Meybohm Commercial’s 2022 Year in Review Newsletter
OUR BEST YEAR YET
2022 in Review
- $190 Million in Sales Volume
- 344 Transaction Sides Including Leases
- Single Largest Transaction: $13 Million
What does 2023 hold for Commercial Real Estate?
This seems to be the most common question we’re fielding right now, and rightfully so. Investors and users alike are concerned about property valuations, where capitalization rates are headed, the cost of borrowing capital, and occupancy costs among others. Most, if not all, of these folks are also experiencing a general malaise connected to lowering consumer sentiment. Much of the macroeconomic data is confusing, contradictory, and seemingly unlike anything many of us have experienced in our lifetimes. However, if you look back to historical data from pre-2000’s and then zero in on reliable sources of current and meaningful data, you can begin to craft of picture of how several different scenarios may play out in the next year in CRE and capital markets in general. Predicting the future of markets is a fool’s errand, but it certainly pays to stay aware of current information and make business and investment decisions with the best information possible. Let’s dive into some of the data to get an idea of what lies ahead:
Federal Funds Rates
Federal funds rates have a significant impact on the commercial real estate market. Lower interest rates can make it easier for investors to secure financing for commercial real estate projects, which can lead to increased investment activity. Additionally, lower rates can make commercial real estate investments more attractive relative to other investment options, such as bonds or savings accounts. Alternatively, increasing interest rates have the opposite effect – higher rates equate to less investment activity and generally higher capitalization rates. Through 2021, the Federal Reserve has kept interest rates low in response to the COVID-19 pandemic. However, in the 2022-2023 calendar year, the Fed increased rates at the fastest pace in 40 years (450 bps) to combat the effects of rising inflation. This action, along with quantitative tightening, is purposefully decreasing demand for good and services in an effort to reduce investments and ultimately the overall inflation rate. According to Federal Reserve Economic Data (FRED), the federal funds rate is projected to peak in 2023 at 5.1% and level out to 3.1% in the first quarter of 2025. This, of course, is only an estimate based on the federal reserve’s response to current economic data.
Market Capitalization Rates
Market capitalization rates represent the expected rate of return on a real estate investment and can vary depending on market conditions and property type. According to recent data, the overall capitalization rate for commercial real estate in the Southeast region of the US is approximately 6.0%. Historically, as interest rates rise, cap rates rise commensurately. In the current economic climate, we haven’t seen these two data points quite so correlated. Interest rates have increased 450 bps in the last 12 months while southeast region cap rates over the same period have only increased 40 bps on average. This is due to a number of factors, but what it translates to in the real world is a pricing disparity between what sellers are hoping to achieve at disposition and what buyers can afford to pay for properties.
The office sector in the Southeast region has been impacted by changes in consumer behavior, including the increased demand for remote work. According to a CoStar reports, the national occupancy rate for office space decreased to 82.86% in the fourth quarter of 2022, down slightly from the fourth quarter of 2021. However, certain markets within the region, such as Nashville, Raleigh, Savannah, and Huntsville have seen increased demand for office space due to strong job growth.
The retail sector has also been impacted by changes in consumer behavior, including the growth of e-commerce. According to a report by CoStar Group, the retail vacancy rate in the Southeast decreased to 4.23% in the fourth quarter of 2022, down from 7.8% in the fourth quarter of 2021. Certain subsectors of retail, such as grocery-anchored centers, power centers, and un-anchored small shops retail centers in well-located areas have performed strong in the region.
The industrial sector has been a bright spot in the Southeast commercial real estate market. According to a report by CoStar, the industrial vacancy rate in the Southeast decreased to 3.61% in the third quarter of 2022, down from 4.6% in the fourth quarter of 2021. This is due in part to the growth of e-commerce and the need for supply chain and distribution facilities.
The multifamily sector has been impacted by the COVID-19 pandemic, with rent growth slowing and vacancy rates increasing in some markets. According to a report by RealPage, the multifamily occupancy rate in the Southeast decreased to 95.1% in the fourth quarter of 2022, down from 95.5% in the fourth quarter of 2021. The Augusta, Georgia market is slightly lower than national average at 93.6%, but due in part to the tremendous increase in supply of units during the past 3 years.
In conclusion, the commercial real estate market in the Southeast region of the United States has been impacted by recent economic data, federal funds rates, and market capitalization rates. While certain sectors, such as the office sector, have faced challenges due to changes in consumer and user behaviors, others, such as the industrial and retail sectors, have shown strength and growth potential. Investors in the Southeast should carefully consider market conditions and property characteristics before making investment decisions, but may find opportunities for competitive returns in certain markets and sectors. As investors continue to grapple with a rising interest rate environment, it pays to understand local market economics and adhere to their specific underwriting criteria. Overall, the Southeast commercial real estate market remains dynamic and presents opportunities for investors with both medium-range and long-term investment horizons and a thorough understanding of the local markets.
