Key Factors Driving Growth in High-Growth Real Estate Markets

While commercial real estate investment can offer substantial returns, it's crucial to acknowledge the variability and risks inherent in this industry. Certain markets are currently demonstrating rapid growth, opening up new opportunities for discerning investors. In this blog post, we will delve into the critical elements propelling these high-growth real estate markets.

1. Economic Growth:

One of the significant factors driving growth in high-growth real estate markets is economic growth. The economy plays a crucial role in the real estate industry as it affects the demand and supply of properties. When the economy is growing, the demand for properties increases, which results in higher property prices. In contrast, when the economy is struggling, the demand for properties decreases, leading to lower property prices.

2. Population Growth:

Population growth is another crucial factor driving growth in high-growth real estate markets. As the population grows, the demand for housing and commercial properties increases, leading to higher property prices. Therefore, investors looking to invest in high-growth real estate markets should consider areas with a high population growth rate as it indicates a higher demand for properties.

3. Infrastructure Development:

Infrastructure development is a key factor driving growth in high-growth real estate markets. Improvements in infrastructure, such as new highways, airports, and public transportation systems, make areas more accessible and desirable, resulting in higher property prices. Therefore, investors should consider investing in areas where significant infrastructure development is underway as it indicates a positive growth outlook.

4. Technology Advancements:

Technology advancements are playing an increasingly crucial role in the real estate industry, and this trend is expected to continue. With the rise of smart homes, real estate investors can invest in properties that are equipped with the latest technology, making them more attractive to tenants and buyers. Investors should consider investing in high-growth real estate markets that are embracing technology to remain competitive.

5. Government Policies:

Government policies can significantly impact the real estate industry, and this is particularly true in high-growth real estate markets. Investors should be aware of government policies related to taxes, zoning, and building regulations, as they can impact the profitability of real estate investments. Therefore, investors should consider investing in areas with government policies that are favorable to the real estate industry.

Conclusion:

Investing in high-growth real estate markets can provide significant opportunities for investors. However, it is crucial to consider the key factors driving growth in these markets, such as economic growth, population growth, infrastructure development, technology advancements, and government policies. By understanding these factors, investors can make informed decisions and maximize their returns on investment.

Navigating Real Estate Investments: A Comprehensive Guide

Investing in real estate can be a lucrative opportunity, but it can also be a risky endeavor. That's why it's important to navigate real estate investments with a comprehensive guide to minimize risks and maximize returns. In this blog post, we will explore key factors to consider when investing in real estate, strategies for successful investments, and pitfalls to avoid.

First and foremost, it's essential to consider location when investing in real estate. High-growth real estate markets, such as major cities and metropolitan areas, often offer the best investment opportunities. According to a recent report by Forbes, some of the fastest-growing real estate markets in the US include Phoenix, Austin, and Nashville, with factors like strong population growth, job creation, and high demand for housing driving growth. Additionally, it's important to research local zoning laws and regulations to ensure the property you invest in is suitable for your intended use.

Another key factor to consider when investing in real estate is the type of property. Residential properties such as single-family homes and multifamily apartment buildings are popular choices for many investors, but commercial properties like office buildings and retail spaces can also offer significant returns. It's important to consider the long-term potential of each property type, as well as the current state of the market, to make informed decisions.

Beyond location and property type, there are several strategies investors can use to increase their chances of success. One such strategy is to consider partnering with experienced professionals, such as real estate agents, property managers, and contractors, to help manage the investment. These professionals can provide valuable insights and expertise, and may even have access to off-market properties or investment opportunities.

Another important strategy is to conduct thorough due diligence before making an investment. This includes researching the property's history, market trends, and potential expenses such as maintenance and repair costs. It's also important to have a solid understanding of the local real estate market and to stay up-to-date on any changes or trends that could affect the property's value.

Finally, it's important to avoid common pitfalls that can lead to failed investments. One such pitfall is overestimating potential returns or underestimating expenses. It's important to be realistic about the costs and potential returns of an investment and to have a solid plan in place to mitigate risks. Another pitfall is failing to diversify investments, which can leave investors vulnerable to market fluctuations and changes. By diversifying across multiple properties and property types, investors can minimize risks and increase their chances of success.

In conclusion, navigating real estate investments can be a complex process, but with a comprehensive guide, investors can minimize risks and maximize returns. By considering key factors like location and property type, partnering with experienced professionals, conducting thorough due diligence, and avoiding common pitfalls, investors can increase their chances of success and build a profitable real estate portfolio.

