Industrial property sales were hot hot hot! (Multifamily sales were not not not.)
The U.S. economy may have experienced a lackluster first quarter, but Frederick’s commercial real estate market is still chugging along. Overall, there were 37 transactions totaling $43.2 million in commercial real estate sales in Frederick County during the first quarter.
Over half of the first quarter CRE sales volume was represented by industrial and warehouse properties—a total of $21.4 million. This is a massive jump from years past: during the first quarter of 2014 industrial sales volume was $7.2 million, and only $538,000 the year prior.
Looks like industrial has dethroned multifamily as the favored segment of commercial real estate. And this isn’t just happening in Frederick County, but all over the U.S., as industrial rent growth is outpacing every other segment of commercial real estate nationwide.
Why is industrial so hot right now? Mainly because so little of it has been built since the great recession began in 2007, and demand for it has been steadily rising the past several years.
Consumer spending late last year was the highest it’s been since before the recession began, causing corporations to expand inventories and adjust distribution channels—directly impacting demand for industrial and warehouse properties.
An additional pressure on the industrial inventory is the migration of traditional office users to inexpensive flex spaces that are typically leased by warehouse users.
And trade lanes are shifting from China to south Asia, which means more goods are entering the U.S. market via the Suez Canal. This is significant because it has caused distribution centers to relocate from the west coast to population dense markets on the east coast, like New York, Baltimore, and Washington, D.C. The expansion of the Panama Canal is accelerating that shift. (Distribution centers require massive warehouse square footage with high ceilings, cross docking, and generous parking lots with plenty of turning radius for tractor trailers.) Frederick is fortunately in an excellent position to benefit from shifting trade lanes.
CoStar reported recently that their analysts expect at least two more years of declining vacancies and rent growth in this sector. No wonder Matan plans to develop an additional 600,000 square feet of warehouse space in Frederick during the next several years.
Industrial has a short development cycle, so it won’t take long for developers to fill the demand for this product.
Following are the top five commercial real estate sales transactions for Frederick during the first quarter of 2015, ranked by sales price:
1. $15,900,000 Stanford Industrial Park Flex Portfolio – 4780, 4840, and 4844 Winchester Blvd and 3951 Dartmouth Drive
In March, Ruppert Properties sold four flex buildings in Stanford Industrial Park to Cabot Properties. 4780 Winchester Blvd. is 67,344 square feet and sold for $98.75/SF. 4840 and 4844 Winchester Blvd. together are 68,880 square feet and sold for 79.85/SF. 3951 Dartmouth Drive is 39,600 square feet and sold for $94.70/SF.
2. $3,125,000 BJ’s Restaurant and Brewhouse – 5616 Spectrum Drive
BJ’s was sold in November by PR Financing Limited Partnership (a REIT) to PBK Property Management (probably another REIT) in November, but the sale didn’t record until the first quarter of 2015. The building is 9,316 SF and sold for $335.44/SF.
3. $3,000,000 Vindobona Nursing Home – 6012 Jefferson Blvd.
Grace Healthcare acquired Vindobona Nursing Home in February from two former employees of Grace who purchased Vindobona when Grace initially passed on it a number of years ago. The building of 25,004 square feet sold for $119.98/SF and sits on nearly 17 acres.
4. $2,900,000 Airport Industrial Park – 500 Monocacy Blvd.
Service Glass Industries, Inc. acquired this Class B Industrial Warehouse building in Airport Industrial Park from Corporate Press in March. The building is 35,800 square feet on over four acres, and sold for $81.01/SF.
5. $2,100,000 Criswell Chevrolet – 111 Frederick Road
Harry Criswell purchased the commercial property in Thurmont he was leasing for his Criswell Chevrolet dealership in January. The buildings on the property total nearly 11,000 square feet in size and sit on almost 3 acres. The sale netted $191.64/SF.
That list does not include the sale of 4612 Navistar Drive in February, as that sale hadn’t been recorded with the county yet so we couldn’t get final sales price data. That building was part of a massive portfolio of 1,078 properties that sold for $8.1 billion. This sale of U.S. industrial properties was sold by Blackstone to Global Logistic Properties (a Singapore corporation). Public financial documents did not break out price-per-property on the deal.
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The author: Kathy Krach is a Vice President at MacRo specializing in commercial sales and leasing.
Data used for this article was gathered from sources deemed to be reliable, although MacRo has not independently verified it and does not guarantee that it is correct.