LDI Land Sale in Brooklyn Park
A new speculative industrial building is planned for Brooklyn Park and the Paramount Real Estate Corp team of Fred Hedberg, John Young, and Joe Schultz sold the land to get the project started. The Paramount team has provided real estate services to Liberty Diversified International (LDI) for over a decade. This includes leasing several of LDI’s industrial buildings and, most recently, selling the excess land in Brooklyn Park. The site is a 5.5-acre parcel at 9501 Louisiana Avenue (southeast corner of Highways 169 and 610) and the developer plans to build a 75,000 square foot state-of-the-art industrial building called Highview 610 Business Center.
Endeavor Development, founded by Josh Budish, is the developer. Groundbreaking for the property is planned for this Spring. The Paramount team is also handling leasing for Highview 610 and is marketing the building for fall 2021 occupancy. The property has have great visibility to Highway 610, will be 28’ clear height, have plenty of vehicle parking, and a spacious truck court. The building will be divisible to 15,000 square feet.
For more information about investment sales contact us at:
PARAMOUNT REAL ESTATE CORP | TCN WORLDWIDE
1650 W 82nd Street, Suite 725 | Bloomington, MN 55431
LDI Land Sale in Brooklyn Park
Paramount Represents Seller in Plymouth Investment Sales Transaction
Fred Hedberg, Principal of Paramount Real Estate Corp was engaged in November 2020 by SJH Real Estate, a long-time client, to sell a NNN leased property it owned in Plymouth Minnesota. The owner of SJH Real Estate had recently concluded the sale of part of his business to SiteOne Landscape Supply LLC. SiteOne Landscape Supply LLC is owned by a publicly traded company that provides wholesale goods for green industry professionals. SiteOne has a market cap of $6 billion with over 500 facilities throughout the United States and Canada. As part of the purchase, SiteOne entered into a 10-year NNN lease with two-5 year options to extend for the property that was used to operate the business unit it had purchased. During negotiations, Fred advised SJH on the best way to structure the lease. He also advised on ways to maximize the value of the real estate and make it saleable in the future.
The property, located at 1205 Nathan Lane in Plymouth consists of 8.15 acres and a 17,580 square foot showroom/warehouse building. The property’s zoning allows for outside storage. Finding a property with zoning that allows for outside storage within the I-494/I-694 loop of this size is very rare and in high demand. The zoning, financial strength of the tenant, and the long term lease made this property very attractive to investors.
Paramount Real Estate Corp/TCN Worldwide started marketing the property For Sale on November 12, 2020. Fred contacted several local investment groups he thought might have an interest in this property. He received eight offers within two weeks, the majority of which were at full asking price or above.
Selecting a Buyer
The top five buyers were asked to submit their best and final offers. Three of the five buyers were at the same price or very close to the same price. The seller decided it would be in his best interest to close on a sale by December 31, 2020. Paramount advised the top three buyers to make one more final offer. They were also asked to provide evidence they could close by December 31. Upon careful review of the final offers and discussions with each of the buyers, one was selected.
Fred and the Seller selected a buyer they felt would have the best ability to close on the sale by year end. Both parties signed the purchase agreement on December 8, 2020 with a short due diligence period. All parties worked together to get an appraisal and environmental study completed in less than three weeks. Christmas even fell within that three weeks. The sale closed on December 30, 2020 and the property sold for $500,000 over asking price.
With a time from listing to close of less than seven weeks including holidays, this was an extremely fast transaction. As the real estate world gets more complex, most transactions are taking longer. This sale is an example of how complex real estate transactions can still be completed in a short time frame if all parties work together towards a common goal. It also demonstrates the strength of the Twin Cities investment sales market and investors’ appetite for good real estate with strong credit tenants and long-term net leases.
Written by: Fred Hedberg, Principal | Paramount Real Estate Corp | TCN Worldwide
INDUSTRIAL MARKET UPDATE: YEAR END 2020
2020 was a challenging year to say the least. COVID-19 had a significant impact on the economy, everyone’s daily lives, and of course the commercial real estate industry. Unemployment has still not recovered from the impact of the pandemic. It remains over 3% higher than the previous year on a national level. At year-end, unemployment was 6.7%. Minnesota’s unemployment rate at year-end 2020 was 4.4%, up from 3.3% at year-end 2019.
Industrial Absorption Remains Strong
The Industrial real estate market demonstrated surprising strength after a significant pause during Q2 and Q3 of 2020. Net absorption of available industrial space for Q4 totaled a robust 1.24 million square feet and 2.48 million square feet (Multi & Single Tenant) for the entire year. In comparison, total net absorption for Q4 2019 was 728,962 square feet and a robust 3.186 million square feet for all of 2019. This shows there is a decreasing supply of industrial real estate in the current market.
