Yeah but what does a private Walgreen’s mean to *property* investors? 

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Word is out this week that Walgreen’s is exploring the possibility of going private. The now-public drugstore chain is working with investment bank Evercore Partners to gauge interest from large private equity firms in footing the roughly $55 billion bill. That would make it the largest leveraged buyout ever.

Walgreen’s has a history of valuing its business privacy — particularly with regards to its prescription sales numbers — and for being at odds with Wall Street scrutiny. The market has battered them this year, pushing stock down 28% in the past 12 months. This move is thought to be prompted by management’s vision to be more autonomous with their strategies and partnerships.

Last week in this newsletter we pondered some numbers around the “retail apocolypse,” and discovered that the Amazon Effect isn’t so much killing brick-n-mortar stores, it’s just reshaping the live retail offering. Walgreen’s is a prime example of this, and while they’ve taken an  Amazon hit, they’re re-aligning in a way that is taking their physical stores in a positive direction.

Walgreen’s has pilot projects and tests with companies like the grocer Kroger, Microsoft, and primary care providers like Humana’s Partners in Primary Care and VillageMD, a developer of primary care clinics. This makes them less reliant on “Amazonable” products like shampoo, while creating revenue from real-time, location-centric services.

And they’ve announced plans to close 200 stores in this streamlining effort, which can sound ominous to property owners leasing to the chain. But these stores are all clearly declining and unprofitable locations, and removing that dead weight actually makes their other locations more valuable.

The conclusion here is that this news makes the investment market for Walgreens properties hotter than usual — Walgreens stock has jumped 6% on the news.

Under our NAI roof here, our overall highest-producing broker over the last several years also happens to specifically be a Walgreen’s expert. Senior VP Mary Alam, working with Investment Advisor CJ Brill, generally covers our retail channels here at NAI NorCal. And within that work, several transactions for both buyers and sellers of Walgreen’s-leased properties have crossed their desks.

The team very recently closed a deal here in the SF Bay Area, as well as representing locations in California’s Central Valley, Sacramento and South Carolina. And they have multiple off-market Walgreen’s options right now. And if you’re looking nationwide, we’ve also got Managing Director Joby Tapia representing a Walgreen’s property in Atlanta, in contract with contingencies removed.

ALL of these properties are the kind of high-traffic, high-performing, market-leading locations that Walgreen’s invests more into while they trim elsewhere. So contact us today if you’re interested in moving on this news while the ink is still wet… 

 

A little perspective on the retail apocalypse

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Our friends at the listing and research platform CoStar have released another interesting report on the impending retail apocalypse.

The Amazon Effect, and the societal retreat into robotic Instagrat lifestyles, is turning 2019 into the heaviest year ever for retail store closures. However. If you read between the lines, you see that while more stores are closing, less square footage is involved.

More than 10,000 stores have announced a closure this year, almost twice last year, and 3,000 more than during the downturn in 2008. Yet while last year saw 155 million square feet close, this year that space is down roughly 30%.

So it appears the Sears, Kmarts, JCPenneys, and similar anchor tenants of yesteryear have gone through their New Economy purge, and now it’s time for the GNCs, Gymborees and Payless stores. E-commerce has its sights on 10,000 sqft and under this year.

But more importantly, these numbers do NOT show a death knell for retail. It’s really more of a cleansing and realigning. Deliverable retail goods — those that can’t be offered via a better user experience than direct-to-your-door convenience — are taking their mid-/small-/boutique stores down. But! There’s growth in the Un-Amazonable.

This includes personal services, restaurants, grocery/drug stores, fitness and sports, healthcare, and even movies and entertainment outlets. These retail establishments are all showing a healthy upward trend.

So. If you have a retail property — or you’re in the market to invest in one — but you’re uncertain about what tenants are promising and which might be at risk, then talk to us.

Market Pulse: North Bay, August 2019

Welcome to NAI Northern California’s “Market Pulse” feature. We checked the pulse of the North Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets.  Each market has four dimensions: current inventory, 12-month net absorption, under construction, and vacancy rate.

Check out our August 2019 North Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the North Bay office market’s inventory is at 40.7 million sq. ft. and holding flat, with 12-month net absorption down at 127,000 sq. ft. of office space. Approximately 17.2 million sq. ft. are under construction with an upward trend. The vacancy rate is at 7.4 percent and expected to drop.

For the industrial market, 105 million sq. ft. of space is in the inventory, with more on the way. The 12-month net absorption is heading up, at 231,000 sq. ft., and the space under construction is also rising, at 1.1 million square feet. The vacancy rate is at 3.4% and holding steady.

There are 65.6 million sq. ft. of retail space available and rising, with a 12-month net absorption rate at 113,000 sq. ft. (a decreasing trend). More is being built, though, with 72,000  sq. ft. under construction. Vacancy rates continue to rise, at 3.7%.

The multifamily market is up to 59,000 units available in the inventory. The 12-month net absorption rate averages just 52 units across the North Bay area and is dropping. Construction is on the upswing here, at 557 units, with a rising vacancy rate of 5.4%.

