2013 appraisal institute year in review

17
2013 APPRAISAL INSTITUTE YEAR IN REVIEW WISCONSIN RETAIL MARKET OVERVIEW WESTON J. ROBERTSON

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2013 Appraisal Institute Year in Review. Weston J. Robertson. Wisconsin retail market overview. Drivers of retail demand. Employment. Housing/Population. Shopping/Dining. Office/Industrial Apartment/Single FamilyRetail Markets MarketsMarket. RECENT TRENDS. - PowerPoint PPT Presentation

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Page 1: 2013 Appraisal  Institute  Year in  Review

2013APPRAISAL INSTITUTE

YEAR IN REVIEWWISCONSIN RETAIL MARKET

OVERVIEW

WESTON J. ROBERTSON

Page 2: 2013 Appraisal  Institute  Year in  Review

DRIVERS OF RETAIL DEMAND

Employment Housing/Population Shopping/Dining

Office/Industrial Apartment/Single Family RetailMarkets Markets Market

Page 3: 2013 Appraisal  Institute  Year in  Review

RECENT TRENDS

Year Non-Farm Employment

% Increase County Population

% Increase

September 2013 831,500 0.2% 950,410 0.2%

September 2012 829,600 1.1% 948,322 0.0%

September 2011 820,600 N/A 948,369 N/A

Year Non-Farm Employment

% Increase CountyPopulation

% Increase

September 2013 359,700 1.3% 491,555 0.5%

September 2012 355,100 0.7% 489,331 0.3%

September 2011 352,700 N/A 488,073 N/A

Milwaukee Metro Area

Madison Metro Area

Page 4: 2013 Appraisal  Institute  Year in  Review

MOSTLY STAGNANT?

Metro Area 3rd Quarter 2013 3rd Quarter 2012Milwaukee 6.7% 6.9%Madison 6.4% 6.6%CoStar Market Survey

Overall Retail Vacancy Rate

Metro Area 3rd Quarter 2013 3rd Quarter 2012Milwaukee $10.66 $10.91

Madison $11.79 $11.80

Average Retail Rent Rate

Page 5: 2013 Appraisal  Institute  Year in  Review

HOW ABOUT THE INVESTMENT MARKET?

Low Avg. HighInterest Rate 5.0% 5.5% 6.0%

Number of Periods 25 yr 25 yr 25 yr

Loan to Value 75% 75% 65%

Investor Return 10% 12% 14%

Indicated Cap Rate 7.76% 8.53% 9.93%

Band of Investment – Typical Multi-tenant Retail

Surveys

Source Cap RatesMarcus and Millichap Low 8% to low 9%

Realty Rates Average 9.82%

Page 6: 2013 Appraisal  Institute  Year in  Review

HOW ABOUT THE NET LEASE MARKET?Property Type Tenant 2013 Asking

Cap2012 Asking Cap

Drug Store Walgreens 5.75% 6.40%

CVS 6.07% 6.60%

Bank Ground Lease 5.00% 5.85%

Auto Parts Stores Advance Auto Parts 7.25% 7.90%

AutoZone 6.50% 7.05%

O’Reilly Auto Parts 6.55% 7.01%

Dollar Stores Dollar General 8.25% 8.40%

Family Dollar 8.28% 8.45%

Page 7: 2013 Appraisal  Institute  Year in  Review

THE CONSTELLATION - MADISON

• Opened August 2013• $39 million cost• 32,500 SF

Commercial/Retail• 220 apartments• Google office, Star Bar,

Cargo Café, Andersen Dental, and others

Page 8: 2013 Appraisal  Institute  Year in  Review

VARSITY QUARTERS - MADISON

• Scheduled Open Fall 2014• Located near UW Campus• Project cost not disclosed• 162 bed – student housing• 7,500 SF retail

Page 9: 2013 Appraisal  Institute  Year in  Review

309 W JOHNSON ST - MADISON

• Scheduled Summer 2015• 600,000 SF• Over 250 apartments with

over 300 bedrooms• Retail on 1st and 2nd floors

Page 10: 2013 Appraisal  Institute  Year in  Review

800 BLOCK OF E. WASHINGTON - MADISON

• Proposed project• $65 million cost• 4.5 acres• Phase 1

• 50,000 SF grocer• 175-240 apartments• 350 parking stalls

• Phase 2• 22 owner-occupied homes• 65,000 SF retail/office• 173 parking stalls

Page 11: 2013 Appraisal  Institute  Year in  Review

THE MAYFAIR COLLECTION - WAUWATOSA

• Dick’s, Nordstrom Rack, Sak’s off 5th, ULTA, Old Navy

• Phase I - 266,000 SF• $49 million cost• Expected opening Spring

2014• Future phases to include

Restaurants, a Hotel, and Mixed Use Office/Retail

Page 12: 2013 Appraisal  Institute  Year in  Review

DREXEL TOWN SQUARE – OAK CREEK

• Mixed use development• 600+ apartments• City hall, public library,

farmer’s market• Meijer anchored, 191,000

SF grocery store• $175 million• $20 million TIF financing

Page 13: 2013 Appraisal  Institute  Year in  Review

WOODMAN’S GROCERY STORE – WAUKESHA

• Opened July 2013• $7 million, $3.5 TIF financing• 243,753 square feet• Approximately 40% liquor store

NORDSTROM MAYFAIR – WAUWATOSA

• Opening Fall 2015• 138,000 SF• Three stories• Addition to existing

Mayfair Mall

Page 14: 2013 Appraisal  Institute  Year in  Review

NEW MILWAUKEE RESTAURANTS

Black Sheep216 S 2nd Street

Self-Serve Wines, Tapas, Haute Dogs

Bel Air Cantina - Wauwatosa6817 North Avenue, Wauwatosa

Margaritas, 25 Kinds of Tacos

Carson’s1141 North Old World Third Street

Steaks, BBQ

Page 15: 2013 Appraisal  Institute  Year in  Review

NEW MILWAUKEE RESTAURANTS

Anodyne Coffee Roasting224 West Bruce Street

Sandwiches, Pastries, Free Trade Coffee

Wolf Peach1818 North Hubbard Street

European Fine Dining

Pizza Man2597 North Downer Avenue

Italian and Specialty Pizzas

Page 16: 2013 Appraisal  Institute  Year in  Review

WHERE DO WE GO FROM HERE?• Concern over increasing interest rates• Source projects a 50 bp interest rate increase

Low Avg. HighInterest Rate 5.5% 6.0% 6.5%

Number of Periods 25 yr 25 yr 25 yrLoan to Value 75% 75% 65%

Investor Return 10% 12% 14%

Indicated Cap Rate 8.03% 8.80% 10.17%

Increase (bp) 27 27 24

• Continued low cap rates in the NNN market• Slow, gradual new development as space is absorbed• Minimal, if any, increase in market rents

Page 17: 2013 Appraisal  Institute  Year in  Review

2013APPRAISAL INSTITUTE

YEAR IN REVIEWWISCONSIN RETAIL MARKET

OVERVIEW

WESTON J. ROBERTSON