June 2011 - Market Update

The Jacksonville market saw its fair share of activity and some closings in the first quarter, and this trend is continuing in the second quarter. There was almost 800,000 SF of lease transactions in the first quarter, with most of it consisting of four large leases with Global Tissue Group, VCT, Keller Logistics and KWS Tire. There are rumors that Coca Cola Bottling, Wagoner Industries, Gallo Wine, and GE are circling the market for some additional space, too. Along with some larger distribution users taking down some space, several smaller users in the 10K – 30K SF range also purchased buildings. All of them were likeminded, in that they had been leasing space for awhile and felt if they were ever going to buy, now was the time. I have personally completed two sales this year in this size range, with a third pending, and have seen three others completed by my competitors.




I don’t believe we are, by any means, out of the woods with this recession, but it is nice to see some deals getting completed. I believe the recovery will be slow and painful with sporadic job creation here and there, with the biggest factor being the lack of confidence the country’s business owners have in our government right now. I think the August 2nd debt ceiling deadline will be a huge issue for a lot of businesses that are waiting to see what the government will do and how it will affect this country. I hope and pray our country’s leaders can figure this out and restore the confidence of our business community nationwide.



To finish on a lighter note, the weather in Jacksonville has been great, and my golf game is getting a little better, as I have made it out to play a couple times in the last two months. The ocean water is nice and warm to swim in, and for the past couple weeks, the waves have been pretty good, too. So, if you’re reading this, and you’re outside of the Jacksonville area, you need to come and visit and take in all the great activities our city has to offer. Until next time; have fun out there!



Jacob Horsley

NAI Commercial Jacksonville, Inc.

Industrial Group

CRE Buyers Are Out in Full Force

Well, 2011 is in full swing now, and in our great city, it seems industrial warehouse leasing is picking up, as is small businesses. There have already been several lease deals completed in Jacksonville this year ranging from 180,000 SF down to 5,000 SF, with many more in the works. The brokerage community seems to be more upbeat than last year at this time and more confident regarding what the rest of the year will bring us. What surprises me most right now, however, is all the buyers in the market. From the small business owner to the large institutional investor, they are looking to acquire property in Jacksonville. In the past year or two, there have been limited buyers in the market due to the lack of available capital and quality product on the market. Now, it seems times are changing, with more quality product becoming available, and more buyers having access to capital. SBA lending seems to be leading the way for the small business owner looking to acquire a new facility. On the investor side, more money has been raised over the past couple years from private investors looking for a stable and secure investment vehicle to place their money. While the stock market has definitely seen its gains over the past 12+ months, many investors feel it is artificially inflated and due for a course correction. With real estate prices where they are today, it seems that the upside potential is there to make a nice return.

Some buyers with whom I am currently working are each telling me a familiar story - they have been leasing for several years, and their business has made it through the recession and is still standing. They have some capital on hand for a down payment and have great relationships with their respective banks that are willing to lend. They all feel now is a great time to take advantage of the real estate market, and I have to agree. Prices have reverted to early 2000 levels, and from all I have read about economic conditions and our local real estate market, they should see slow, but steady, gains in their real estate holdings over the next several years. I hope, for their sakes, as well as mine, I am right!

Well, the market and the weather here in Jacksonville seem to be taking a turn for the better, and I personally can’t wait to get back on the golf course and get my game in shape! I hope all of you reading this are doing well, and if anyone has any questions on his/her industrial neighborhood, send me an email with your questions or give me a call. I would be happy to answer any and all questions. Until next time, have fun out there!

Jacob Horsley
NAI Commercial Jacksonville
Industrial Group

TWITTER, FACEBOOK, LINKEDIN, AND THE EVOLVING BUSINESS WORLD

When was the last time you got on Twitter, Facebook, or LinkedIn for business or personal use? Chances are you are probably logged in to one of them right now or have used one of these sites sometime today. It seems that you cannot find a retailer, corporate, or privately-held business that does not have one or all of these accounts set up to attract business and referrals or to simply stay in touch with customers. I have recently jumped on the social-networking bandwagon and am working on how to shamelessly promote myself and my business. I have found an unbelievable amount of information on Twitter from, coupons, and up-to-the-second news about everything from real estate to the new Verizon iphone that will be released on Feb. 4th. Sometimes, I feel that I may not need to go through my list of online periodicals to get up-to-the-minute news about my industry, but to just login to my Twitter account and watch my feed.

