Impress Your Friends With These Net Lease Facts
So you're at a cocktail party and the conversation turns to net lease properties (this happens to us all the time). The most attractive person in the room asks you about net lease deals in South Florida, which have been hot in recent years. You don't want to disappoint him or her, so here are some trends to make you sound like an expert.
1) "Volume this year was strong, but not quite like last year."
Calkain managing partner for South Florida Patrick Nutt (with a couple of fish he caught in the Bahamas) tells us that while there is usually a year-end rush for net lease properties, activity has slowed ever so slightly this year. Last year's velocity was driven by the impending increase in long term capital gain taxes--jumping from 15% in 2012 up to 20% for '13--the end of year this time is more of a self-imposed deadline. But activity isn't slow. "If last year we had 20 buyers for every net lease deal in South Florida, this year that number would be more like 10 to 15 for each asset," notes Patrick, who says he's working on some deals in Broward that will close in November. (It's not a smaller group of buyers... it's a more intimate group of buyers.)
2) "Supply is tight."
The biggest issue affecting the net lease space right now is supply, Patrick says. The tri-county area continues to improve and see a variety of successful smaller-scale redevelopment projects like new PNC, Chase, and BankUnited branches popping up, along with new concepts like PDQ taking over old sites. But the market has yet to see any real progress on the development and redevelopment of shopping centers and big box retailers on a broader scale.
3) "Even so, the long-term outlook for the sector is very good."
Until we see velocity of shopping center development and redevelopment, there will be a supply-demand imbalance for net lease properties, Patrick says. (Why can't those two get along?) Still, the pipeline for retail development slated for delivery in '14 and '15 continues to grow, and every aspect of the net lease space remains bullish for the foreseeable future. Between the abundance of affluence, natural barriers preventing sprawl, and existing density, Broward County, along with the rest of South Florida, will be a hot net lease market.
