Growth moves down the corridor of US-1, maybe not at the speed or intensity of the commercial property pricing drops or increases from east to west, north to south, but nonetheless, it moves.
The pandemic has hit so many small “mom and pop” towns with lethal blows to their economy and small business bases. As a local resident, I have been discouraged by seeing businesses close up over the COVID-19 pandemic, but I have also been encouraged by the way that the Oxford/Nottingham community has pulled together to support local and helped existing businesses sustain and even thrive in spite of the challenges they face, and as a bonus, encourage new entrepreneurship within the area with new “pop-up” establishments, like the “Rudolph’s Bourbon Bar” over the Christmas Holiday Season. Our local leaders really stepped up to the challenge of the “new normal”. Cameron’s Hardware helped us by offering no-contact pickup, and other retailers offered delivery via UBER eats and DoorDash. We saw what I’d like to call “Creative Sustainability” all around us. Existing local businesses like DuBarry have created brick-and-mortar spaces fronting on “Oxford Main Street” and are doing quite well. Home to great local eateries like Sawmill Grill, The Octoraro Tavern & Grill, Wholly Grounds, La Sicilia, Andres, the Nottingham Creamery, and Little Miss Oxford Diner, this town is full of character and charm. The new parking garage is a tremendous benefit to the retailers in our area. Oxford is also home to large businesses such as Neuchatel Chocolates, Tasty Baking Company, and The Scotts Company.
We are watching local entrepreneurs emerging such as the Whisky Shack, Smokin Dragons, Pickled Pickles, and Sweet Cakes, bringing new life and excitement to our area.
The Preston & Steve Show featured our own BellyBusters as one of the top 10 cheesesteaks of 1,000 different varieties taste-tested in the area! Now that’s impressive! Oxford Mainstreet Inc. announced that First Fridays will be starting up again in April. That’s just around the corner! There’s a lot of positive things going on in Southern Chester County during this arduous pandemic.
We have a unique opportunity available within the borough limits to present to you:
Eighteen municipalities in Chester County have embraced the “Official Map” measure. Our neighboring township of New Garden has jumped on the bandwagon recently.
These Official Maps are projected to be useful tool to protect open spaces. However, there is a catch. The end game is for the municipality to amass land. If you, Mr. or Mrs. Property owner decide to construct on your existing parcel or choose to subdivide, you must notify the township. The clock starts ticking at that point and the township has a defined time frame to negotiate a “fair market price” for the parcel.
Note that this is not eminent domain or condemnation of property. This tool basically gives them right of first refusal for your property. If they have no interest in purchasing your property, then you are permitted to proceed with your plans within the township’s navigational beacons.
It seems that a crop surplus has led to a 14-year low in agricultural industry profits according to Bloomberg. The amount of debt that farms have taken on is said to be the highest in the last 30 years.
The banks don’t want to give out anymore loans unless they are secured by land. This has caused an influx of interest in the USDA program which was originally designed to be a last ditch effort, not a standard. Enter in the statistically consistent problem with any government programs. You said it. Yes. This one is almost broke as well.
The lessors of land will find it to be a difficult year most likely. Will lease rates fall? Still remains to be seen. According to the USDA, the forecasts do not look good in the profit column for 2016. The National Farmers Union is petitioning Congress for a credit solution asap so that they can continue production.
Recently there has been a surprising increase in prices and it is the agricultural industries hope that the rally continues.
(Data courtesy of Bloomberg, National Real Estate Investor 2016)
As we dove into 2015’s waters, investment capital stats were already at in influx. The US has traditionally been a favorite depository for said capital. With US Treasury Rates on a decline due to demand and the US Stock Exchange experiencing new elevations, commercial real estate is an attractive invitation for both foreign and domestic investors. The evidence of this is the growth of overall commercial property transactions in the US by foreign investors has now arrived at a level that we haven’t seen since 2006/2007. Firms aim a close eye at interest rates and market stability as they compare these current statistics with historical data. The timing for interest increases is concerning for most, and whether long term and short term rates will increase in a united or disjointed manner. A majority of soothsayers, (correction: forecasters), hold the belief that the Federal Reserve will raise rates Summer of 2015. Out of the estimated $5 trillion plus capital invested in the United States, over $3 trillion is debt-driven. Commercial real estate loans are steadily gaining as per the Feds, with private equities and REIT’s in the lead. There is speculation that we will see a “re-do” of 2006 where large sums will be reinvested into #cre in 2015 if all goes according to pattern. Is your brokerage positioned for these potential opportunities? Are you as an investor positioned to take advantage of this stimulative climate and seize the day?
