Sun News, Myrtle Beach, SC ---- With a one-year population increase of more than 12,000
people, the Myrtle Beach metropolitan statistical area ranked as the
second fastest-growing in the nation from July 1, 2013 to July 1, 2014. The
U.S. Census Bureau, which released the 2014 population estimates
Thursday, said the metro area had 417,668 residents, up nearly 41,000
people since the 2010 census. The MSA includes Horry County and, for the first time, Brunswick County, N.C., which boosted the overall number by 118,836. Georgetown County, which is not in a federally-defined MSA, saw its population rise to 60,693 in the new estimate. The
Beaufort MSA, including Hilton Head Island, was the 13th fastest
growing with a 2.4 percent population increase from 2013 to 2014, the
Census Bureau reported. The Charleston MSA, the only other S.C. area in
the top 20, came in at No. 17 with a 2.2 percent growth rate. The
growth in Horry County alone, about 9,300 new residents in the year,
approached the boom years of 2005 to 2007 when Census numbers show more
than 10,000 new residents a year.
What this means to you:
Roads:
It’s almost impossible to build roads fast enough to keep up with the
kind of growth that Horry County is having, said Mike Barbee, regional
project engineer for SC Department of Transportation. The state doesn’t
have the money, so local road-building initiatives such Horry’s RIDE
program become essential. Barbee said Horry raises more money to build
roads each year than any county in the state. He said drivers can expect
some type road construction, such as that now along U.S. 707 from
Socastee to Murrells Inlet, in their motoring future. Roads, though, are
not make-or-break to future growth. “With the quality of life Horry
County has to offer,” he said, “people are coming anyway.”
Schools: “It’s hard to keep up,” said Joe DeFeo,
Horry County Schools board chairman. He said the system will begin a
$160 million, five-school construction project this year and that all
should be complete in 2017. But with growth stats such as those from
2013 to 2014, he’s thinking the system will need two more new schools
ready for incoming students in 2021 or 2022. The first wave will be
built with some excess capacity, he said, which should help absorb the
growth until the second group comes on line. The first wave of new
schools will accommodate the fast-growing areas of Carolina Forest,
Forestbrook and St. James. He believes Carolina Forest will need a third
elementary school in the second wave of construction.
Business:
All types of businesses will find opportunities from the growth that’s
coming to the Grand Strand, said Brad Dean, CEO of the Myrtle Beach Area
Chamber of Commerce. Airlines and franchisors, in particular, will
definitely take note of the MSA’s surge in residents. Retail businesses
have already taken note of the growth, as evidenced by the new Coastal
North Town Center in North Myrtle Beach, a soon-to-open Gander Mountain
along U.S. 501 at Carolina Forest and a Carolina Pottery that will open
in the old Kmart along Kings Highway in Myrtle Beach.
Quality of life: The growth, said Myrtle Beach Mayor
John Rhodes, challenges area leaders to figure out how to expand
performing arts so that theater and concert offerings meet the
expectations of new residents. The look of the city is also important,
Rhodes said, but he believes the Community Appearance Board does a good
job of guarding it. Horry County Council Chairman Mark Lazarus said the
county requires open space for new developments and added that the
growth could lead to a plan to allow recreation facilities to keep pace.
The 20 fastest-growing metro areas, July 1, 2013 to July 1, 2014
1. The Villages, Fla., 5.4 percent
2. Myrtle Beach, 3.2 percent
3. Austin, Texas, 3 percent
4. Odessa, Texas, 2.9 percent
5. St. George, Utah, 2.9 percent
6. Fort Myers, Fla., 2.7 percent
7. Bend, Ore., 2.7 percent
8. Greeley, Colo., 2.6 percent
9. Midland, Texas, 2.6 percent
10. Naples, Fla., 2.5 percent
11. Houston, Texas, 2.5 percent
12. Fort Collins, Colo., 2.4 percent
13. Beaufort, 2.4 percent
14.Daphne, Ala., 2.4 percent
15. Raleigh, N.C., 2.3 percent
16. Orlando, Fla., 2.2 percent
17. Charleston, 2.2 percent
18. Sarasota, Fla., 2.2 percent
19. Panama City, Fla., 2.2 percent
20. Boise City, Idaho, 2.1 percent
Source | U.S. Census Bureau
Wednesday
Hotel Occupancy To Hit Record High In 2015
PKF-HR Forecasts A Shift In the Drivers Of RevPAR Growth
http://atlanta.citybizlist.com -- The U.S. lodging industry will continue to achieve very strong growth in rooms revenue per available room (RevPAR) during both 2015 and 2016 according to the recently released March 2015 edition of PKF Hospitality Research’s (PKF-HR) Hotel Horizons®(PKF-HR is a CBRE company). The report further predicts that the composition of the factors driving the RevPAR is starting to shift with record-setting occupancy yielding ground to growing average daily rates (ADR).
