Downtown Residential Market Report

https://www.youtube.com/watch?v=CGggUa-lkUw&feature=youtu.be

Today we’re going to cover one of our pet subjects, the Downtown Augusta residential market, specifically Olde Town.  Click here to download Olde Town Q4 2019 Market Report

 

What’s going on:  Prices are rising–homes bought at retail (livable, decent condition) have risen from about $63/SF on average to just under $80/SF on average over four years–that’s about a 26% increase.  As a whole, the average price has risen from about $30/SF to about $57/SF–almost double–over the past four years.  

 

Part of what’s happening is that there are lots of abandoned and derelict homes that have been purchased, along with the rise of young professionals moving downtown.  The average buyer in Olde Town today is a young, single, professional female.  She is educated, trendy, and wants to be connected to the neighborhood and the downtown.  

 

In 2010 when I bought my home in Olde Town, things were much different.  The neighborhood was ‘busier’–more foot traffic, and there was a significantly higher percentage of section 8 housing in the neighborhood.  Over the past ten years families have moved downtown–many connected to First Presbyterian Church and Christ Community Health Services (a non-profit heath center located in the middle of Olde Town).  The rents started rising, investors started buying and renovating the homes, and soon things started changing.  

 

In the past two years is when I’d say I’ve seen the most change.  The main section 8 property in our neighborhood, Olde Town Apartments, had their tax credit expire and has been renting and selling their properties at market rate (primarily to young professionals).  Many of the derelict properties on the southern edge of the neighborhood have been demolished, and plans are underway for new homes to be built.  

 

My prediction is that the trends we see will continue, and that home values will continue to climb.  I think that if the trend continues, in the next two years prices/SF for homes sold at retail will surpass $100/ft, at which time we will hit a tipping point which will open the neighborhood to new construction, and we will see many of the functionally obsolete homes demolished and new homes built.  All this is great for our city, and for the greater urban community in Augusta, GA.  

 

What are your thoughts?  Where do you see the market downtown headed?

Augusta Medical Office Building Market Report

 

This is Jonathan Aceves wth Meybohm Commerical here with a brief update on the Medical office market. Click here to download the Report.  

 

Overall, well-located and in good condition, medical office space in Augusta is leasing for around $18/SF, and selling for around $150/SF.  As expected, offices in Evans commanded a premium (around $200/SF), and offices around Trinity sold at a discount ($120/SF).  This is slightly higher than standard office space, and tends to be clustered around hospital facilities:  University, Doctors, AU Health, and Trinity(University Hospital Summerville)

 

One outlier that we see is with the rise of Urgent and Prompt Care clinics, which tend to lease in line with NNN leased retail space.  We are seeing them leasing at around $30/SF NNN and trading at corporately-guaranteed retail cap rates. There has definitely been a rise in Medical/Dental/Physical Therapy providers taking space in shopping centers and even developing practices on retail out-parcels.  The impact is that these lease rates fall in line with their competitors for these spaces.  

 

POB Buildings.  The POB buildings are a good milestone–what would it cost a physician to locate inside the hospital complex, with a full-service lease?  Asking rates there tend to be around $25/SF Full Service, potentially you could lease space there between $20-21/SF.  If we back out the full-service items, it’s a helpful comparison.  That might get us to a rate around 18/SF. 

 

Renovation of office buildings.  Another helpful number is what would it cost a physician or dentist to purchase a 4000 SF building and convert it to a medical practice?  Our guess is that in good condition, it would cost around $25/SF. so in theory an office building could be purchased and 100-150K invested in it to make the conversion.  Alternatively, an office could be leased, and the improvements amortized into the rent, which would equate to 4-5/SF/YR on the rate.  At those numbers, it is slightly more cost-efficient to lease or purchase an existing medical office than to convert an office building into a  practice (which makes sense).  

 

On a related note, we are seeing a large demand for purchase of NNN leased medical office space.  If you own a practice and the real estate, it may be a great retirement planning tool to investigate the value of leasing back the building and selling the real estate.   Also if you are selling your practice or looking towards retirement, it might be a good idea to sell the practice along with a  lease on the building, and then sell the leased building. That may be a great way to cash out of your investment and give your new partners a fixed and budgetable cost.

 

Notable Sale:

Augusta GYN sold their building earlier this year to University Hospital.  

 

Notable Lease:  

Pruitt Health.  12.60/FT, Modified Gross.  1220 Augusta West Parkway.  

 

Thanks for reading!  Please let us know your thoughts on the market for medical office buildings.  What are you seeing?  What’s your experience been?