Kurt’s quotes (see below for details and context):
The panel included . . . Kurt Schoenhoff, vice president of hospitality and brokerage services at Selwyn Property Group, who specializes in land deals for hotel development.
Schoenhoff: The recession was very hard on hospitality. Hotels were the last thing that banks were interested in financing. However, in the past 12 months I was involved with three new hotel-site transactions, and have six new hotel sites that are under contract. Those nine hotels represent about 1,250 new rooms for the Charlotte region.
Hotel development now is very active. The consensus is that now is a great time to buy, sell or develop hotels. Occupancy rates are at pre-recession levels because there wasn’t any new supply during 2009, 2010, 2011. It’s a great segment to be in. I think the current cycle will be very strong through 2016.
Full Article:
At the Charlotte Business Journal ’s CREQ Live event in March, a panel of Charlotte Region Commercial Board of Realtors’ Deal Maker award winners discussed industry trends. Each year, the awards program recognizes commercial real estate brokers who individually accumulated transactions totaling more than $2 million in the office, industrial, investment, land and retail sectors.
The panel included Billy Cooper, senior vice president at NAI Southern Real Estate, who specializes in retail and restaurant properties as a landlord and tenant representative; Barry Fabyan, senior vice president at The Bissell Cos., who heads its office leasing; Patrick Gildea, first vice president at CBRE Group Inc., who specializes in the sale of office, industrial and mixed-use properties in the Carolinas; Anne Johnson, senior vice president at CBRE, who represents industrial tenants and landlords; and Kurt Schoenhoff, vice president of hospitality and brokerage services at Selwyn Property Group, who specializes in land deals for hotel development.
Following are edited excerpts from the conversation:
How would you describe activity so far in 2014?
Cooper: It’s rebounding and it’s gotten a lot stronger since the recession. We’re back to rates that we were at in 2007, and the vacancies are very low. There’s not much brick and mortar being built. The whole retail segment is changing into more of a service-driven sector.
A prime example is FastMed Urgent Care. We put a bunch of them in former Blockbusters, which had A-1 real estate, and so we’re putting these service-driven users into those spaces. That’s going to be the trend. There are quite a bit of retail uses in grocery centers, but they’re changing. They’re changing into hospital uses, chiropractic uses, Great Clips is expanding, Palm Beach Tan. Any type of service user is the one that’s really growing right now.
Restaurants are changing as well. The fast-casual concept has been very hot for many years with the Moe’s (Southwest Grill) and Five Guys. A trend that you will continue to see is fresh casual, where all these brands will be turning more to a chef-driven product with more fresh ingredients and more ambiance in restaurants. Vapiano’s is an ideal representation of the fresh-casual concept. I think that is going to be a huge trend for the future.
One of the clients I represent, Cantina 1511, is going to be coming out with a new concept called Paco 1511, which will have the same quality of food as Cantina but with a fresh-driven concept. We feel over time it will dominate Chipotle (Mexican Grill) and Moe’s at the same value of $8 to $12.
Fabyan: I think everybody expects office to take off. I would call it good today, not great, but healthy. In 2013, you really had no office deliveries from landlords, and we’re trying as landlords to get back to a position of strength.
There’s not a single deal that’s simple to do because tenants have been able to control the negotiations. We need to see rents move for landlords to start to feel good, and rents have not really moved.
We have 6 million square feet of proposed construction in the city waiting for deals to provide the catalyst, and I think until rents move there’s no reason to start a new building. The demand has been able to be absorbed in existing availabilities. Until we can push the lever a little farther, we’re still waiting for smiles all around.
This is the first time we haven’t had construction in Ballantyne since 1996. And the owner is certainly eager to do it. We’ve got plans, and we’re moving forward.
MetLife and the last two or three deals we did provided a little bit of a lesson for us in that they come in and rip up the lobbies, they tear out hundreds of thousands of dollars of beautification and tailor the building to their needs. And so as the deals have gotten larger and larger, we’re trying to get the building virtually ready and cut all the front-end time off but make it a quasi-custom build where we don’t spend money twice. We think we’re only really losing three or four months, and this gives us a chance to provide customization for a big tenant.
Gildea: I think the driving force in 2014 and the key theme we’re seeing is capital availability, both from a debt and equity standpoint. The money that has been raised to invest in real estate is amazing. Private-equity fundraising is at an all-time high. Family offices (a company that manages money for a wealthy family) are very active buyers right now. That’s something that we didn’t see in the last few years.
If you look back at 2013, volume was about $102 billion for investment sales nationwide. That’s almost back to 2004 and 2006 levels. Pricing feels like it’s back to that point as well.
One recent transaction we had almost felt like 2007. It was fun. Four buyers came back in and resubmitted offers at higher pricing. They blew past our pricing expectations, and people were posting nonrefundable earnest money. That opened our eyes a bit to how much capital is in the market and how aggressively these buyers are looking to place that capital.
Johnson: What’s exciting is that we finally are having a little bit of a transition in our industrial market. We have actually shifted in Charlotte from what is a smaller market, where our typical tenant is going to be somewhere around 20,000 to 50,000 square feet, to where now we are seeing a lot of significantly larger deals.
I think the reason for that is e-commerce is a huge factor. Customers want to get product quickly. Consumers want stuff at their houses immediately. The model is changing to where retailers aren’t stocking a huge amount of inventory, and they want items to their stores very quickly. So Charlotte has gone from being more of a customer-centered market to more of a regional distribution center, not for the Southeast but more of the mid-Atlantic. So our average deal size has jumped up now to closer to 100,000 square feet.
As a result, the construction that you’re going to see will be focused primarily on these huge distribution centers. We’re going to see a lot more of these 200,000- to 400,000-square-foot buildings. There’s been a big shift.
Schoenhoff: The recession was very hard on hospitality. Hotels were the last thing that banks were interested in financing. However, in the past 12 months I was involved with three new hotel-site transactions, and have six new hotel sites that are under contract. Those nine hotels represent about 1,250 new rooms for the Charlotte region.
Hotel development now is very active. The consensus is that now is a great time to buy, sell or develop hotels. Occupancy rates are at pre-recession levels because there wasn’t any new supply during 2009, 2010, 2011. It’s a great segment to be in. I think the current cycle will be very strong through 2016.
Will Boye
Senior Staff Writer
Charlotte Business Journal
