NBI Properties Sponsors 8th Annual YOLO Board Relay Series

NBI Properties is a proud sponsor of the 8th annual YOLO Board Relay Series to be held at the Bay Restaurant in Santa Rosa Beach. We are so excited to once again be a part of this event with our friends at YOLO Board because every year it’s a true wonderful celebration of community, family and friends.

Event dates for this year’s Relay Series are May 28, June 18 and July 16. Come out and support the teams or call 850-622-0812 to sign up your own three-member team. Hats off to YOLO Board’s Jeff and Mitzi Archer for making this a great event year after year!

Additional sponsors for the Relay Series are: Garden of Life, 30A.com, Coastal Skin Surgery and Dermatology, Grayton Beer, The Bay Restaurant, Ocean Reef Resorts, Bud and Alleys, Hinano, PT Solutions, 30A Radio, Beach Ready Spa, Thirty A Review, StandUp Paddle Magazine, Copy Systems, and Health Source Chiropractic. We hope to see you there!

Investors Flip Over Crowdfunding

Flipping homes has gotten a lot more sophisticated than the days when casual investors placed “We Buy Ugly Houses” ads online to pick up a few projects. These days, with home prices rising, investors are once again looking to cash in by flipping properties – but many are now using online crowdfunding sites to fund these flips.

Unlike the housing boom days when loan approvals were quick and relatively easy, lenders are currently showing more caution in granting financing to buyers who want to quickly spruce up properties and sell them for a profit. As a result, investors are turning to other financing avenues to fund their flips. In addition, a growing number of online crowdfunding sites offer some financial aid for housing flips.

“It used to be that house flipping was more of a hobby for some people than a serious investment, but then people learned there were quick profits to be made in some areas and it became more popular,” Barrett said.

With crowdfunding, the interest charged is much higher than conventional financing. However, loans backed by Fannie Mae and Freddie Mac are in the 4 percent range while crowdfunding interest rates can average about 11 percent. The higher interest rate isn’t a problem if a home won’t be held for long before the resale. Most investors involved in flipping say they plan to flip houses in three months or less so they only pay the higher rate a short time before paying off the full loan.

“Crowdfunding picked up the slack left by banks and lenders who are slow to approve loans for flipping houses,” said Barrett. “Investors are turning to crowdfunding for,this purposes so that paperwork can be handled with speed and efficiency since time is of the essence when flipping houses.”

CRE Investors Scurrying for Best Interest Rates

The U.S.dollar is soaring and interest rates may soon be skyrocketing along with it. What do commercial real estate investors think about these developments? Craig Barrett, co-founder of NBI Properties in Fort Walton Beach, said that investors on the Emerald Coast are paying close attention to interest rates and recognizing that opportunities in 2015 may look a lot different than those in 2014.

“Last year we saw an increase in CMBS availabilities,” said Barrett. “Interest rates and cap rates remained low in 2014, but almost everyone expects this will come to a halt this year when the Fed decides to raise rates again. We don’t have any indication of when this will happen, but investors are expecting it and are structuring deals accordingly.”

Barrett added that cap rates normally follow interest rates, holding all else constant, and as rates rise that will have the effect of reducing values on “flat” rental stream assets such as single tenant credit retail leases with no rent increases.

“We’ve had more closings in February and March this year than ever before,” Barrett added. “Investors are moving ahead with deals so they can take advantage of the best rates possible.”

 

Mini Apartment Complexes Lure Investors and Developers

Bigger is not always better, at least not according to some budget-strapped millennials looking for affordable housing solutions. As a result, the demand for smaller, micro-unit apartments, lofts, and studio rentals is attracting new developers and investors.

Although new housing construction has not recovered since the recession, in 2013 and 2014 developers built about 1,000 micro units with roughly 2,200 more either under construction or proposed. The tiny apartments are especially popular in large technology or media-focused markets with high housing costs, such as Seattle, New York, San Francisco and Washington, D.C., although several sources and analysts say the trend is spreading to smaller metro areas as well. Experts say it’s too early to surmise if the mini-studio concept will be a flash-in-the-pan development fad or if it will catch on in other markets.

Craig Barrett, co-founder of NBI Properties, said that although the mini apartment craze is not prevalent on the Emerald Coast, commercial real estate investors are always considering new projects involving housing for local military families and retail businesses scaling back on showrooms or floor space.

“The popularity of micro units concept will grow as we discover new ways of making small spaces more attractive and efficient,” Barrett said. “Some furniture manufacturers are addressing the trend by offering retractable Murphy beds, convertible sofas, and other furnishings that will make interior spaces and storage more efficient. These features and the ability to retain tenants are making the projects more attractive to commercial developers.”

Developers are typically attracted to rent premiums they can charge on a per square foot basis. A comparison between micro dwellings and standard studio apartments shows that building a denser concentration of tiny studio units on dwindling patches of available land makes better economic sense in many cases. Overall, the apartment market overall is shifting toward a greater mix of smaller studio and one-bedroom units being included in traditional apartment communities, as well as more construction of micro-unit communities, according to a report earlier this year from the Urban Land Institute (ULI).

