Posted by Amy Johnson
Are you an owner of a single tenant retail investment property in Colorado? Now may be the time to sell your property. Single tenant retail property values have gone up 13 percent over the past 12 months, indicating that now may be a good time to sell. Data obtained from CoStar* shows that Cap Rates have fallen since 2010. Cap rates are inversely related to price meaning lower cap rates equate to higher selling prices.
In 2010 the average cap rate for single-tenant retail property was 8.6 percent. Between March 2011 and March 2012 the average cap rate was 7.7 percent. Cap rates are a ratio used to estimate the value of income producing properties and take into account selling price, gross rents, non-rental income, vacancy and expenses. Sellers are looking to sell properties at the highest price possible which equates to a low cap rate. Buyers are trying to purchase properties at the lowest price possible, equating to a higher cap rate.
Lack of construction of new single tenant triple net retail properties in Colorado, along with increased investor demand and historically low interest rates, are market factors that are driving prices up and cap rates down. Call Russell Agnew or Matt Ritter at 303-962-9555 for a FREE property valuation. Pinnacle Real Estate Advisors focuses on commercial investment properties in Colorado.
How Cap Rate is Calculated
Cap Rate = NOI** / Market Value
Example 1: a property has NOI of $100,000 and the asking price is $1,000,000
Cap Rate = $100,000 / $1,000,000 x 100 = 10
Example 1: Cap Rate is 10%.
(** Net Operating Income is calculated by subtracting vacancy amount and operating expenses from a property’s gross income)
Pinnacle’s full-service platform delivers innovative real estate solutions through The Pinnacle Experience™, a unique approach that is focused on each client’s needs, delivering superior real estate guidance, proven market perspective and unmatched results. In 2011, Pinnacle Real Estate Advisors closed 183 transactions for a total of $145 million.
(*Data obtained from CoStar and based on average CAP rates for retail single-tenant property sales in the Denver and Colorado Springs MSA in 2010 and sales from March 1, 2011 to March 28th, 2012)
Posted by Amy Johnson
Pinnacle Real Estate Advisors is Hiring Commercial Real Estate Brokers
Growing Colorado Brokerage Firm is Hiring Seasoned Professionals, New Brokers, Interns and Staff
Job creation and hiring is in motion, according to the Intuit Small Business Employment Index. Intuit, Inc. (NASDAQ: INTU) reported a 0.2 percent increase in employment among small businesses in February 2012. According to the report, 45,000 new jobs were created in February.
Pinnacle Real Estate Advisors, LLC, is embracing the hiring trend. "We are ready to hire. Our biggest challenge now is finding the right people,” said Matt Ritter, Principal at Pinnacle Real Estate Advisors.
Pinnacle Real Estate Advisors, LLC, has had tremendous success over the past five years and has an aggressive growth plan to double sales in the next five years. You can hear the passion in the voices of Jeff Johnson and Matt Ritter, Founders and Principals at the company. The duo founded the company in 2006 and they have created a successful model for commercial real estate brokers to plug into. "We really focus on hiring people who have two to five years of work experience and are entrepreneurial by nature. We look for enthusiastic people who bring new perspectives. We offer all of the systems needed to be successful," said Ritter.
Further, he explains the challenges of hiring the right people. "We are a unique organization and are focused on doing this business progressively. We use the latest technology and always look for people with a great work ethic, top notch integrity, have demonstrated success oriented behaviors and have a total focus on serving our clients while having fun!"
Pinnacle’s growth plans are already in action. Since its inception, the company has been a dominant player in the apartment market in Colorado. Each year Pinnacle Real Estate Advisors has grown its share of the market and in 2011 was responsible for 48 percent of the apartment sales in the 5-200 units range. Pinnacle is also growing its presence in the office, retail and industrial sales and leasing. "We have always been active in the office, industrial and retail sectors but this year we are growing our business in these sectors and expanding our presence," said Jeff Johnson.
Matt Ritter recently turned his focus to investment sales in the office, retail and industrial sectors, representing both buyers and sellers. "This is a natural fit for me. I have been in this business for 12 years and have had success in apartment sales. I am always up for a new challenge and know our services and processes are superior in the market. We focus on building relationships and continue to advise our clients for the long-term. It’s not only about the deal; it’s about really focusing and serving our clients."
Ritter was recently awarded 2011 Broker of the Year by DMCAR. He's been recognized as top producer and selected by Realtor magazine as "30 under 30" in 2005.
To further grow the company’s presence in the office sector, two seasoned office leasing brokers joined Pinnacle in late 2011. Jeff Caldwell and Blake Holcomb have been in the business for a combined 25 years. "We are excited to be here because we can focus on offering superior service to our clients,” said Caldwell, Senior Advisor.
Pinnacle recently moved to a new office at One Broadway. The company moved from 4,100 square feet off of Colorado Boulevard to 7,900 square feet to accommodate the planned growth. "We now have space for 14 additional brokers. We are hiring, we have great space and excellent systems in place for the right sales professional."
