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Why Retailers Win Big By Owning Real Estate – Forbes

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Right now, there is a great dichotomy going on as retailers are buying real estate while chains are being urged by activists to divest themselves of properties. Why are retailers buying big properties?

Retail chains like Amazon and Costco both have purchased warehouses to improve their warehouse operations, and they hope this action will save them money. It is a matter of control. When you own a warehouse that is critical to your operation, it is likely to be less costly if you operate the location and have developed an efficient distribution system that you control

According to a WSJ Property Report by Marc Maurer, the 25 largest retailers acquired about 38 million rentable square feet in new industrial locations in 2020. This was an increase of +101% over the 18.9 million square feet acquired in the previous year. The 2020 figure is the highest in ten years.

Amazon is the largest corporate owner of industrial space in the United States. It owns 78 buildings with 83.6 million square feet. In the past year Walmart

WMT
, Costco, Target

TGT
, Kroger

KR
, and Dollar General Corp.

DG
have also acquired additional warehouse space.

Other major retailers have also rushed to buy industrial space. These actions have been triggered by the disruptions caused by supply delays due to blockages at U.S. ports and delays in overland deliveries. It is all because of a shortage of container ships, containers themselves, and lack of labor at ports. In addition. there is a transportation lag because of the absence of drivers. The supply problems have caused shortages in stores. It is anticipated that the severe blockage of merchandise will continue through most of 2022.

One should note that retailers anticipated the shortages at store level and ordered merchandise early in order to have an exciting assortment on the selling floor for the holiday. Many stores are trying to prevent serious shortages during the fast-approaching Christmas selling season. (Thanksgiving is only 25 days away and all sorts of holiday selling activity is already underway!) However, merchandise, I am told, is still stuck at ports though some has flowed into distribution centers. To resolve these challenges, some specialty retailers are using expensive air transportation to move their goods. Retailers like Costco, Walmart, and Dollar Tree

DLTR
have acquired container ships in the hope of expediting their own merchandise. Yet, Mr. Michael Mullican of Academy Sports and Outdoors says that “his company is $100 million light of where they want to be”.

At the end of 2020, the 25 largest retailers owned 155.1 million square feet of industrial warehouse space. That space is mostly for warehouses and distribution centers. With the sharp increase of internet sales since the pandemic started, more companies than ever are looking for well-located distribution buildings. Here are some examples:

1.   Costco owns about 12 million square feet of industrial space in the United States. According to CFO Richard Gallanti, the company paid $345 million to acquire a 1.6 million square foot facility in Ontario, California. The company will expand its West Coast distribution network and hopes to handle Asian imports with greater control and efficiency.

2.   Amazon, as mentioned above, already owns 78 buildings with 83.6 million square feet. It is acquiring more. Since most of its sales are on-line, it is not surprising that the company needs extra distribution facilities and is looking for more space.

Retailers that own facilities generally view them as long-term investments and amortize them over thirty to fifty years.

The point-counterpoint to the dot com needs is that companies like Macy’s

M
are being urged to divest their real estate holdings by activist investors who want to see underperforming physical stores sold off. They also believe that a dot com operation should be a free-standing independent business. There are good reasons why the restructuring of stores should be carefully reviewed by the company’s board. However, one must remember that splitting up companies requires more personnel since it means it will no longer be possible to rely on one person to cover a function for both stores and e-commerce.

POST SCRIPT: Keeping stores well stocked is a challenge in these critical times. Retailers must find ways to efficiently source their merchandise and expedite its delivery to their warehouses. Customers are likely to clamor for more choices, and shortages will force them to take second best.

The dichotomy between owning stores and aggressively promoting on-line business will be resolved in the next few months. Saks Fifth Avenue has successfully split its e-commerce business from brick-and-mortar stores. The jury is still out as to who is right. I am waiting.

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Grand real estate sales on pace to set record in 2021 – Sky-Hi News

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This year is on track to see record real estate sales in Grand County, driven by a high demand for mountain properties and limited availability.

Data from the Grand County Board of Realtors shows that October was the 115th month of gains in median sales prices compared to the same month of the previous year, while the available inventory has dropped consistently during that same period.

In October, the one-year change in the median sales price for all properties was up 11.8% while the number of active listings was down 14.4%, according to the board of Realtors.



“Due to the lack of inventory and the need for housing up here, when properties do get put on the market, they’re just going so fast,” said Lindsey Morrow, an agent with Keller Williams Top of the Rockies. “This has been a really strong year for real estate in general.”

The September report from the Land Title Guarantee Company shows the average sales prices for single family and multi-family properties are at their highest reported rates with single family homes reaching an average of $876,425 and multi-family properties going for $510,367 on average.



