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Dallas-Fort Worth Named The No. 2 Investment Market Nationwide

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Commercial real estate investors rank Dallas-Fort Worth as the No. 2 investment market in the U.S., with the Texas metro maintaining its reputation for solid economic fundamentals in the job and population growth categories, CBRE said in its 2021 Americas Investor Intentions Survey.

Popular investment targets include life sciences labs, medical offices, single-family rentals, data centers and cold-storage facilities.

Austin is the only market to outrank DFW in the study, which was completed by surveying 150 U.S.-based real estate investors from Dec. 9 through Feb. 2.

Secondary markets like Dallas and cities across the Sun Belt scored high among CRE investors in the latest survey because of investors’ potential to obtain more equity and income growth in these low-cost, rapidly expanding areas, CBRE said.

Tech-driven markets also scored high among the CRE investor class, with the Top 10 choices for investment outlays including big-time tech players like Austin, Denver, San Francisco and Seattle.

Investors with more assets under their control also showed a greater interest in taking risks in 2021. For the first time since the survey began seven years ago, a larger pool of  investors with assets of more than $50B under their control showed a stronger appetite for opportunities in secondary markets like Dallas over primary, first-tier cities.

Investors looking for high returns also exhibited a greater risk tolerance heading into 2021, with 30% of respondents, up from 16% last year, saying they’re ready to target distressed assets or opportunistic plays in 2021. As they expand their reach, investors expect aggressive pricing in the logistics and multifamily spaces and discounts in most other asset types, according to CBRE.

CRE investors in 2021 also want more diversity when it comes to asset types.  Seventy-two percent of those surveyed said they are looking to invest in one or more alternative asset types this year, up from 54% in 2020.

 

Source: Bisnow

UT Southwestern’s Move Is A Trend Breathing New Life Into Big, Empty Department Stores

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Turning abandoned mall space such as the closed Sears store in the RedBird development in Dallas into medical offices and clinics is a new use for tired shopping centers that has already found success in other cities.

RedBird owner Peter Brodsky just announced that UT Southwestern and Parkland Hospital are taking over vacant retail space at the former Red Bird Mall. UT Southwestern will open offices in a 150,000-square-foot Sears store that closed earlier this year. About 43,000 square feet of a Dillard’s store that closed in 2008 is already being retrofitted for Parkland.

Dallas developer Frank Mihalopoulos, who has been working with Brodsky since 2015 on the RedBird project, has already successfully adding university-affiliated medical offices to aging malls in Nashville; York, Pa.; and Atlanta.

 “Selling the RedBird development to local health care companies became a priority as community needs and wishes matched up with trends in the mall redevelopment business,” Brodsky said.

“Health care companies want to reach underserved populations and are trying to find ways to serve more people with the least amount of cost,” Mihalopoulos said. “Repurposing mall space can keep costs down. The University of Pittsburgh Medical Center, for example, has opened occupational therapy clinics and back offices in 22,000 square feet of the West Manchester Mall in York, Pennsylvania It’s lowered their overall cost of occupancy, and then the university medical center is able to rent its space that can fetch higher rents to others.”

In Atlanta, Emory Healthcare agreed in October to lease 224,000 square feet of a former Sears store at Northlake Mall to house offices for 1,600 administrative staff. That also adds daytime traffic to the mall, which is anchored by J.C. Penney and Macy’s. Northlake and the mall in Pennsylvania are owned by ATR Corinth, a partnership of Mihalopoulos and Dallas real estate investor Tony Ruggeri formed 15 years ago to redevelop ailing malls.

“Mall locations have a lot of what medical clinics and offices need,” Mihalopoulos said. “There’s parking, good real estate with good exposure to freeway locations. Old department stores have high ceilings that office tenants are looking for these days and those new office workers can shop and eat without leaving the property.”

ATR Corinth’s first big success was in Nashville, where Vanderbilt University Medical Center put administrative offices and medical clinics in One Hundred Oaks Mall.

“That project began in 2008, and within five years of the redevelopment, the stores in the center had experienced sales increases of as much as 100%,” Mihalopoulos said.

While they were considering the RedBird development, UT Southwestern officials visited that project. They also visited the Jackson Medical Mall in Mississippi, which was converted from a shopping mall in 1996 after it lost customers and stores to a newer mall in Jackson.

At that point, Red Bird Mall was also well into its decline. The former mall at the intersection of Highway 67 and Interstate 20 in Dallas was one of the early shopping center casualties. Several Dallas mayors and out-of-town owners tried to fix the center as the mall continued to lose traffic. There are 800 vacant anchor spots at the 1,300 malls and outlet centers in the U.S., according to an updated mall report from Green Street. In addition to health care uses, malls have been turned into call centers and even Amazon warehouses. When Brodsky first purchased the mall, Sears and Macy’s were still open.

“But it became apparent that anchor stores would have to be filled with other sorts of activities to draw people to the property,” Brodsky said. “The shopping center still has about 60 tenants, from Burlington Coat Factory to small mom-and-pop businesses that are doing well. A Foot Locker is under construction in a new green space being built on the Camp Wisdom side where Starbucks opened last year. I’m new to the real estate industry and I give Frank a lot of credit for his track record of converting malls into highly productive office space.”

 

Source: Dallas News

Diagnosing The Net-Lease Medical Sector

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What do dialysis clinics, urgent care locations, and dental offices have in common?

They are often net lease tenants and together these types of tenants make up the net lease medical sector.

Calkain’s just-released “Net Lease Report: Medical Sector” notes that net lease medical properties can prove to be viable investments, thanks to the following fundamentals.

In-Place Tenants

The main appeal of a net lease medical property is the tenants, which funnel capital into extensive space buildouts and industry-specific equipment. Furthermore, a net lease medical tenant is less likely to up and relocate, as moving X-ray machines, dental equipment and surgical suites can be a costly challenge.

In-Person Healthcare Delivery

Even with telemedicine and virtual healthcare becoming important tools, medical care continues to flourish through face-to-face interaction. The in-person, real-time relationship between patient and physician is difficult to replicate via the internet, meaning a continued need for physical space. Additionally, medical tenants set up shop in specific areas, based on proximity to target populations and lack of competition.

Financial Strength

Net lease medical tenants range from solo dental practices to regional stand-alone urgent care/emergency centers to national specialty clinics. Another aspect tying these businesses together is they are, for the most part, strong financially. A consistent revenue stream adds to the appeal of a net lease medical property.

As with any kind of investment, there are downsides. The net lease medical sector is no exception, and investors need to keep in mind the following.

Empty Space

As mentioned above, relocation is less likely to take place, but this doesn’t mean that it won’t happen. If a healthcare tenant decides not to renew a lease, backfilling the property can be difficult and tenant improvements to convert to general retail purposes can be costly.

Shifting Dynamics

Neighbors Legacy Holdings Inc., which owned and operated Neighbors Emergency Centers, filed for Chapter 11 bankruptcy protection in summer 2018. The year before, six urgent care centers in Southern California filed for bankruptcy protection. Increased competition, changing third-party payer conditions, and increasing overhead costs created financial difficulties for these and other companies. The bankruptcy process can kill a net lease investor’s revenue stream until a judge approves a reorganization plan.

Certainly, there are risks when it comes to owning a net lease medical property and due diligence is essential. The future is bright for the sector.  With advances in medicine, people are living longer and this creates a greater need for healthcare services. The growing demand could push net leased medical facilities to full capacity and lead to a need for additional medical offices, specialty clinics, and urgent care locations. As such, market fundamentals and increasing demand can make medical-sector properties attractive to a net lease property owner.

 

Source: GlobeSt.