.” Effective rents rose 1.4% to $14.65/SF, following a 2.4% decrease last year.” Interest in local assets remains keen, Glickman said, and will increase as investors set their sights on secondary markets. “Good news is out there; but sometimes it’s hard to hear it.”
Sean Glickman is a real estate investment advisor and a retail expert. Sean works with many of the top retail owners in the Orlando area. In his approach he offers clients a chance to determine how market conditions and other challenges affect their properties and the ramifications of these challenges on their future goals. Once this is clear, he helps clients determine a strategy that is appropriate to their specific situation and needs. He can be reached at 407-571-5532 or: seanglickman@gmail.com