References: "The Five Fastest-Growing Real Estate Markets In The US" Forbes. https://www.forbes.com/sites/forbesrealestatecouncil/2022/04/20/the-five-fastest-growing-real-estate-markets-in-the-us/?sh=1dc9072474cc

Texas Leads the Way in Industrial Real Estate Development

Texas Leads the Way in Industrial Real Estate Development

Industrial real estate growth in Texas is gaining momentum, attracting significant investment in development projects that create new opportunities for businesses and investors. One example of this growth is the partnership between Ledo Capital Group and St. Clair Commercial Real Estate, which is building a three-building, 663,000-square-foot industrial project in San Marcos. What is driving this growth, and how is Texas leading the way in industrial real estate development?

Factors Driving Industrial Real Estate Growth in Texas

Several factors come into play, making Texas an ideal location for industrial real estate development:

• Location: Texas is strategically located and an excellent hub for trade and commerce with its proximity to Mexico and major transportation routes.

• Business-friendly policies: Texas offers a low-tax environment and minimal regulations encouraging investment and economic growth.

• Skilled workforce: Texas has a large labor pool and a strong educational system to support the various industries that require industrial spaces, including manufacturing, logistics, and warehousing.

• E-commerce rise: The increasing demand for warehousing and distribution centers has accelerated the need for industrial development projects.

Sustainable Development in Industrial Real Estate

The growth of industrial real estate in Texas is impressive, but it presents challenges. Developers must find innovative ways to meet the demand while minimizing the impact on the environment and local communities. Sustainable development practices, such as incorporating energy-efficient technologies and using eco-friendly materials, will become increasingly important in the years to come.

In conclusion, Texas' industrial real estate sector is driven by a combination of factors, including its strategic location, business-friendly policies, a skilled workforce, and the rise of e-commerce. As the state's industrial real estate continues to surge, it is essential to balance development with sustainable practices to ensure long-term growth and success. Texas is leading the way in industrial real estate development, and sustainable development practices will be critical in maintaining its attractiveness to businesses and investors.

Market Update - Summer 2020

Markets remain chaotic amid economic and public health challenges resulting from the pandemic.

“In the midst of chaos, there is also opportunity” – Sun Tzu, The Art of War

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2020 has been a year like no other in our lifetimes. The coronavirus pandemic continues ravaging globally--public health, the economy, sports, and yes, commercial real estate. We would like to send our thoughts and best wishes to everyone who has been affected, and express our gratitude to all of the healthcare workers who are risking their lives every day for the rest of us, as well as other essential workers – grocery stores, delivery drivers, airline workers, etc., all working to keep life as relatively normal as possible for the rest of us.

Despite the terrible impact to employment and certain sectors of the economy, capital markets and CRE activity has remained active largely due to Fed action and low interest rates. Liquidity in the debt markets initially was tight, but has now begun to loosen up. Regional and local banks have been very active, while life insurance companies are being highly selective, and CMBS is struggling (9.6% delinquency rate as of July, according to Trepp Analytics). Where the current situation differs from the Great Recession is the severe and uneven impact to hospitality and retail, as well as the glut of equity capital present in the market right now to support pricing. Another noteworthy difference is that pre-pandemic underwriting was more responsible than in the mid- 2000s, with stronger underlying fundamentals, so defaults have been less widespread.

In terms of pricing, assets that were under contract before the pandemic began have, from our perspective, seemed to have continued to close at their pre-pandemic prices, although transaction volume and speed are down. We are seeing some price cuts, particularly on retail and hospitality assets, but generally most sellers do not (yet) seem willing to adjust pricing to reflect current headwinds and risks to rent rolls.

While this may change for the right opportunity or as pricing adjusts, Industrial and Multifamily are Nordic's current focus for new acquisition opportunities. 

Industrial properties have continued to perform well, with strong cash flows for underwriting, and the heavier reliance on, and growth in, e-commerce is driving additional demand for warehouse and industrial space. Industrial remains the strongest sector with a heavy volume of new development, acquisitions and deal activity.

In the Multifamily space, the Federal Reserve stepped in early with CMBS purchases, which averted a liquidity crisis, and allowed interest rate spreads to tighten. Rates are now historically low and capital is plentiful, though some agencies are requiring 6-12 months of debt reserves. And, while it seems that the multifamily market should be worse, collections continue to be surprisingly strong. 

Next, with Office workers everywhere adjusting to working from home, everyone is wondering about the post-pandemic office market. While vacancies will rise in the next year, the longer term impact to office occupancy is uncertain. Offices offer in-person collaboration, foster productivity and company culture, and are not going away, but the overall need for space may decline. 

Hospitality and Retail are feeling the most pain in CRE. Given the decline in travel and entertainment, collections are way down, vacancy is up and increasing numbers of loans are in default and/or forbearance. Some will move into workouts or be handed back to the lenders in coming months and the impact will be felt in these sectors for some time. 