For more detailed updates or to find out how the North Bay’s submarkets are doing, contact one of our advisors; whether you’re interested in office, industrial, retail, or multifamily properties, we can help.

Market Pulse: South Bay, August 2019

Welcome to NAI Northern California’s “Market Pulse” feature. We checked the pulse of the South Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets.  Each market has four dimensions: current inventory, 12-month net absorption, under construction, and vacancy rate.

Check out our August 2019 South Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the South Bay office market’s inventory is up to 129 million sq. ft., with 12-month net absorption also up at 2.7 million sq. ft. of office space. Approximately 6.2 million sq. ft. are under construction with an upward trend. The vacancy rate is at 8.3 percent and dropping.

For the industrial market, 198 million sq. ft. of space is in the inventory and rising. The 12-month net absorption is on its way up, at 844,000 sq. ft., and the space under construction is also rising, at 771,000 square feet. The vacancy rate is at 5.7% and trending downward.

There are 79.9 million sq. ft. of retail space available and dropping, with a 12-month net absorption rate of 78,000 sq. ft. (a decreasing trend). More is being built, though, with 1 million sq. ft. under construction. Vacancy rates continue to drop, at 3.3%.

The multifamily market is holding strong, up to 144,000 units available in the inventory. The 12-month net absorption rate is 2,500 units and rising. Construction is on the upswing here, at 1,000 units. The vacancy rate is at 4.3% and dropping.

For more detailed updates or to find out how the South Bay’s submarkets are doing, contact one of our advisors; whether you’re interested in office, industrial, retail, or multifamily properties, we can help.

Market Pulse: East Bay, August 2019

Welcome to NAI Northern California’s “Market Pulse” feature. We checked the pulse of the East Bay commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets.  Each market has four dimensions: current inventory, 12-month net absorption, under construction, and vacancy rate.

Check out our August 2019 East Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the East Bay office market’s inventory is up to 112 million sq. ft., with 12-month net absorption down at 819,000 sq. ft. of office space. Approximately 1.4 million sq. ft. are under construction with an upward trend. The vacancy rate is dropping, at 8.2 percent.

For the industrial market, 265 million sq. ft. of space is in the inventory and rising. The 12-month net absorption is almost even, dropping to -1,100 square feet. The space under construction is also dropping, at 6 million square feet, and the vacancy rate is rising to 4.9%.

There are 124 million sq. ft. of retail space available, on an upward trend, with a 12-month net absorption rate of 29,000 sq. ft. (a decreasing trend). Over 340,000 sq. ft. are under construction, with more in the pipeline. Vacancy rates continue to rise, at 3.5%.

The multifamily market is holding strong, up to 170,000 units available in the inventory. The 12-month net absorption rate is 2,000 units. Construction is on the upswing here, at 9,400 units, with a rising vacancy rate of 4.5%.

For more detailed updates or to find out how the East Bay’s submarkets are doing, contact one of our advisors; whether you’re interested in office, industrial, retail, or multifamily properties, we can help.

Market Pulse: San Francisco, August 2019

Welcome to the NAI Northern California’s “Market Pulse” feature. We checked the pulse of the San Francisco commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets.  Each market has four dimensions: current inventory, 12-month net absorption, under construction, and vacancy rate.

Check out our August 2019 San Francisco Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the San Francisco office market’s inventory is up to 176 million sq. ft., with 12-month net absorption at 2.2 million sq. ft. of office space and dropping. Approximately 6.6 million sq. ft. are under construction with an upward trend. The vacancy rate is rising, at 6.2 percent.

For the industrial market, 95 million sq. ft. of space is in the inventory and rising. The 12-month net absorption is at 6,800 sq. ft. and rising. The space under construction is also rising, at 2.5 million square feet. The vacancy rate is at 3.7% and trending upward.

There are 82 million sq. ft. of retail space available, and more coming, with a 12-month net absorption rate of 244,000 sq. ft. heading upward. More is being built, about 433,000 square feet. Vacancy rates have started to drop, at 2.5%.

The multifamily market is holding strong, up to 164,000 units available in the inventory. The 12-month net absorption rate is 2,200 units and rising. Construction is on the upswing here, at 6,200 units, with a decreasing vacancy rate of 3.9%.

For more detailed updates or to find out how San Francisco’s submarkets are doing, contact one of our advisors; whether you’re interested in office, industrial, retail, or multifamily properties, we can help.

How retailers are succeeding in San Francisco

San Francisco’s changing demographics, tricky economics, and transforming neighborhoods are requiring retailers to adapt, but many are rising to the challenge. The city has become one of the most popular destinations for “clicks-to-bricks” retail stores; San Francisco is tied with Los Angeles in second place for where e-commerce retail opens their first physical location (as of 2018). 

One characteristic of successful stores is that they have a story in addition to a popular product; examples include Warby Parker, with 2 SF locations, and Allbirds. Both started as online-only retail (eyeglasses and shoes respectively) and then opened flagship brick-and-morter stores. 

Another winning strategy is anything that will get millennials in the door: experiential retail, pop-ups, fitness centers, and quality food and drink stores like Onedome, CorePower Yoga, and Barry’s Bootcamp are doing well enough to open new locations.