Investors Showing Renewed Interest in Emerald Coast Office Space

Suburban office properties are once again high on the list for investors after weathering the office market recovery during the past few years. After the recession and corporate downsizing sent suburban office occupancy rates spiraling downward as much as 50 percent in some markets, real estate analysts were writing off suburban office parks, shopping centers and other far-flung properties as spots where no career-minded millennials would want to work, shop or live. However, currently suburban office space is in demand, thanks in no small part to yield-starved real estate investors priced out of expensive CBD assets. Craig Barrett, co-founder of NBI Properties, said that leases for office space is enjoying a comeback on the Emerald Coast in both cities and suburban areas.

“We’re working with investors who are interested in well-leased properties in metro areas such as Fort Walton Beach as well as suburban areas in Crestview and Mary Esther,” Barrett said. “They’re primarily interested in safe, lower risk properties where they can achieve value-add plays and boosted returns.”

In recent months, investors have responded to a plethora of opportunistic and value-add plays, many involving vacancy risk that often accompanies suburban office investments. Buyers have been attracted by the wide pricing spreads between properties north of 90% occupancy and challenged buildings between 50% and 75% occupancy, and the spread has compressed from 144% in 2011 to 97% in 2014.

“This kind of success is appealing to investors and many property owners who managed to hold onto their suburban office assets through the recession,” noted Barrett. “People are eager to test the market by taking advantage of declining vacancy rates and historically low levels of new construction.”

Five Tips for Commercial Real Estate Investors

Whether you are thinking about investing in commercial real estate on the Emerald Coast to diversify your portfolio, create wealth,or provide a passive income stream for retirement, NBI Properties has developed successful strategies and tips to help you be successful. Keep these tips in mind and you will be well on your way to reaping the benefits of your investments.

1. Realize that knowledge of the market is crucial your success. If you are well versed about a specific commercial sector, stay with that sector. On the other hand, if you have no knowledge about a particular sector, obtain the knowledge you need before investing. Even if you’re investing as a landlord, it doesn’t bode well to invest in a restaurant if you don’t know anything about the food service or hospitality industries. This is especially true with the manufacturing sector. It’s wise not to purchase raw land or an industrial strip if you don’t know the best use of the property to maximize cash flow.

2. Be aware of the fact that commercial real estate is valued differently than residential. While residential properties derive their value based on recent comparable sales of similar properties in the area, this does not apply to commercial real estate. The value of commercial property is calculated based on cash flow. Two buildings of the same size and located on the same downtown block may have drastically different asking prices. A single tenant barber shop will have less cash flow than a four-tenant professional building with dentists and pharmacists.

3. In addition to market and sector knowledge, you should make it a point to learn new profit and loss formulas before investing in commercial real estate. These are not difficult to comprehend, but you need to fully understand what each means and how they affect your profitability.

4. Determine the long term impacts before investing. Other than the immediate cash flow, make an effort to understand what is predicted to happen to commercial real estate in the surrounding area in the coming years. For example, if your properties are located in a city where the core infrastructure has been neglected for years, eventually businesses will begin relocating to better areas. Consider the tax base of the community and how major employers are faring. All of these things should be assessed objectively prior to making investments.

5. Stock advisors never recommend putting all of your eggs in one basket, and this advice also applies to commercial real estate. If you’ve experienced success as a residential investor, hang on to some of your holdings in residential. Whether you’re investing in stocks or real estate, savvy investors always aim for a diversified portfolio.

Lower Oil Prices Not Impacting Emerald Coast CRE

Oil prices have been dipping since the end of 2014, and while some industry experts predict the price of oil will never rebound to $100 per barrel again, others believe it will go beyond that figure as early as this summer. Jayme Nabors, co-founder of NBI Properties in Fort Walton Beach, says most of his clients think oil prices will definitely rise again and impact commercial real estate in the process.

“Historically, investors know that oil prices are destined to go up again,” Nabors said. “But currently with oil prices dropping, energy companies are holding off on drilling new shale wells and making investments in long-term projects. This is expected to have an effect on commercial real estate in energy markets.”

Reports show that as much as $150 billion in oil projects are predicted to be deferred in 2015 as energy companies align their spending with current cash flow. Oil-producing markets will be the focus of any negative impact from falling oil prices and would include states such as Texas, Oklahoma, Louisiana, Mississippi and North Dakota.

“These negative impacts could include decreased property values and lower rents in these areas,” adde Nabors. “Luckily, investors don’t have to worry about this here on the Emerald Coast.

Emerald Coast Retail Sector is Red Hot!

Shopping centers, outlet malls, grocery stores, and boutiques that reported sluggish sales during the recession are now making a huge comeback on the Emerald Coast. According to Craig Barrett, real estate broker and co-founder of NBI Properties, investors are snapping up retail space throughout the region.

