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The Roasterie in Kansas City brews $5M expansion plans for factory, event space

admin — Thu, 02 Jun 2011 22:55:23 +0000

From the Kansas City Business Journal website dated: June 2, 2011

Danny O’Neill is flying high about his Kansas City coffee factory’s roughly $5 million expansion project.

And that’s not just because The Roasterie Inc. The Roasterie Inc. Follow this company ’s factory will have a new, larger entrance, an expanded cafe and event space across the street. The renovated space at 1204 W. 27th St. will have a full DC-3 airplane mounted out front, in line with the company’s logo. (Last year, The Roasterie did a rebranding that included adding a large DC-3 airplane mural off Interstate 35 near Downtown proclaiming the new tag line: “Live Life on the Rim!”)

“We just want to make a real statement,” said O’Neill, the company’s founder. “We want it to be kind of like, ‘Wow, this is one of the top five things to do in Kansas City.’”

O’Neill was looking for a way to expand after daily tours started to overwhelm the factory and the list of changes to make kept growing. With about 33 people at the factory, space was getting tight.

“We’re finding out lots of ways to do more with less,” he said. “We’re becoming a lot more efficient.”

He originally eyed the Folgers plant at 701 Broadway, which is set to shut its doors next year, but an alternative presented itself when the property across the street from his current plant became available.

“It just opened up all kinds of opportunities,” O’Neill said.

The time was right for the company, which he said has experienced 30 percent revenue growth from 2010. O’Neill projects more than $10 million in sales this year.

He intends to turn the new property, which includes three separate buildings totaling 50,000 square feet, into an event space that he hopes will be perfect for weddings, as well as provide new parking for the factory and events. The roughly $3.5 million project should be completed by the end of the year.

A separate factory renovation will cost about $1.5 million and wrap up by the fall, O’Neill said. It will provide an expanded cafe, a larger cuppery, a nicer entrance and loading docks moved to the back of the building, adding about 2,000 square feet to the already 34,000-square-foot property.

And O’Neill is in no rush if project timetables expand.

“We’re comfortable,” he said. “We’re doing it right.”

1st Quarter 2011 Commercial real estate results for our Kansas City clients

admin — Mon, 16 May 2011 23:13:20 +0000

Click here to view report in PDF color format

Economic Environment

The best news about the economy during first quarter 2011 was that the unemployment rate ended the quarter at 8.8 percent, down from 9.4 percent at the end of fourth quarter 2010, according to the Bureau of Labor Statistics (BLS). Payroll began to increase by slightly better numbers. However, first-time unemployment claims began inching up again in April 2011, jumping to more than 400,000 per week for several weeks in a row.

Real gross domestic product (GDP) growth increased at an annual rate of only 1.8 percent in first quarter 2011, according to the advance estimate released by the Commerce Department. This was a deceleration from the 3.1-percent growth in fourth quarter 2010, with the slowing growth largely due to reduced personal consumption expenditures, a sharp upturn in imports, and the decrease in government spending.

Standard & Poor’s (S&P) lowered its outlook for U.S. sovereign debt from “stable” to “negative” during first quarter 2011. In addition, the federal debt exceeded $14.3 trillion in May, and Congress will need to raise the debt ceiling again within the next couple months or the nation will risk defaulting on our obligations.

According to the BLS, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in March 2011, with gasoline and food prices accounting for almost three-fourths of the increase. As such, consumers are pulling back, and while U.S. retail sales rose 0.4 percent in March 2011, this was down from the 1.1-percent increase in February, according to the Commerce Department.

What Does This Mean for Commercial Real Estate?

Despite the uncertainty in the economy and investment environment, commercial real estate continues to be a reasonable investment alternative for institutional investors. However, demand for investment property in secondary or tertiary markets is generally weak in comparison to that of the top-tier markets. We are starting to see slight improvement in leasing activity in some areas, particularly among technology firms.

Lending standards started to ease in first quarter 2011, according to results of the Federal Reserve’s quarterly Senior Loan Office Opinion Survey, but demand remained weak and growth remains tentative. In addition, problem banks remain at a record high, with 884 banks, or nearly 12 percent of all U.S. banks, at risk of failure at the end of 2010, according to the Federal Deposit Insurance Corporation (FDIC). The total number of failed banks in first quarter 2011 was 26, and another 13 banks failed in April, reported Trepp, LLC.

According to the Federal Reserve, banks have already taken $80 billion in commercial real estate losses (about half of what they are expected to take as a result of the recession). But there is still much distress, and the delinquency rate on commercial mortgage-backed securities (CMBS) increased to a record 9.34 percent in fourth quarter 2010 (compared to less than 1 percent in 2007). In contrast, the volume of new CMBS issuance is expected to be about $45 billion in 2011, well above 2010 issuance of $10.9 billion, but far below the $228 billion in 2007.

Transaction Analysis

On a 12-month trailing basis, total volume increased approximately 20 percent in all property types during first quarter 2011, according to Real Estate Research Corporation (RERC). In contrast, the 12-month trailing size-weighted average price decreased slightly in all property types. On a quarter-to-quarter basis, total volume decreased from the previous quarter in all property types during first quarter 2011, while the size-weighted average price declined.

