Investment Sales: It’s A Strong Seller’s Market
By Michael Randman
In a recent Southpace Properties sales meeting, one of our brokers presented a NNN, free-standing, national credit tenant restaurant available for purchase. The broker was asking an 8 CAP for the deal. Within a few hours, he had five real offers for this well-located property that had a long lease term remaining. Ultimately, the price got bid up 50 basis points and went under contract for close to a 7.5 CAP rate. So what does this say about the current investment market?
I have spoken to investment sales brokers across the country and the one constant is that there is so much money chasing very few quality deals. Interest rates remain at an all-time low and international money continues to pour into this country, which is keeping rates depressed. Bond yields are weak, and you can forget about money market accounts. There are so many investors chasing yield, that when a quality property becomes available there is very strong demand that drives the values up.
Many property owners are now realizing that this may be the best time in recent history to sell a quality, well-performing asset, if they no longer want to own the asset or if there are other considerations as such time to refinance or changes in the makeup of the ownership entity. This market is driven by quality assets, and the lower quality properties are not currently seeing the same increases in value. The demand is so great for “A” properties—in both retail and multi-family segments—that listing brokers are beginning to tell the buyer’s brokers to get the commission from their clients.
How long will this last?
Many have been predicting that interest rates will have to rise sometime next year, but with the United States being a safe haven for foreign investors, it may take a while for us to see this rate increase. The 10-year treasury has actually fallen this year—something no one thought would happen. The moral of the story? If you are currently in the process of long-term planning or are at the end of your hold cycle for your asset, now would be a great time to be a seller.
Southpace Properties, Inc. is Alabama’s largest independent commercial real estate firm. At Southpace, we add value to the use and ownership of commercial real estate through services such as office, retail, land, warehouse and industrial sales and leasing, tenant and landlord representation, development, consulting, investment sales, property management and construction management. With 13 CCIM designees, Southpace has the highest number of CCIM accredited brokers in the Southeast.