More Information on the Careers Page
Posted by Brad Kostalnick
Most commercial office lease transactions involve some sort of construction, i.e. tenant improvements. The purpose of tenant improvements is to reconfigure the office space to best suit a company’s needs and tastes. The improvements may be as minor as new paint and carpet to an extensive high-quality build-out of a space. In many cases, landlords will offer a “tenant improvement allowance” to assist with the construction costs. The amount of the tenant improvement allowance is negotiable and will typically depend on the rental rate, the length of lease term, the tenant’s credit history, market conditions, and the investment goals of the landlord.
One of the biggest pitfalls companies make is not taking all the right steps necessary to ensure you are getting the most out of your tenant improvements.
Here are a few suggestions to consider:
Hire an architect - An architect can help design your space for optimal efficiency. Taking this step can save you thousands of dollars. For example, imagine comparing two office spaces and one is 10,000 square feet and the other is 12,000 square feet. A good architect can reconfigure the 10,000 square foot space to accommodate the company’s needs therefore saving that company from paying rent on 2,000 square feet of office space. If market rents are $20 per square foot, you would save $200k over a five year lease term. That’s real savings!
Hire a Project Manager - A project manager will help reduce occupancy cost and ultimately save you time and money by managing the details. A good project manager can coordinate everything from the architect to the contractor to all of the sub-contractors. Project managers are excellent for larger tenant improvement jobs that have a lot of moving parts.
Get Competitive Bids – In this market, everyone is looking for work especially in the construction business. Getting competitive bids from all your vendors is a great way to reduce your occupancy cost and stretch your tenant improvement dollars. Most people only consider bidding out the construction work, but we suggest not only bidding out the construction work, but also the telecommunications, furniture, IT, moving/storage, etc.
This may sound like a lot of work, but when comparing lease options, carefully evaluating the tenant improvements is critical to the decision making process. For more information on the best way to negotiate your tenant improvements or for any other commercial real estate related questions please contact Eric Shaw or Brad Kostalnick.
Brad Kostalnick is an Office Tenant Representative with Pinnacle Real Estate Advisors. For more information on Denver office leasing, contact Brad at (303) 962-9552.
Posted by Brad Kostalnick
If so, it is time to begin gathering some information on market rents and considering your options. The closer you get to your office lease expiring the less leverage you will have to negotiate a favorable lease. Landlords realize how long it takes to find new office space and how long the decision making process takes for most companies, thus tipping the negotiations in their favor. Keep in mind that the landlord’s representative is hired to look out for the landlords best interest, which means getting the most rent they can from tenants.
If you are in this situation with regards to your office space you should consider hiring a tenant representative to help your organization negotiate a new lease, even if you plan on staying in your current office space. If you think about it, how is a renewal any different than an initial lease transaction? In today’s economy it is critical for top executive to provide the company’s stakeholders with only the best financial decisions to ensure maximum profitability. An experienced and reliable tenant representative can make a huge difference in the successful outcome of your renewal or new search for office space. Here are a few reasons why:
• Experience and market knowledge – You may do this once every three to five years, while an experienced tenant representative negotiates several leases a month. A tenant representative will help you to understand and negotiate the lease terms to benefit you the most and eliminate any harmful commitments.
• A tenant representative will help safeguard your company throughout the lease term. This is helpful should any issues arise during the lease term. He or she can help be the mediator and ensure that your rental relationship with your landlord is amicable.
• A tenant representative has a fiduciary duty to act and negotiate in your best interest. A landlord does not necessarily share that same interest. Your landlord does not share that same interest.
• Prevent you from overpaying for your rent as well as save you time away from running your business.
Lastly, in most cases there is no cost to you. By engaging a tenant representative you will receive the most current and relevant information in order for you to make the best decision for your company.
Brad Kostalnick is an Office Tenant Representative with Pinnacle Real Estate Advisors. For more information on Denver office leasing, contact Brad at (303) 962-9552.
Posted by Kevin Calame
In speaking with many apartment building owners in Denver we asked what they are doing in this market to keep their vacancies low. Here are a few of the suggestions we have heard:
Good Marketing
CraigsList - Most people use this service because its free and it works. If you want to take Craigslist to the next level try a couple simple techniques:
- Add photos. Most users will filter their search by ones with images.
- Try using Postlets.com. This is a great site that really jazzes your ad up and actually puts it on multiple sites.
- Keep the adds fresh. A few great times to post are Wednesday morning and Friday afternoon.
Help Tenants Act Now
The old trick, Stop Look Lease. In today's rental market potential renters are like gold, don't let them go. We have found that if you motivate them to act now your chances increase immensely. Tell them you will credit back their application fee if they lease today.
Think in Advance
How many times have you had someone call looking to rent 30-60 days out? Know what units will be available 30 days in advance and start marketing today.
Posted by Justin Krieger
The first half of this year was relatively quiet in terms of Colorado retail investment transactions. While other markets are noticeably experiencing distress, there have only been a handful of distressed retail transactions in Colorado this year. Is this the calm before the storm or have we already seen the worst?