The downtown area is strongest, with stores targeting millennial workers in locations a little off of Market but still within easy reach. The Marina and Pacific Heights are also profitable locations, loci for millennials and far away from centers of homelessness.

 It may soon get much easier to open retail stores in the city; Mayor London Breed has announced a new initiative to speed up the permitting process for small business. The ordinance eases zoning codes, eliminates duplicative inspections, and standardizes local laws to match state regulations. In addition, according to the Mayor’s office, “The proposed investments for Fiscal Years (FY) 2019-20 and 2020-21 include $9 million to provide small businesses with access to capital through low-interest loans, resources for storefront and tenant improvements, and new funding to provide small businesses with financial assistance for regulatory fees.”

Source: Bisnow

Investor confidence in multifamily real estate begins recovery

According to a survey by National Real Estate Investor, confidence in multifamily properties appears to be recovering after a dip in 2018, though all other classes of commercial real estate have been neutral or dropped slightly. The survey asked respondents to rate the attractiveness of the major commercial real estate markets on a scale of one to ten. Most investors prefer multifamily and industrial properties over hotels, office, and retail; last year multifamily and industrial were tied for desirability, but this year multifamily pulled ahead at a 7.9 and industrial fell to a 7.5. They are both still well ahead of the other categories, though; hotels are a 5.9, offices are a 5.8, and retail is just a 4.8. 

Compared to 2018’s rankings, hotels dropped .2 points, offices dropped .1 point, retail held steady, and industrial dropped .2 points. Overall, multifamily has been a rock in the current real estate cycle, despite cap rates being driven lower by the high demand for multifamily. 

While desirability doesn’t necessarily reflect actual sales and purchases, sentiment can be a useful data point in the commercial real estate market. For more information about the current state of the market and how the San Francisco Bay Area differs from the nation as a whole, contact one of our advisors; we have specialists in multifamily and industrial properties as well as office and retail.

Source: National Real Estate Investor

Market Pulse: North Bay, July 2019

Welcome to NAI Northern California’s “Market Pulse” feature. We checked the pulse of the South commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets.  Each market has four dimensions: current inventory, 12-month net absorption, under construction, and vacancy rate.

Check out our July 2019 North Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the North Bay office market’s inventory is at 40.7 million sq. ft. and rising, with 12-month net absorption also up at 325,000 sq. ft. of office space. Approximately 17.2 million sq. ft. are under construction with a downward trend. The vacancy rate is at 6.8 percent and dropping.

For the industrial market, 105 million sq. ft. of space is in the inventory, with more on the way. The 12-month net absorption is heading up, at 164,000 sq. ft., and the space under construction is also rising, at 1 million square feet. The vacancy rate is at 4% and trending upward.

There are 65.7 million sq. ft. of retail space available and rising, with a 12-month net absorption rate nearly neutral at -4,600 sq. ft. (a decreasing trend). Less is being built, though, with 61,000  sq. ft. under construction. Vacancy rates continue to rise, at 3.7%.

The multifamily market is up to 59,000 units available in the inventory. The 12-month net absorption rate averages just 24.2 units across the North Bay area, but is rising. Construction is on the upswing here, at 987 units, with a rising vacancy rate of 3.8%.

For more detailed updates or to find out how the North Bay’s submarkets are doing, contact one of our advisors; whether you’re interested in office, industrial, retail, or multifamily properties, we can help.

Market Pulse: South Bay, July 2019

Welcome to NAI Northern California’s “Market Pulse” feature. We checked the pulse of the South commercial real estate market to discover the ups and downs of the office, industrial, retail, and multifamily markets.  Each market has four dimensions: current inventory, 12-month net absorption, under construction, and vacancy rate.

Check out our July 2019 South Bay Market Pulse infographic. If a dimension is on the rise, the pulse goes above the baseline; if it’s on the decline or negative, the pulse will dip below the baseline.

This month the South Bay office market’s inventory is up to 129 million sq. ft., with 12-month net absorption also up at 1.6 million sq. ft. of office space. Approximately 6.4 million sq. ft. are under construction with an upward trend. The vacancy rate is at 8.6 percent and dropping.

For the industrial market, 198 million sq. ft. of space is in the inventory and rising. The 12-month net absorption is on its way up, at 1.1 million sq. ft., and the space under construction is dropping, at 710,000 square feet. The vacancy rate is at 5.6% and trending downward.

There are 80.1 million sq. ft. of retail space available, with a 12-month net absorption rate of 169,000 sq. ft. (a decreasing trend). Less is being built, though, with 1 million sq. ft. under construction. Vacancy rates continue to drop, at 3.4%.

The multifamily market is holding strong, up to 144,000 units available in the inventory. The 12-month net absorption rate is 2,100 units and rising. Construction is on the downswing here, at 10,00 units, with a rising vacancy rate of 4.7%.

For more detailed updates or to find out how the South Bay’s submarkets are doing, contact one of our advisors; whether you’re interested in office, industrial, retail, or multifamily properties, we can help.