“In 2015, RevPAR growth will be achieved by healthy increases in both occupancy and ADR, similar to the pattern we have seen since 2011,” said R. Mark Woodworth, senior managing director of PKF-HR. “However, beginning in 2016, we are forecasting that ADR gains will be the dominant, if not sole, driver of RevPAR growth through 2019.”
For 2015, PKF-HR is forecasting a 1.9 percent increase in occupancy, combined with a 5.3 percent rise in ADR, for a 7.3 percent boost to RevPAR. In 2016, the increase in occupancy is projected to slow down to just 0.6 percent, but the pace of ADR growth is forecast to improve to 6.3 percent. The net result will be a 6.5 percent gain in RevPAR next year.
“The 65.6 percent occupancy level we are forecasting for 2015 is an all-time record for the 27 years STR, Inc. has been reporting U.S. lodging industry performance. At such lofty levels, it is natural that the pace of occupancy growth will slow down, and we will start to see prices take off,” said Woodworth.
Are The Gains Real?
“When discussing ADR and RevPAR growth, you should always evaluate them in real terms, not just nominal,” said John B. (Jack) Corgel, Ph.D., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. “Hotel owners and managers financially benefit from real dollar flows which occur when demand exceeds supply for hotel rooms as it has during this recovery and expansion and will into the near future.”
According to CBRE Economic Advisors and Moody’s Analytics, inflation in 2015 is forecast to be a mere 0.6 percent. However, in 2016, as the price of oil and other commodities start to rise, the inflation forecast jumps to 2.6 percent.
“Taking inflation into consideration, we do see a slightly different RevPAR outlook each of the next two years,” Corgel said. “In the low-inflationary environment of 2015, the real RevPAR gain is projected to be 6.7 percent, the strongest growth in real RevPAR since 2005. The combination of low occupancy growth and rising inflation nets a real RevPAR gain of 3.8 percent in 2016.”
“The slowdown in the pace of real RevPAR growth next year might alarm some owners and operators,” Woodworth said. “However, it is important to note that the 3.6 percent real gain in ADR forecast for 2016 is still well above the real ADR gains we have observed over the past 20 years. Real ADR growth, combined with a limited increase in the variable expenses due to the slowdown in occupancy growth, should yield some very attractive improvements in net operating income in 2016.”
PKF-HR is forecasting gains in excess of 10 percent for both 2015 and 2016 for unit-level net operating income, extending the streak of double-digit increases in hotel profits to six consecutive years.
Market Forecasts Foretell
Analyzing the projected performance of the nation’s major markets reveals a clear picture of the future of the U.S. lodging industry. In 2015, New York, Austin, and Pittsburgh are forecast to experience the greatest increases in supply and concurrently the three lowest levels of RevPAR gains for the year.
“Localized surges in supply are creating declines in occupancy, which in turn results in suppressed RevPAR growth. Clearly this is going to occur in more and more cities over the next few years,” Woodworth noted. According to STR, Inc., just three of the 59 markets in the Hotel Horizons® survey suffered a decline in occupancy during 2014. Woodworth said he expects an increase to 17 markets in 2015, followed by 22 markets in 2016.
“Fortunately occupancy rates in most markets are expected to remain above long-run levels, thus allowing for sizeable growth in real ADR,” said Woodworth. PKF-HR is not forecasting the national supply growth to exceed the long-run average until 2017.
“By any measure, 2015 and 2016 will two more years of strong performance for U.S. hotel owners and operators. Beyond 2016, the impacts of rising supply and inflation will begin to curb some of the record annual performance growth rates U.S. hoteliers have enjoyed since 2011,” Woodworth concluded.
http://atlanta.citybizlist.com -- The U.S. lodging industry will continue to achieve very strong growth in rooms revenue per available room (RevPAR) during both 2015 and 2016 according to the recently released March 2015 edition of PKF Hospitality Research’s (PKF-HR) Hotel Horizons®(PKF-HR is a CBRE company). The report further predicts that the composition of the factors driving the RevPAR is starting to shift with record-setting occupancy yielding ground to growing average daily rates (ADR).
“In 2015, RevPAR growth will be achieved by healthy increases in both occupancy and ADR, similar to the pattern we have seen since 2011,” said R. Mark Woodworth, senior managing director of PKF-HR. “However, beginning in 2016, we are forecasting that ADR gains will be the dominant, if not sole, driver of RevPAR growth through 2019.”