So far this year, real estate sales have totaled more than $861 million, which is a 41.7% increase over the same time frame last year, according to the Land Title Guarantee Company.

Last year saw record sales with more than $994 million in transactions.

The high demand for property in Grand County can be credited to a number of factors, including more people working from home, low interest rates, rising sales prices in surrounding mountain communities and recreational opportunities.

“Grand County is only an hour and a half from Denver … we have the infrastructure and internet for people to (work at home), and I think people are realizing that Grand County has a great work-life balance,” Morrow said.

A majority of the buyers are from the Front Range, which has accounted for 61% of sales so far this year, per data compiled by Land Title Guarantee Company.

All the demand means that active listings go quick.

Properties sold in October saw a 52% decrease in the number of days on market compared to October 2020. The average townhouse or condo sold after only 48 days and single-family homes sold at 72 days, according to the Grand County Board of Realtors.

Morrow said the demand has slowed toward the end of the year, though it remains comparatively high when held up to previous years. Demand is the highest for properties priced below $600,000.

“It’s definitely calmed a little bit compared to the summer where there were multiple offers and properties spent two or three days on market,” she said. “Though as soon as you get into those properties in the $400,000 or $500,000, which are desirable, those are going off within five or six days.”

According to the Grand County Board of Realtors’ data, a majority of properties sold so far this year range from $600,000 to $999,999.

Inventory below $600,000 in Grand County is increasingly rare with only 13 single-family homes currently on the market.

On top of the incredible demand and low inventory, external factors such as rising building costs, labor shortages and problems in the supply chain have also contributed to the extreme sale prices.

Single-family properties going for $1 million to $1,999,999 in 2021 have increased by 52-55% increase compared to last year, GCBOR data shows.

However, there are still opportunities out there for buyers.

With rental rates increasing, Morrow urged interested buyers to reach out to a lender while interest rates remain favorable

“If people are willing to spend $3,000 per month on rent, that could potentially get them a $600,000 or $700,000 house, which there is inventory for,” she said.

Morrow said the market is sustaining itself so, unlike the 2008 market, it’s unlikely there would be a crash and current trends will likely continue until more inventory is available.

“Appraisal values of properties are still coming in at or above contract price,” she added. “The biggest thing is we don’t have the inventory for people moving into the community.”

Building permit numbers indicate that Grand County is picking up the pace on construction with 2021 seeing a record number of permits for single family homes, according to Steve Jensen of the Grand County Builders Association.

Not including construction in Fraser, Granby or Winter Park, Grand County has issued 237 permits for single family homes so far this year compared to the same period in 95 in 2020 and 108 in 2019. Of the permits issued this year, 89 are fire rebuilds.

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More Bad News For China’s Sorry Real Estate Market, UBS Says – Forbes

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The hits keep on coming for China’s economy.

This time the news is the country’s already beleaguered real estate sector is set for more bad news.

“Property activities are likely to fall further in the coming quarters, and without policy easing, property sales and starts could fall 20% or more by 2022,” states a recent report from Swiss bank UBS.

The current and near-future prospects for China’s property sector is the result of spillover from the Evergrande debt debacle earlier this year, policy tightening by the Chinese government, and shifts in domestic demand, the report explains.

In turn, a real estate slowdown could hit the broader economy hard slowing growth to 4% or even lower. That’s a standstill from China’s perspective.

In other words, China’s economy is likely headed for a hard landing soon if its government doesn’t take swift action.

“Our baseline forecast is for gradual policy easing, but there is a substantial risk for policy easing being delayed or insufficient,” the UBS report states.

Policy easing would likely mean lower cost of borrowing for domestic Chinese companies and or easier loan standards.

Still, the news comes on the back of a sharp contraction in China’s steel production earlier this year, at the same time when the world’s other top steel producers were seeing growth in output.

It doesn’t augur well for China’s economy overall so investors in Chinese or Hong Kong stocks might want to be cautious for the immediate future.

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Research: Small-business real estate lenders for San Francisco North Bay – North Bay Business Journal

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The latest North Bay Business Journal research (Lists.NorthBayBusinessJournal.com) focuses on lenders certified to handle U.S. Small Business Administration program loans for real estate.

A list of SBA 504 lenders (certified development companies) is ranked by the value of debenture portion placed in Sonoma, Marin, Napa and Solano counites from Oct. 1, 2020, through Sept. 30, 2021. Other information provided includes the number of loans made in each county.

Detailed information from the list is available for purchase as a spreadsheet via the links above.

Want to have your company surveyed for this and other lists? Contact Research Director Michelle Fox at michelle.fox@busjrnl.com or call 707-526-8682.

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