Retail buyers continue to largely sit on the sidelines and wait for signs of major distress while sellers hope for improvements in occupancy and lease rates and declines in cap rates. While some economists are beginning to report "green shoots" of economic recovery, the American consumer continues to get battered by rising unemployment, an uncertain future, and a much different view of how much income is truly "disposable" than a few years ago.
Recent positive news about the retail sector may be somewhat misleading because lately a lot of consumer spending has been fueled by government incentive programs (eg. Cash for Clunkers). While some parts of the economy appear to show some fundamental improvement, a v-shaped recovery seems out of the question. Until we experience organic growth and companies feel safe enough to begin hiring again, it is likely that consumers will continue to hold purse strings tight.
While the bleeding may have slowed, it has not stopped. The fact that inflation has been almost flat while the government continues to print money tells a lot about consumer spending and sentiment. In short, it is likely that consumer attitudes will be a lot different than they were when we were spending more than we were making, which was the case a few years ago. An increase in the consumer savings rate is a good thing in the long-term, and retailers must adjust to those realities in the short-term to stay relevant. With a reduction in spending comes a reduction in the amount of retail space needed. To that extent, retail rents in Colorado are likely to remain flat or down, and occupancy is likely to follow suit for the foreseeable future, particularly given the fact that there is still speculative retail space under construction or recently completed.
With a change in consumer behavior, a tremendous amount of high leverage loans maturing in the near future, some owners "feeding" deals that went in the wrong direction, and a constant re-evaluation of rental rates, it is likely that things will get worse before they get better. Banks are very nervous about their commercial real estate loan portfolios, and the FDIC recently warned of more bank failures on the horizon because of commercial mortgage problems.
Transactions appear to be picking up in the second half, but final numbers are not yet available. While the Colorado retail market is viewed as safer than most, we are not out of the woods yet. Sellers looking for a quick turnaround are likely to be out of luck, and vulture buyers may need to continue to be patient.
Justin Krieger is a Senior Retail Advisor and a founding member of the Pinnacle Retail Group. He is also author of The Krieger Report, a quarterly publication for Colorado NNN retail investors. Learn more about Justin.
Posted by Justin Krieger
While empirical data is unavailable, it appears that Colorado's fastest growing retail tenants are, no pun intended, medical marijuana dispensaries. While Colorado's constitutional amendment that allows medicinal marijuana went into effect in 2001, very few dispensaries opened up before this year. What has spurred this activity are U.S. Attorney General Holder's comments, supported by President Obama, that the federal government will not intervene in a state's decision to legalize medical marijuana so long as state rules are followed. If dispensaries violate state law regarding medical marijuana, the DEA might get involved. Marijuana, however, remains illegal under federal law-a risk for landlords.
Obtaining exact information on the number of dispensary retail tenants in Colorado is extremely difficult as some occupy office buildings, run delivery-only operations, operate discretely from retail spaces under the guise of "alternative therapy", or simply do not advertise at all. However, dispensaries are popping up on almost every major Colorado retail corridor. Some are obvious about what they sell and feature large marijuana leaves painted on the storefront while others are more discrete.
Looking at California, the pioneer state of medical marijuana, shows how great the demand really is for medical marijuana. One study reported that Los Angeles county alone has over 800 marijuana dispensaries. The exact number of marijuana dispensaries in Colorado is currently unknown, but one website has over 30 listings for dispensaries in Denver. Dispensaries are popping up along the Front Range and go as far west as Grand Junction. Colorado Springs, one of Colorado's most conservative cities, is the unlikely home to the state's largest dispensary. Annual sales at that store are said to be in the multi-millions.
Medical marijuana seems to be here to stay, at least as long as the Obama administration is in power. Colorado should look to California to determine the best ways to regulate this fledgling industry. California's growing pains can be learning opportunities for Colorado lawmakers, dispensary owners, patients, and landlords.
Some municipalities are taking it upon themselves to regulate this new industry above and beyond what is already in the Colorado Constitution. Englewood, for example, is considering ordinances requiring dispensary owners to pass a background check, pay a $1500 licensing fee, and keep three years of records at all times. Greenwood Village has said flat out said "No!" to dispensaries, citing the fact that their business licensing rules require businesses to comply with federal law. In the alternative, some cities looking to fill vacant spaces and generate tax revenue may welcome dispensaries with open arms.
A few months ago, many calls from aspiring dispensary owners to retail landlords went unanswered. Landlords are slowly beginning to change their tune as they become more comfortable with marijuana dispensaries and see them as viable, recession-proof businesses.
The law is still vague, and changes are sure to come. Medical marijuana, however, appears to be here to stay for now and may become a significant source of "vice tax" revenue, just as cigarettes, tobacco, liquor, and pornography are. Once the government realizes that benefit, dispensaries may be here to stay for the long-run.
Photo credit: KayVee.INC
Justin Krieger is a Senior Retail Advisor and a founding member of the Pinnacle Retail Group. He is also author of The Krieger Report, a quarterly publication for Colorado NNN retail investors. Learn more about Justin.