For 2015, PKF-HR is forecasting a 1.9 percent increase in occupancy, combined with a 5.3 percent rise in ADR, for a 7.3 percent boost to RevPAR. In 2016, the increase in occupancy is projected to slow down to just 0.6 percent, but the pace of ADR growth is forecast to improve to 6.3 percent. The net result will be a 6.5 percent gain in RevPAR next year.
“The 65.6 percent occupancy level we are forecasting for 2015 is an all-time record for the 27 years STR, Inc. has been reporting U.S. lodging industry performance. At such lofty levels, it is natural that the pace of occupancy growth will slow down, and we will start to see prices take off,” said Woodworth.
Are The Gains Real?
“When discussing ADR and RevPAR growth, you should always evaluate them in real terms, not just nominal,” said John B. (Jack) Corgel, Ph.D., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. “Hotel owners and managers financially benefit from real dollar flows which occur when demand exceeds supply for hotel rooms as it has during this recovery and expansion and will into the near future.”
According to CBRE Economic Advisors and Moody’s Analytics, inflation in 2015 is forecast to be a mere 0.6 percent. However, in 2016, as the price of oil and other commodities start to rise, the inflation forecast jumps to 2.6 percent.
“Taking inflation into consideration, we do see a slightly different RevPAR outlook each of the next two years,” Corgel said. “In the low-inflationary environment of 2015, the real RevPAR gain is projected to be 6.7 percent, the strongest growth in real RevPAR since 2005. The combination of low occupancy growth and rising inflation nets a real RevPAR gain of 3.8 percent in 2016.”
“The slowdown in the pace of real RevPAR growth next year might alarm some owners and operators,” Woodworth said. “However, it is important to note that the 3.6 percent real gain in ADR forecast for 2016 is still well above the real ADR gains we have observed over the past 20 years. Real ADR growth, combined with a limited increase in the variable expenses due to the slowdown in occupancy growth, should yield some very attractive improvements in net operating income in 2016.”
PKF-HR is forecasting gains in excess of 10 percent for both 2015 and 2016 for unit-level net operating income, extending the streak of double-digit increases in hotel profits to six consecutive years.
Market Forecasts Foretell
Analyzing the projected performance of the nation’s major markets reveals a clear picture of the future of the U.S. lodging industry. In 2015, New York, Austin, and Pittsburgh are forecast to experience the greatest increases in supply and concurrently the three lowest levels of RevPAR gains for the year.
“Localized surges in supply are creating declines in occupancy, which in turn results in suppressed RevPAR growth. Clearly this is going to occur in more and more cities over the next few years,” Woodworth noted. According to STR, Inc., just three of the 59 markets in the Hotel Horizons® survey suffered a decline in occupancy during 2014. Woodworth said he expects an increase to 17 markets in 2015, followed by 22 markets in 2016.
“Fortunately occupancy rates in most markets are expected to remain above long-run levels, thus allowing for sizeable growth in real ADR,” said Woodworth. PKF-HR is not forecasting the national supply growth to exceed the long-run average until 2017.
“By any measure, 2015 and 2016 will two more years of strong performance for U.S. hotel owners and operators. Beyond 2016, the impacts of rising supply and inflation will begin to curb some of the record annual performance growth rates U.S. hoteliers have enjoyed since 2011,” Woodworth concluded.
Monday
Self Storage Industry Benefiting from Private Equity
nreionline.com - Investors are crowding into self-storage
as the sector continues to post the highest long-term returns of any
commercial property type, according to a recent quarterly industry
survey. Marc Boorstein, a principal
with Chicago-based MJ Partners Self Storage Group, said in his full year
and fourth quarter overview that the average 2014 investment return for
self-storage REITs was 31.4 percent. The REITs are the major owners in a
largely fragmented sector, as about 80 percent of self-storage
properties are owned by small mom-and-pop-type firms. But according to
Boorstein, private equity is starting to enter the sector.
Long-term returns for self-storage beat out all other commercial real estate sectors, Boorstein says. The five-year average return for self-storage is at 24.4 percent, the 10-year average is at 17.8 percent and the 15-year average is at 20.3 percent, beating out the closest sector, multifamily, by about 400 basis points for each category. These numbers, as well as a lack of new supply and unusually high demand, have led to increased competition for assets.
“There’s
just a lot of transaction activity going on, for every $50 million
portfolio there [are] 20 offers,” Boorstein says. “Average occupancy has
increased to more than 91 percent, and new supply was at less than 100
new properties last year. That compares to about 3,665 new properties
that opened in the peak year of 2005. Even if we have 300 to 500 new
properties in 2015, as Extra Space Storage CEO Spencer Kirk predicts,
that’s still not enough to even match the population growth.”
