June 13, 2018
Single-user industrial retains a spot high on investors’ shopping lists, Avison Young says in a new report. 2017 saw $13.2 billion of single-user properties change hands, up 45.4% from the previous year. The first quarter’s total was down 1.1% from Q1 2017, yet Avison Young says the level of activity is significant and is expected to continue throughout the year.
A good number of single-user sales take the form of sale-leasebacks, such as Supervalu’s recently-announced sale of eight distribution centers for $483 million (pictured). These are driven by an appealing cap rate environment, and a focus on monetizing corporate facilities, according to Avison Young.
There’s also the change in the tax law regime, which has entailed a more granular look into how SLBs can affect the financial health of the corporation selling the properties. A finance lease and an operating lease will both appear on the corporation’s balance sheet, but each is expensed differently. “While there are many different nuances to these structures, many corporations are using these two methods to their advantage,” according to Avison Young.
“Many corporations are realizing the tremendous benefits of sale leasebacks, which allow companies to generate capital for business expansion and general expenses,” said Erik Foster, a principal with Avison Young and leader of its national industrial capital markets group. “These types of single user sales are particularly attractive to investors, as they provide long-term stability through the triple net lease structure.”
Los Angeles was the top market for single-user sales in 2017, with $1.2 billion, followed by Las Vegas, with $1 billion, and New York City, with $897 million. New York was the leader in Q1 of this year with $264 million, followed by Los Angeles, San Francisco, Chicago and Seattle.
Among the growth markets from 2016 to 2017 were Greensboro, NC, which jumped from $2 million in 2016 to $452 million last year; Philadelphia, $181 million to $451 million; Dallas, $212 million to $404 million; Raleigh, $53 million to $346 million; and Miami, $206 million to $337 million.
For comments, questions or concerns, please contact Paul Bubny