I am finding that this new wave of social media is not just a fad but seems to be here to stay, and businesses are all over it. I mean, just think - you can reach thousands with just the click of a mouse and promote your new ideas and products. I would love to find out how your business is using one of these social media outlets and what you are posting. Is it just products and coupons, or have you discovered another way to use these outlets?

Currently, I am using Twitter as a way to keep my followers up to date with what I am reading about the industrial real estate market and relevant Jacksonville news. I also plan to post some new listings and recent sales, as they occur, but I am looking for other creative ways to use these accounts. I recently read that there is a coffee shop on the West Coast that is using Twitter to take their customers’ coffee orders. Just think, you can tweet what you want, show up at their store, and it’s ready for pick up… how cool is that!

So, if you’re willing to share how you’re using the social media outlets, I would love to hear from you, and I will elaborate some more on what I am doing too… maybe we can all learn something from each other.

Jacob Horsley
NAI Commercial Jacksonville
Industrial Group

2010, 2011 & Beyond!

Well, it’s that time of year to reflect on the previous twelve months that passed so quickly and to ponder what’s to come in the New Year. 2010 was definitely better than 2009, with some light appearing at the end of the proverbial tunnel. Many economists are forecasting 2011 to be slightly better than 2010, with the majority of the recovery to take place in 2012. I am still trying to figure out where it’s going to come from, but maybe that will be next month’s topic???

Getting back to this year, many sources speculated that the commercial real estate industry was to be the next “shoe to drop”; however, in Jacksonville, as in may other markets around the country, brokers with whom I have spoken confirm that never happened. The struggling financial industry also figured out how to rework many of the loans that were in foreclosure/default. Companies battled through tough times and are still standing, with many owners now telling me the worst is behind them, and they are stabilizing. Even so, those companies that are once again becoming profitable are not predicting any sizable expansion until 2012 or later. Now, let’s not confuse 2010’s definition of “profitable” with 2006’s definition, because they are worlds apart, but it is nice to hear that word again!

What does 2011 hold for the business world? Probably much of the same as in 2010, with a little more good news sprinkled in - except for the NFL lockout that seems inevitable! I believe in 2011, we will see more companies make a “leap of faith” and expand their businesses and/or go from leasing to owning. I am already speaking with several companies that, because they wanted to wait and see what was going to happen in 2009 and 2010, did a typical short-term, 12-month lease renewal, but are now ready to go to the market and shop the availabilities to purchase a facility. I think we, in the commercial real estate world, will see more companies exploring this option in 2011 than in the past couple years. The investor appetite has been - and continues to be - strong, but all seem to have a similar complaint - they have money to spend but cannot find the quality product they would like to spend it on. Citing a “poor tenant mix” or “outdated building standards”, they chase only 3-5% of the deals that come across their desk. I am not sure if that percentage will change next year, but I do know investors can’t hold on to their cash forever. They are too smart to let it sit in an account collecting minimal interest when it can be working for them through real estate at a much higher rate of return.

As a final note, I will be helping out at the Pine Castle Christmas Party (www.pinecastle.org) this Friday, December 17, 2010, with our Northeast Florida NAIOP group. Last year was a blast, and I expect more of the same this year. I hope everyone has a Merry Christmas and safe travels to wherever you may be going this year and I will be back next year… I hope you will too!

Jacob Horsley
NAI Commercial Jacksonville
Industrial Group

Market Update

Well, I have heard the “good, the bad, and the ugly” from businesses and building owners here in the last couple months. Several groups with whom I am currently working for are considering adding to the capacity of their respective warehouses, and they have mentioned to me that substantial growth is predicted for the coming months and into 2011. On the other hand, I spoke with a company today that is closing its doors in Jacksonville, as well as many others who are holding on for dear life. I believe we will continue to hear about a mixed bag of results for many companies and industries over the next 12-18 months, as the economy makes a slow turn for the better. Now, I don’t believe we will see the heights of 2006-2007 anytime soon, but maybe in 2012, we will start to see small, but steady, growth in our economy.

During a recent conversation with the owners of a local transportation company that ships goods predominantly by rail, they told me that rail activity is picking up, and more freight is being transported. They also said they have seen four straight months of positive growth and believe in 2011, there will be more of the same. The freight increases aren’t huge - and not even close to the market highs, but they do believe the worst of times are behind them. Only time will tell, but if freight is moving, someone is buying and someone is selling, and that is a positive fact to report.