Industrial Category Stats
In both 2019 and 2020, Warehouse Distribution space (buildings with 24’ clear height or higher) outperformed Flex/R&D and Office Warehouse net absorption; totaling more than both other categories combined. Net absorption for Warehouse Distribution space totaled 1.973 million square feet in 2020 and 1.769 million square feet in 2019. Clearly Warehouse Distribution has been the best performing industrial product type. Overall, the industrial vacancy rate Year End for 2020 stood at 4.9%. Warehouse Distribution space stood at 4.5% and Office Warehouse vacancy rates were 0.2% lower than Warehouse Distribution space. When accounting for the 3.68 million square feet of new speculative development currently under construction, most of which is Warehouse Distribution space, this additional square footage has little impact on vacancy rates.
The weakest portion of the industrial market continues to be the Flex/R&D (Office Showroom) product. COVID-19 has exacerbated an already weak 2019 performance. YTD Net Absorption for Flex/R&D was a -182,645 square feet and has the highest vacancy rate at 9.5%.
Factors Driving Demand
Warehouse Distribution product will continue to perform better than any other segment of the market in 2021. Demand is driven by a number of variables that appear will only increase the need for more and higher quality high bay space going forward. Tenants are willing to pay new construction rates to benefit from operational efficiencies of new construction, particularly for in-fill locations in urban areas. The demand from 3PL (Third Party Logistics) companies and Last Mile Home delivery companies will increase. This will be a direct result of more consumer purchases online. In addition, investor demand to acquire this product type is stronger than ever. Investors are driven by strong property-level fundamentals, relative liquidity, and a broadening of their appetite due to the global yield environment.
While COVID-19 has negatively impacted the market, this high demand and low supply in the industrial real estate market has resulted in property sales and lease rates to increase over the last year. We expect this trend to continue into and throughout 2021.
Written By: Phil Simonet, Principal | Industrial Sales & Leasing
Q4 2020 Industrial Market Update
OFFICE MARKET UPDATE: YEAR END 2020
Most everyone will agree that 2020 was an exhausting year. Challenges brought on by the pandemic, social unrest and a polarized political environment kept the mood just below tolerable. Working from home and state mandates have left streets empty, restaurants closed and frustratingly vaccinations are just not happening as expected. Not surprisingly, state unemployment numbers rose. Reaching 3.9% up from 2.7% at year-end 2019 and business pushed decision making out to the future.
Q4 office leasing data does not bring too many surprises as overall absorption for the quarter came in at a negative 203,552 across all property types in all submarkets. The only winner appears to be the Northwest submarket. It experienced 4th quarter positive absorption of nearly 300,000 square feet. Overall vacancy rates have increased by over a full percentage point year over year. They came in at 13% for all properties and 17.2% in multi-tenant properties, nearly 2% over year end 2019.
What about Rental Rates?
While vacancies are up and the market still struggles, rental rates have not changed. Landlords are likely willing to incentivize new deals with free rent and larger allowances but for now aren’t moving off their quoted rental rates. Overall quoted rental rates are averaging $24.81 per square foot gross, slightly higher than 2019.
Total sales volume for Q3 surpassed 1.4 million square feet. Low interest rates continue to drive sales but inventory is low and investors have few options readily available. Working from home continues and the expectation is that employees will start returning to the office late in 2021. In the meantime, landlords are working to make their properties cleaner with bi-polar ionization and touchless doors/elevators/restrooms. Rearranging office layouts to meet 6’ social distancing recommendations is the primary tool being utilized and we all hope vaccination levels ramp up and the local economy starts humming again.
Written By: Nancy Powell, Vice President | Office Sales & Leasing
The Twin Cities industrial real estate market is HOT!
Is it the “Amazon Effect”?
Amazon’s 24-hour delivery promise requires them to lease multiple, dispersed, and well-located distribution centers. This, in turn, is driving up building values and rents all over the country. Case in point, two recent owner/user building sales. First, a 31,000 square foot building in Mendota Heights sold for $86.69 per square foot, and second, a 63,000 square foot building sold for $88.91 per square foot. Just a few short years ago, these would have been sold for $70.00-$75.00 per square foot. Winning the lottery would be great, but it seems like owning a 10,000 to 60,000 square foot industrial building anywhere in the Twin Cities (especially in the 494/694 loop) is the next best thing.
Funny thing happens when building values go up…rents go up, too. Multi-tenant landlords throughout the City are pushing up rates by $0.25-$0.45 per square foot and, for renewals, they are not accepting rents below the last lease rate in effect for the lease.
All of these factors are now fueling a resurgence of sale/lease backs. Recently, two sale/lease back transactions had sale prices 20% over the normal market price with seller’s signing ten-year leases. This put cash in the seller’s pocket to fuel business growth and provided much needed investments to Opportunity Zone or 1031 exchange investors. “Amazon Effect” or not, building values are climbing with no end in sight…for now.
~Written by John Young, CCIM | Vice President
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