“The retail sector is red hot right now,” said Barrett. “Transactions have picked up in Destin, Crestview, Santa Rosa Beach and along 30A, but we’re handling more leases in Fort Walton Beach than any other area.”

Like many other regions of the country, Northwest Florida has emerged from the recession with job growth and economic strength. Nationwide, retailers absorbed about 13 million square feet of neighborhood and strip shopping center space in 2014 — double the level of demand of the previous year — and retail vacancies have fallen below 10% for the first time since the recession in 2008.

On the Emerald Coast, Barrett said there is renewed investor interest in local neighborhood shopping centers, small businesses and boutique tenants. He noted that while the retail center segment still has a lot of ground to make up relative to faster-recovering power centers and malls, demand is noticeably picking up.

“Vacancies are falling quickly due to the limited amount of new retail construction going on,” he said. “Investors are interested in opening new stores, so the demand is rising.”

Nationally for all retail property, the vacancy rate fell another 20 basis points to 6.3% to close 2014 and net absorption of shopping space totaled 81 million for the year, both are the strongest readings since 2008. Somewhat surprisingly, malls have performed stronger than the overall retail market, with very high-end malls attaining the best sales per square foot and seeing sales productivity rise by 26% over last three years. The recovery among malls remains highly selective, with shoppers flocking to the strongest performers and shunning others.

Emerald Coast Commercial Real Estate Growth Defies Global Outlook

A stabilized U.S. economy is expected to keep commercial real estate demand on the rise for the next several months, although overall growth may be slightly curtailed by overseas weakness, according to the National Association of Realtors® (NAR) quarterly commercial real estate forecast. Analysts based predictions on economic data showing that although conditions have improved domestically, a weakening global economy may impact exports. Craig Barrett, co-founder of NBI Properties in Fort Walton Beach, said that commercial real estate transactions on the Emerald Coast have increased dramatically since the recovery.

“Overall, there’s a feeling of optimism because businesses are hiring again and consumers are enjoying the benefits of lower gasoline prices,” Barrett said. “The demand for leases for defense contractors, professional buildings and retail space is contributing to the economic growth in this area.”

On the national front, office vacancy rates are expected to decrease a slight 0.1 percent over the coming year as improved hiring increases the demand for office space. The vacancy rate for industrial space is predicted to decline 0.4 percent and retail space 0.3 percent as manufacturers boost production for goods and services and consumers accelerate their spending. A plethora of new apartment construction coming onto the market is forecast to lead to an uptick (0.1 percent) in the multifamily vacancy rate.

Barrett noted that foreign investors dissatisfied with the fledgling overseas economy are diversifying portfolios with commercial real estate projects in the states. With GDP estimated at 3 percent this year, investors are snapping up retail, industrial, office and multifamily complexes.

“Overall, this is the busiest we’ve been in the past three years,” said Barrett. “Investors are looking for 8-10 percent cap rates and buying up retail all over town. We’re getting requests from high tech defense contractors, big box tenants, and passive investors who all want to capitalize on the stable commercial real estate market here.”

Passive Commercial Real Estate Investing on the Emerald Coast

Investing in real estate doesn’t have to mean lots of blood, sweat and tears. Today’s busy investors don’t always have time to be “hands-on” with all of their projects, so many choose “passive” investing and leave the heavy lifting to experienced real estate brokers. Craig Barrett of NBI Properties in Fort Walton Beach, Florida, says his firm regularly works with investors on the Emerald Coast and from other parts of the country who have discovered the advantages of passive investing.

“We work with investors who own multiple properties all over the globe, and they simply can’t devote time to day-to-day management tasks,” Barrett said. “While some investors may choose to work with tenants, make repairs, and renovate properties, most high level investors are content to let real estate professionals handle property management and other chores.”

In addition to saving time, Barrett added that passive investing usually results in having access to quality deal flow. In commercial real estate, there are many sectors that offer opportunities for investment, including multi-family apartment buildings, retail shopping centers, self-storage facilities, and office or professional buildings. Unless an investor specializes in one of these areas and has developed good deal sources, Barrett said that it is usually difficult to develop suitable projects.

“We’re able to help a lot of investors who live in other cities or states because we have ties to the community and have strong relationships with local banks,” Barrett noted. “We regularly review the multiple listing services and scout potential opportunities for our clients. When investors are not familiar with the area, they lose out on lucrative deals and cannot capitalize on the best property listings.”

Another advantage of passive investing is avoiding the potential headaches associated with banks and closing issues. Financing on commercial properties is typically slow, complicated and involves mountains of paperwork. In some cases, long lead times are required in order to get approvals from a bank’s investment committee. Barrett said this is one of the top reasons that passive investing appeals to some clients.

“Everyone knows that closing on a deal can be a nightmare,” he said. “Many investors would much rather hand over the reins to a professional real estate company that is familiar with the entire process and knows the property reports the banks will require for closing. For this reason alone, there are many investors who prefer to sit back and let a professional take care of all the details.”