2022 Meybohm Awards Gala
Meybohm Commercial stayed ahead of the growth in our community and dominated the market in 2022. With over $190 million in sales volume, 344 transaction sides including leases, and the single largest transaction ringing in around $13 million, Meybohm Commercial, again, had their best year yet.
- Top Leasing Agent: Matt Rogers
- Top Sales Agent: Jordan Collier
- Commercial Elite – Silver: Dean Newman
- Commercial Elite – Gold: The Finem Group
- Commercial Elite – Platinum: Jordan Collier
In the News
LOCAL REAL ESTATE FIRM EXPANDS INTO COASTAL GEORGIA MARKET
No matter where you go in the CSRA, you’re likely to see a Meybohm Commercial Properties sign, but that will soon be the case in the Greater Savannah area as well. The company just opened a new office in that area on Friday, March 18…
MEYBOHM CELEBRATES GRAND OPENING OF NEW DEVELOPMENT DIVISION LOCATION
A major division of a local real estate company now has a new home. Meybohm Real Estate’s development division, known as CSRA Development, has relocated to a new building at 247 Camilla Ave. in Martinez…
NEW OLIVE GARDEN COMING TO AIKEN
If you’re tired of driving from Aiken to Augusta to satisfy your craving for Olive Garden’s breadsticks, you won’t have to do that much longer. The popular Italian restaurant plans to open a new location in the former Golden Corral Buffet & Grill in front of the Aiken Mall. The city of Aiken plans to redevelop the building located at 2265 Whiskey Road in the next nine months, according to Meybohm Commercial Properties…
2022 Deals of the Year
- Matthew’s Motors | The Finem Group: The Finem Group represented the owner of Matthews Motors in this Triple Net Sale Leaseback. They were able to provide them with sound advice and and helpful financial analysis that looked beyond the scope of a single transaction, allowing them to expand and grow their business. The Finem Group helped them capitalize on an illiquid asset, their Real Estate, and turn it into a liquid asset. This will be enough capital to fuel their acquisitions and internal business growth.
- 1102 Trust Avenue | David Hogg: David represented the seller of this 2.58 acres of land, owned by South State Bank, located at 1102 Trust Avenue off Wheeler Road across from the Augusta Exchange. The property had to be rezoned to B2 (General Business) and complex legal issues had to be resolved prior to closing. The purchaser is a local developer who plans to build a retail center.
- 00 Wrightsboro Road | Cole Townsend + Travis Reed: Meybohm Commercial Properties was excited to close on this 200 acre tract located off of Old Wrightsboro Road in Thomson, GA. While boasting a great stand of mature timber, the property also has excellent development potential. Meybohm Commercial was proud to facilitate a deal that encumbers the value of the timber along with future value of development for the city of Thomson, Ga.
- New Bern Marketplace | Jordan Collier + Brian Sweeting: Meybohm Commercial led the efforts for the 59,516 square foot New Bern Marketplace in New Bern, North Carolina. Meybohm represented a regional investment firm in the acquisition of this $12.75M value-add retail shopping center. With 2.8 million total visits annually, New Bern Marketplace is the fourth most visited center within 30 miles. Located at 3531 Martin Luther King Jr. Blvd., New Bern Marketplace is positioned along the area’s main retail corridor and is passed by approximately 37,500 vehicles per day. The center reaches a trade area of over 20 miles and is just four miles from downtown New Bern.
- 1096 Toolebeck Road | Dean Newman: Dean listed and sold (in 90 days) this outstanding 5 acre property with 5 buildings to Ring Power, one of the leading Caterpillar dealers in the southeast. Formerly owned by one of the most well-known contractors in the Aiken area, Larlee Construction Company, this property offered a beautiful office building, a large warehouse building with 16 foot ceilings and was completely fenced with a security gate. Meybohm Commercial specializes in finding the perfect fit for their properties and this was truly a win-win sale for both buyer and seller.
- Uptown Cheapskate of Athens | Matt Rogers: Matt worked with the Uptown cheapskate Franchisee on securing a location in Athens, GA. He worked with this tenant for close to two years before finding the right location in Athens. Uptown Cheapskate will be taking 5,885 sqft. in the Mark Athens retail center and should be opening summer 2023!
- 690 Medical Park | Karen Daly: Karen represented the tenant and landlord at this medical office complex in Aiken, SC. The goal was to procure tenants to stabilize the building at 690 Medical Park Drive, Aiken SC, and she was able to do so with both Aiken Vascular Specialists and Hanger Orthotics & Prosthetics. Heavener Assoc. Construction built out almost 5000 SF for Dr. Perera and Hanger was then procured for his 1900 SF swing space.
- Taco Bell Grovetown | Bobby Meybohm: Bobby worked diligently alongside Taco Bell franchisees and corporate for over 4 years on this deal. After much time, 935 Huskbox Way, near I-20, was finally set to be Grovetown’s newest fast food restaurant. The deal was finally done in July 2022 and construction on the new franchise is nearing completion. Grovetown – Stay tuned for late night tacos!