There is a gargantuan player in this game of whom some of us may be unaware. Recall the “Defined Contribution Real Estate Council”? It was originally created to assist sponsors/participants get better results via institutional quality properties. According to the Urban Land Institute, 2014 was monumental for US retirement assets achieving the 23 trillion mark. A good portion of those funds were in defined contribution or IRA funds.
As of first quarter 2014, it was reported that there were $6.6 trillion dollars in IRA funds and 6 trillion in defined contribution 401k’s. Our industry is being propositioned to produce improved selections for real estate investing. Institutional allocations can potentially mean billions of investment capital. Because liquidity is imperative to retirees, REIT’s may outshine direct investing options.
Urban Land Institute & PWC, “Emerging Trends in Real Estate – US and Canada 2015″
As the housing market slowly attempts to turn the corner, the rental demand remains high for our particular region. Some areas report up to 20% increases in rental inventory. New construction is playing a large part in those numbers. Does this mean that the financial institutions are loosening up the purse strings for development loans? Possibly. In 2011, there was a 60% increase in Multi-Family Development Lending as compared to the previous year on a national level. The Census Bureau reported one outstanding statistic that 53% of the total number of renter households faced a housing cost burden last year. Unemployment remains high. Affordable housing is a treasure anxiously sought after. Rental rates remain high even paired alongside of the housing market slight improvements. Right now as it stands, renters make up approximately 22.64% of the Chester County, PA, population. 4.97% of houses and apartments in Chester County, PA, are unoccupied (vacancy rate).
When analyzing the current economy and market conditions, often times Commercial Real Estate and Residential Real Estate are assimilated in the reports. Although similar, they are often found dancing to different “tunes” on the same dance floor. What I mean by this is that although they are operating simultaneously in a wavering economy, they are distinct, which has allowed for the Commercial Real Estate industry to “creatively” overcome and seek sustenance in other ways that the housing market does not provide. Some examples of those new dance steps are:
REIT Running Man:
REIT’s are pushing for rent increases on multi-units, due to apartment and housing turnover trends at record lows due to inability to acquire mortgages. Public REIT’s are said to be paying yields in the 3.5% range. If you shift to the private sector, you can expect somewhere in the 8’s. Commercial Real Estate can also be considered an inflation hedge.
Buy or Build Butterfly:
Large Developers are focusing on new construction retail projects while some remain conservative favoring property acquisitions. When considering an acquisition, take a careful look beyond the cash flow. What will the rent income be when the current leases terminate? Novice investors miss this all of the time. Commercial Real Estate as a whole is driven by jobs, particularly the office and industrial sector. Consumer spending drives retail. Although the multi-unit industry has made remarkable improvement, we see a need to shrink the chasm between new construction costs and trending rental rates.
Buying land in the current market can be sketchy at best. Land with approvals, availability of utilities and located within the “right market”…it’s like trying to find a customized car with all of your wish list features off the lot of the used car dealer. Before jumping in with both feet, most investors are considering several items of interest when performing their due diligence:
Demand – What is the demand for the project?
Dinero – What will my ROI be and how far out can I expect my rate of return?
Domination – What bureaucratic hullabaloo will I have to endure to gain the “blessing” to execute this project and how long will it take to come to fruition? Also, will you be able to sell the property when you are ready to? What will it take?
The Lean,..oh I mean GREEN wit it, Rock wit it:
As an owner/investor, green solutions can potentially provide tenant attraction and maximize your property value. Applying Green initiatives to your current property can influence negotiations, improve operations and sustainability, boost tenancy and rent rates, improve the property to optimize sales price and attract “green” buyers.