We are cautiously optimistic but there are still many potential pitfalls and risks ahead. In our view, the avoidance of the worst-case economic outcomes are largely due to the economic support and liquidity provided by the federal government, and the quick and effective response of many world governments in controlling the virus. While the system is better capitalized now than during the Great Recession, there could certainly be further economic decline, especially if the virus drags on well into next year, and the lack of a second stimulus could jeopardize liquidity and lead to a landslide of evictions and defaults in residential mortgages and consumer debt.

Overall, Nordic believes that CRE will be very challenging over the next 6-12 months, but those who remain diligent, disciplined and are creative could emerge in a stronger position than before the pandemic. As difficult as the Great Recession was, many successful firms, developers and entrepreneurs arose from that challenging period.

As always, we will continue to be diligent in our underwriting and remain conservative in our approach, maintaining our focus on capital preservation. We thank you for your time and attention and should you have any questions, comments or concerns please don’t hesitate to contact us.

Sincerely,
NORDIC REALTY PARTNERS

Austin Development Update - 2019

Our summer 2019 intern Ben Sessa (Indiana University ‘22) assisted in composing a summary of what Nordic believes to be a few key exciting development projects to hit Austin in 2019.

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70 Rainey Condominiums

Highrise Combination of Luxury, Location and Lifestyle.

         With Austin’s very unique bar districts, Rainey Street is one of a kind located in a historic district filled with converted bungalow-style homes that are now home to it’s trendy bars. Additionally, this location is a hotspot for developers to build high rises just blocks if not feet away from the happening day and night action. “70 Rainey” did just that:

●      Luxury 34-stories

●      First development in Austin by the New York based Sackman Enterprises. “We felt that this site had the best views in Austin”- C.J. Sackman, Director of development for 70 Rainey

●      76 Units closed

●      164 Units total, 80% sold

●      Unit Range: 663 sq ft to 3,862 sq ft

●      Price Range: $540,000 to $4.7 Million

●      Average PPSF: $815

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The Bridge at Asher Apartments

Market Rate Multifamily to Affordable Housing Conversion

To help alleviate the shortage of affordable housing, a joint venture between Community Development Trust, Austin Affordable Housing Corp, and the Housing Authority of the City of Austin bought this property at 10505 S. I-35 frontage road, just south of Southpark Meadows, for $70 Million from New York based Castle Lanterra Properties after millions of dollars were invested for renovations. After buying the 56 acre property for $51.6 Million in 2015, this has become a great community for lower income families who would like to stay close to the city and meet these income requirements:

●      Renting to those making 80% or less of the metro median family income level

●      Priority given to those making 30% or less of median family income

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Aiden by Best Western @ Austin City Hotel

Hipster Style in South Austin

The Best Western is collaborating with Aiden boutique brand and hopping on the hip train that is rapidly taking over South Austin by starting its $2 Billion brand makeover in the heat of the action. With each hotel designed to reflect its surrounding community, this new Aiden by Best Western hotel offers a hip, relaxed hangout spot for millennials along with the like-minded hipster travelers passing by. Catering to the rapidly growing Austin startup market with an around-the-clock Business center, public spaces with bright and modern signature seating, multiple meeting facilities, all underneath it’s 158 vibrant colored, lush fabricated rooms. “Aiden is breaking the mold in the upper midscale boutique segment by catering to today’s travelers looking for an inviting space that embodies the personality and spirit of its location,” says Brad LeBlanc, senior vice president and chief development officer at Best Western Hotels & Resorts. This unique hangout spot will soon be a staple and hub of the rapidly growing South Austin market that is sure to have many more boutique shops built around it.

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H-E-B in South Austin

Redevelopment into first multi-level grocery location in Austin

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Another great sign of the promising future for South Austin’s trendiness that is moving rapidly along the thriving South Congress is the redevelopment of the current HEB grocery store. With big plans in play for the construction to start in 2020, HEB will totally redo its current grocery store and turn it into a multilevel (first multilevel location in Austin) grocery store containing a beer garden, food hall, along with two levels of underground parking. HEB also owns the Twin Oaks shopping center that is located directly across the street from their main store on South Congress. This underdeveloped property is a great opportunity to add to the unique high-speed changes that are happening to South Congress, or sell to a redeveloper who will continue the hip trendiness that has already taken over South Congress. As HEB is the largest private sector employer in Austin with nearly 14,000 employees,  this is a perfect opportunity to capitalize on the rapid growth and redevelopment that is spreading up South Congress and into main South Austin.