Long-term returns for self-storage beat out all other commercial real estate sectors, Boorstein says. The five-year average return for self-storage is at 24.4 percent, the 10-year average is at 17.8 percent and the 15-year average is at 20.3 percent, beating out the closest sector, multifamily, by about 400 basis points for each category. These numbers, as well as a lack of new supply and unusually high demand, have led to increased competition for assets.
The
recession created more renters, and the urban movement further
increased self-storage customer base, Boorstein notes. Investors have
flocked to the industry because of how quickly rents can be increased. A
customer who pays $125 per month will tend not to move if the rent is
increased incrementally, to $140 per month.
“That doesn’t sound like much each month, but multiply that by owning a thousand units and that’s a huge impact on revenue,” Boorstein says. New income generators such as self-storage insurance and improved digital advertising and management platforms have also boosted bottom lines, he adds.
The returns have attracted private equity firms new to the sector, such as the Carlyle Group partnering with self-storage operator William Warren Group last year, as well as increased activity from investors such as Prudential, Fortress, Morgan Stanley and Harrison Street. The four major REITs—Public Storage, Extra Space Storage, CubeSmart and Sovran Self Storage—are able to take down the large deals of more than $75 million, but there are aggressive bidding wars by private equity for the smaller portfolios, Boorstein says.
“If it’s a mid-sized deal, say between $20 million and $70 million, there’s four times as many private equity groups looking to purchase than there were two years ago,” he says. “There [are] groups bidding that have barely been in the market that long. Cap rates have plunged because of all this competition and partnering that’s going on.”
For example, Roseville, California-based Life Storage secured more than $120 million from TPG Real Estate and Jasper Ridge Partners late last year. “Not only is there strong continued support for self-storage, the industry remains very fragmented, which should provide opportunities for consolidation and attractive follow-on acquisitions,” said Avi Banyasz, partner and co-head of TPG, in a statement regarding the investment.
Michael Mele, senior director with Marcus & Millichap’s national self-storage group, says he agrees that private investment in the sector is “bigger than it has ever been.” He says while these investors can’t compete with the REITs in the large deals, there’s much more competition for the second-tier properties.
“Mom-and-pop ownership of self-storage is declining because of the demand by private investment,” Mele says. “There’s also a continued consolidation of the industry, with a lot more private firms going after large portfolios with the help of the REITs, or using the REITs as third-party managers. You’re going to start seeing, in major and secondary markets, the same people owning many of the properties.”
Scott Humphreys, self-storage acquisitions director at Austin, Texas-based Virtus Real Estate Capital, says a new trend in the industry being employed by many of the REITs and larger regional players is purchasing sites in construction or shortly after they open. This eliminates some of the risk/liability associated with the development timeframe, and has also allowed the REITs to move forward with new site development without the added overhead and expense of keeping a full coterie of development resources in house. For example, Extra Space recently bought a portfolio of three self-storage properties in Austin from Endeavor Real Estate Group. All three properties were new, with two of the three having been opened less than a year at the time of sale.
“The difficult element to this type of purchase is the valuation gap, and determining how much to pay for yet-to-be leased space,” Humphreys says. “In core and growth markets, the risk is obviously not as great, and this allows you to rely on ‘merchant-build’ type development resources who know the local municipalities, and their nuances, well.”
“That doesn’t sound like much each month, but multiply that by owning a thousand units and that’s a huge impact on revenue,” Boorstein says. New income generators such as self-storage insurance and improved digital advertising and management platforms have also boosted bottom lines, he adds.
The returns have attracted private equity firms new to the sector, such as the Carlyle Group partnering with self-storage operator William Warren Group last year, as well as increased activity from investors such as Prudential, Fortress, Morgan Stanley and Harrison Street. The four major REITs—Public Storage, Extra Space Storage, CubeSmart and Sovran Self Storage—are able to take down the large deals of more than $75 million, but there are aggressive bidding wars by private equity for the smaller portfolios, Boorstein says.
“If it’s a mid-sized deal, say between $20 million and $70 million, there’s four times as many private equity groups looking to purchase than there were two years ago,” he says. “There [are] groups bidding that have barely been in the market that long. Cap rates have plunged because of all this competition and partnering that’s going on.”
For example, Roseville, California-based Life Storage secured more than $120 million from TPG Real Estate and Jasper Ridge Partners late last year. “Not only is there strong continued support for self-storage, the industry remains very fragmented, which should provide opportunities for consolidation and attractive follow-on acquisitions,” said Avi Banyasz, partner and co-head of TPG, in a statement regarding the investment.