Currently, most building owners are still not ready to part with properties at prices buyers are willing to pay, but the bid-ask gap is narrowing. Most sales and leasing activity has involved industrial buildings smaller than 20,000 SF, with a few larger users poking around the market. Leasing activity was fairly strong in the last two quarters, which was a direct result of landlords’ willingness to do almost anything to fill vacant space, from providing free rent and extensive tenant improvements to offering significant rent reductions. If only sellers would be this realistic!

To summarize… the market is tough but slowly rebounding, and while the economy has taken a beating, business owners are fighting back and will come out of this recession smarter and stronger than before it began. I hope that everyone has a great Thanksgiving and safe travels to wherever their holiday destination may be. Until next time, have fun out there!

Jacob Horsley
NAI Commercial Jacksonville
Industrial Group

The Recession Has Ended???

So, The National Bureau of Economic Research says that the recession ended in June of 2009??? The title from our featured article says that someone should send the tenants a memo. Someone should send the consumers a memo… I understand the NBER has its own valuation criteria as to what designates a recession and recovery, but from the companies I have spoken with over the last 6 months, they all tell me the same thing. They are all trying to stay alive to “fight again another day”. They are all still trying to figure out more ways to cut costs and do more with less. Some have mentioned to me that a small level of consistency has come back into their market, but actual growth is little to none.

Personally, I believe that this pattern of little-to-no-growth is what this country will face over the next year and maybe two or even three years. A newly-elected Congress and House of Representatives may be a perceived “ray of hope” in the eyes of some Americans, but, unfortunately, I don’t believe it will be the “be all and end all” to solve all our problems. I think we need to give our small-to-medium-sized businesses some relief and consistency with their business taxes, healthcare, and insurance and provide incentives for them to grow and hire more employees. Most companies I have spoken with have made comments similar to those in our featured article. They state they have no idea what hiring a new employee is going to cost them, so they simply are not planning any new hires.

Jobs are the key to economic recovery, and right now, there seems to be only talk about how high the unemployment rate is and little action is being taken to reduce it. It is very clear that another government bailout is not the solution, but providing tax incentives to small-to-medium-sized businesses so they can hire more Americans and start chipping away at that high unemployment rate will definitely help. Then, with just a few more Americans working, maybe we will see an increase in consumer spending and jumpstart a supply-and-demand “circle of life” to get out of this recession!

Now, that all the business is out of the way… if you live in northern Florida, this is the best time of the year. The tourists have all gone home, our beaches are wide open, and the sun and water is still warm. It’s a “perfect storm” of fun in the sun with some close friends and ice cold beverages! I thank everyone for reading and until next time, have fun out there!

Jacob Horsley
NAI Commercial Jacksonville
Industrial Group

Distressed Assets

There has been a lot of talk recently over distressed and REO sales, as well as the CMBS delinquency rate during past year or more. I have spoken firsthand with several CMBS servicers and have learned that most of the delinquent notes will get worked out with a blend-and-extend model that has been a successful workout method so far. Using this method, the due date on the note is extended (balloon payment) , the interest rate is reduced, and everyone just keeps on trucking. Sometimes, a capital infusion is required to make the workout more successful, but it’s not always needed. This tells me that a small portion of the CMBS distressed product will actually come to market over the next several years. Now, when it comes to the bank-owned/REO sales being transacted by smaller local banks, my experience has been that they are a little less likely to workout deals for the borrower and may opt to bring the asset to market instead. What I have seen lately, is that, in most cases, the product that comes to market from these REO/bank-owned sales, is your typical bottom-of-the-barrel-type building. Regardless of the product type (office, retail, industrial, etc.) the building is in extremely poor condition and has not been taken care of in the past 6, 12, 18 months. In these cases, regardless of how cheap the price is, you are going to have a tough time finding a buyer that wants to spend the time cleaning up the facility and getting it ready to occupy or lease out. Now, every once in awhile, there is “diamond in the rough” and you’ll find a great deal, but it’s kind of like shopping at Ross Dress-for-Less. You have to spend most of the day looking through all the junk to find the one pair of pants that actually fit, but when you do find them, it was worth the effort because they’re only $18.95! That might actually be the best way to describe this distressed market... there are some good deals out there, but you need to be patient and widen your geographic parameters.

Well, on the lighter side of things, my Labor Day weekend was exciting, and I hope everyone else’s was, too. I visited with some friends and spent some time on the golf course. The golf adventure was not pretty this time around, but that always leaves room for improvement for next week. To all those reading, I thank you for taking the time, and until next time… have fun out there!

Jacob Horsley
NAI Commercial Jacksonville
Industrial Group