Investment Acquisition: Austin Industrial Park

9709 Brown Lane (76,000 SF) in Austin, TX Closed March 2019

Austin, TX – Nordic Realty Partners purchased the 76,000 square foot “last mile” infill industrial park located at 9709 Brown Lane. The property traded at an undisclosed price. Byram Properties was the seller, which has owned the property since 1984.

Located on Brown Lane in the Cameron Industrial Park in central east Austin, 9709 Brown Lane compromises three large warehouse buildings spread over four acres.  Nordic plans to make significant capital improvements and bring the property up to specifications seen in other urban infill parks, tailoring the spaces for a new generation of tenants including creative makers and entrepreneurs, local service businesses, and high-volume users who need to be within 20 minutes of central Austin. Nordic’s objective is to offer affordable space to growing businesses seeking high ceiling heights and secure storage space with truck and dock access.

Nordic principal Adam Cibik on the acquisition: “Last mile infill industrial is one of our highest conviction investment sectors for Austin. The yields are higher than apartment buildings, and we are finding tenant demand to be very deep for flexible spaces that appeal to small businesses and creative users. After our improvements, users can be anyone from a carpet distributor to a craft brewery. We have a pipeline of future acquisitions that will enable long-term owners to unlock the true value of their properties, and are looking for more warehouse deals in and around Austin.”

About Nordic Realty Partners – Nordic Realty Partners, LLC is a privately-held real estate development, investment management, and brokerage firm with offices in Los Angeles, Austin and Chicago. Mr. Cibik has been a resident of Austin since 2013 and opened the Nordic Austin office in 2015. Nordic has since acquired over 125,000 square feet of high-value creative warehouse space in central Austin. Nordic investors include several prominent family offices and wealth management groups across the US.

Investment Acquistion: Foxconn Office/Warehouse

9900 Durand Ave (19,500 SF) in Sturtevant, WI - Closed February 2019

Sturtevant, WI – Nordic Realty Partners purchased the industrial building located at 9900 Durand Avenue. The property traded at an undisclosed price. NAI MLG Commercial represented the Seller.

Located on Durand Avenue in Sturtevant, 9900 Durand Avenue is located in close proximity to the developing Foxconn manufacturing campus. The building is comprised of approximately 5,000 SF of office and 14,500 SF of warehouse space.  Nordic plans to make capital improvements and lease the space to one or more tenants.  The building was formerly occupied by Titan Inc., a machinery manufacturing and testing firm, which was acquired by Grand Rapids, Michigan-based Burke Porter Group in 2018 and is relocating to a new and larger facility.

About Nordic Realty Partners – Nordic Realty Partners, LLC is a privately-held real estate development, investment management, and brokerage firm with offices in Los Angeles, Austin and Chicago. Our company offers a complete array of services to help investors optimize their real estate investment portfolio across property types and geographies, based upon their individual goals, risk tolerance and capital needs. 

Adam Cibik joins Nordic Realty Partners as Managing Director

Austin, TX – Nordic Realty Partners LLC (“Nordic”) is pleased to announce the appointment of Adam Cibik to Managing Director to be based out of Austin, Texas effective September 1st, 2018.

In this newly-created role, Mr. Cibik will manage acquisitions, asset management and capital raising for new value-add real estate investments with a geographic focus on the central Austin, TX market and a sector focus on multi-tenant light industrial and workforce housing (multifamily) assets.  He aims to use his experiences working for best-in-class LPs to create a better GP model through technology-based market/asset selection, lower fee loads and higher partnership transparency.

Mr. Cibik brings over fourteen years of institutional real estate investment management experience to Nordic.  He was most recently at the Employees Retirement System of Texas (“ERS Texas”) where he served as Portfolio Manager – Real Estate Investments overseeing comingled fund and direct co-investments for the $27 billion pension fund’s real estate allocation.  Prior to ERS Texas, Adam spent five years with the Canada Pension Plan Investment Board (“CPPIB”) working in Toronto and London on international real estate acquisitions.  Earlier in his career, he held positions at CBRE and Builders Bank. 

Mr. Cibik holds a MBA and BBA in real estate and urban land economics from the University of Wisconsin – Madison and sits on the Advisory Board for the Graaskamp Center for Real Estate.

About Nordic Realty Partners – Nordic Realty Partners LLC is an emerging real estate private equity, investment management and brokerage firm that runs private partnerships and separate accounts for institutional and high net worth clients.  The firm runs a tech-enabled sponsor/operator model though value-add and opportunistic real estate partnerships in central Austin, Chicago and southeastern Wisconsin.  Nordic has offices in Los Angeles, Austin and Chicago.  For more information, please visit www.nordicrealtypartners.com.

Contact:                                                                                                                         

Nordic Realty Partners, LLC

773.234.8077

www.nordicrealtypartners.com

info@nordicrealtypartners.com