Michael Mele, senior director with Marcus & Millichap’s national self-storage group, says he agrees that private investment in the sector is “bigger than it has ever been.” He says while these investors can’t compete with the REITs in the large deals, there’s much more competition for the second-tier properties.
“Mom-and-pop ownership of self-storage is declining because of the demand by private investment,” Mele says. “There’s also a continued consolidation of the industry, with a lot more private firms going after large portfolios with the help of the REITs, or using the REITs as third-party managers. You’re going to start seeing, in major and secondary markets, the same people owning many of the properties.”
Scott Humphreys, self-storage acquisitions director at Austin, Texas-based Virtus Real Estate Capital, says a new trend in the industry being employed by many of the REITs and larger regional players is purchasing sites in construction or shortly after they open. This eliminates some of the risk/liability associated with the development timeframe, and has also allowed the REITs to move forward with new site development without the added overhead and expense of keeping a full coterie of development resources in house. For example, Extra Space recently bought a portfolio of three self-storage properties in Austin from Endeavor Real Estate Group. All three properties were new, with two of the three having been opened less than a year at the time of sale.
“The difficult element to this type of purchase is the valuation gap, and determining how much to pay for yet-to-be leased space,” Humphreys says. “In core and growth markets, the risk is obviously not as great, and this allows you to rely on ‘merchant-build’ type development resources who know the local municipalities, and their nuances, well.”
Friday
Big Box Shows Cap Rate Decline
GlobeSt.com -- “Cap rates in the single tenant net leased big box sector compressed
from the fourth quarter of 2013 to the fourth quarter of 2014 by 39
bps,” according to the latest report from the Boulder Group,
a net lease firm based in suburban Chicago. The decline from a 7.10%
cap rate last year to 6.71% by the end of last quarter parallels a
similar decline in other retail properties. As reported in GlobeSt.com,
Boulder found that rates in the net lease retail market sank
from 6.85% last year to 6.50% in the fourth quarter, the data show.
Still, that leaves a 21 bps gap between that market and the big box
sector.
Boulder attributes that gap to the re-leasing risk associated with the much larger big box properties and their significantly higher prices. Net lease big box transaction velocity was down 47% in 2014 when compared to 2013, the firm found. Much of this was due to a lack of new construction as many tenants such as Hobby Lobby, Ross and T.J.Maxx were able to backfill second generation or inline space at low rents.
“Big box properties tenanted by investment grade companies remain at the forefront of investor demand,” the firm added. “However, the entire big box sector was made up of only 43% investment grade tenants in the fourth quarter of 2014.” Big boxes occupied by investment grade companies commanded a 100 bps premium compared to non-investment grade companies. However, with retail cap rates at historic lows, some investors want the higher yields promised by those non-investment grade properties.
In 2013, REITs were responsible for 69% of the big box sales, but last year there was a shift. Private buyers boosted their share of big box transactions to 47%, according to Real Capital Analytics, a 104% increase over 2013. “Private buyers continue to dominate the net lease market in the low cap rate environment as institutions cannot typically pay the cap rate premiums due to yield restrictions,” Boulder found.
“The single tenant net leased big box sector will remain active as both individual and institutional investors seek net leased properties with higher yields,” the company added. “However, with low availability of net lease big box properties market participant expectations are for cap rates to hold steady or decline slightly in 2015.”
Boulder attributes that gap to the re-leasing risk associated with the much larger big box properties and their significantly higher prices. Net lease big box transaction velocity was down 47% in 2014 when compared to 2013, the firm found. Much of this was due to a lack of new construction as many tenants such as Hobby Lobby, Ross and T.J.Maxx were able to backfill second generation or inline space at low rents.
“Big box properties tenanted by investment grade companies remain at the forefront of investor demand,” the firm added. “However, the entire big box sector was made up of only 43% investment grade tenants in the fourth quarter of 2014.” Big boxes occupied by investment grade companies commanded a 100 bps premium compared to non-investment grade companies. However, with retail cap rates at historic lows, some investors want the higher yields promised by those non-investment grade properties.
In 2013, REITs were responsible for 69% of the big box sales, but last year there was a shift. Private buyers boosted their share of big box transactions to 47%, according to Real Capital Analytics, a 104% increase over 2013. “Private buyers continue to dominate the net lease market in the low cap rate environment as institutions cannot typically pay the cap rate premiums due to yield restrictions,” Boulder found.
“The single tenant net leased big box sector will remain active as both individual and institutional investors seek net leased properties with higher yields,” the company added. “However, with low availability of net lease big box properties market participant expectations are for cap rates to hold steady or decline slightly in 2015.”
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