Acquisitions – The Role of Accurate Market Research

Critical to being able to draw conclusions as to the viability of income (as well as expense) projections, is the comprehensive and complete evaluation of the following trends in the subject’s market:

  1. Rental Rates of Comparable Properties
  2. Reimbursements
  3. Concessions and Build-Outs
  4. Market Vacancy and Absorption Trends
  5. Future Competition (including projects under construction, planned, or rumored)
  6. Recent Sales of Comparable Properties (Cap Rates)

This information may be obtained through various market sources, including:  local appraisers and consultants, local and national brokerage companies, published market and trend reports, the local Chamber of Commerce, the County and City tax assessor’s office, and through Internet research.  By using all available resources, you will determine the likelihood of being able to lease any vacant space at market rates and, if the existing income stream from each lease can be easily replaced when the tenants eventually vacate or renew their leases.

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How Technology Changed the Real Estate Auction Landscape

Twenty years ago we were in the early stages of the last savings and loan crisis. Activity with real estate auctions and sealed bids heated up and filled the pages of real estate “for sale” sections of all national and regional publications.

How has the auction landscape changed over the past twenty years? We are now light years ahead, with an ability to sell properties more quickly and also expose them to a far broader audience of buyers. All of this can be attributed to online technology. Twenty years ago there was no online bidding, or online access to due diligence, and the only access to persons who could answer questions about a property or provide market intelligence was via phone or fax during “regular” business hours.

Today, not only can real estate be sold online, all of the information regarding the property is available online as well. Prospective bidders go online and download virtually all pertinent information to enable them to intelligently bid on a property. Technology allows one to view properties – frontal, aerial, floor by floor and in 3-D. A bidder does not need to physically visit a property to understand the complexity of the asset; however some auction companies have bidders acknowledge in writing that they have visited the auction property. Bidders can communicate online 24/7 with customer service for most auction companies and receive answers to questions and additional collateral immediately and most times for free. Gone are the days of sending (and charging $50 plus) bulky packages and having war rooms set up prior to an auction so bidders could pour over volumes of paper documents and rolls of plans to become familiar with a property being auctioned.

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Industrial Merger Could Impact Entire Market

Two of America’s largest cold storage landlords are expected to merge this quarter or first quarter of next year.

Americold and Versacold own and manage over 62 million square feet of cold storage assets in North America. With their largest footholds in Pennsylvania, Georgia and Florida, the merger would create a behemoth of cold storage assets.

The demand is minimally diminished for food/grocery storage only due to the retail demand down due to economic conditions. However, the cyclical demands shall return and the consumer will again buy in bulk and food and perishables need to be kept cold.

This prospective merger will create efficiencies and standards that will improve logistics, distribution and speed to market and consumer.

-Paul A. Waters, SIOR, CCIM, CRE, FRICS

Based in New York City, Paul Waters, SIOR, CCIM, CRE, FRICS, is Executive Vice President-The Americas at NAI Global, where he is responsible for business development and client relationships among major corporate end users of office and industrial space.