RERC’s 12-month trailing weighted-average capitalization rate for the industrial and retail sectors declined during first quarter 2011, while the cap rate for the apartment sector remained mostly unchanged. In comparison, the 12-month trailing weighted-average capitalization rate for the office sector increased from the previous quarter.

For more information about RERC’s research, please go to www.rerc.com.

Office:

• According to RERC’s investment survey results, distressed and foreclosed property sales dominated office transactions in first quarter 2011. One of the commonly reported strategies was to buy cheap, hold, and sell the property at a higher price when the economy improves and office demand increases.
• Twelve-month trailing office sector total volume increased nearly 20 percent during first quarter 2011, while the size-weighted average price per square foot remained stable. The 12-month trailing weighted-average capitalization rate increased to 6.8 percent for the office sector. The volume of office transactions of $2 million or less increased by nearly 5 percent during first quarter 2011 on a 12-month trailing basis, although the size-weighted average price for transactions of $2 million or less declined 5 percent from the previous quarter.
• According to Reis, Inc., vacancy in the office sector declined slightly to 17.5 percent due to positive net absorption of 5.5 million square feet during first quarter 2011. This decline in the vacancy rate is the first reversal in the rate since third quarter 2007. In addition, this is the second consecutive quarter that both asking and effective rents increased.

Industrial:

• According to RERC’s investment survey respondents, the majority of industrial property transactions that took place during first quarter 2011 were for normal and distressed properties, while the sale of foreclosed industrial properties was not as predominant. The majority of respondents thought that the price of industrial properties was attractive for buyers.
• Industrial property total volume increased 20 percent on a 12-month trailing basis during first quarter 2011, while the size-weighted average price per square foot declined slightly. The 12-month trailing weighted-average capitalization rate declined to 7.6 percent during first quarter. The volume of industrial property transactions of $2 million or less increased by more than 10 percent during first quarter 2011 on a 12-month trailing basis, although the size-weighted average price for transactions of $2 million or less declined by nearly 10 percent from the previous quarter.
• According to Grubb & Ellis, the availability rate for the industrial sector fell 50 basis points to 15.9 percent during first quarter 2011 due to strong demand and few new deliveries. In addition, asking net rent grew 3.2 percent on an annual basis. Completions totaled 3 million square feet for the fifth consecutive quarter.

Retail:
• Respondents to RERC’s investment survey noted that there were about three times as many distressed or foreclosed retail properties that sold during first quarter 2011 as normal retail property sales.
• Total retail property transaction volume increased 15 percent on a 12-month trailing basis during first quarter 2011, although the size-weighted average price per square foot declined slightly from the previous quarter. The 12-month trailing weighted-average capitalization rate dropped to 7.7 percent. While retail property transactions of less than $2 million increased by more than 15 percent on a 12-month trailing basis during first quarter 2011, the size-weighted average price of this retail space declined by nearly 10 percent.
• According to Reis, Inc., the vacancy rate for neighborhood/community retail centers remained unchanged at 10.9 percent during first quarter 2011. In contrast, vacancy for the regional retail mall sector jumped 40 basis points during first quarter 2011, after declining in late 2010. In other signs of weakness, asking and effective rents for both retail sectors further declined by 0.1 percent.

4th Quarter Commercial real estate results for Kansas City clients

admin — Tue, 01 Mar 2011 17:52:09 +0000

Click here to view report in PDF color format

Economic Environment

The U.S. economy ended 2010 with a real GDP growth rate of 2.9 percent, slightly higher than the 2.6 percent growth in 2009, according to the Bureau of Economic Analysis (BEA). Although economic growth was more sluggish than any of us hoped for the year overall, it was positive each quarter in 2010, and thus far, we have avoided the much-feared “double-dip” recession. More importantly, the economy seems to have acquired a little more steam as we move into 2011.

The Congressional Budget Office (CBO) announced that the federal budget will reach a new record of nearly $1.5 trillion, and as a share of GDP, is expected to increase to 9.8 percent in fiscal year (FY) 2011. As a percentage of economic output, the 9.8-percent deficit would be the second-largest in 65 years, behind only the 10-percent level in 2009.

According to the Bureau of Labor Statistics (BLS), the unemployment rate declined to 9.4 percent in December 2010, the lowest it has been for nearly a year and a half, but this was primarily because a record number of people stopped looking for work. Nonfarm payroll employment increased by 103,000 during the month, and although this rate of growth does not keep up with the addition of new entrants into the workforce each month, at least it is a positive number. The economy added 1.1 million jobs during the past year.

Consumers opened their pocketbooks during the 2010 holiday season, with total retail sales from October through December 2010 up 7.8 percent from the same period a year ago, according to the U.S. Census Bureau. This topped off a year of increases, with total retail sales for the entire year up 6.6 percent from 2009 figures.

What Does This Mean for Commercial Real Estate?

Commercial real estate activity was mixed during fourth quarter 2010. Top-tier properties have been selling at record-prices in some of the major markets, although there was much less sales activity in the secondary and tertiary markets. However, leasing markets exhibited increasing signs of recovery. Construction activity remains quite limited, but the bulk of new commercial real estate construction was related to healthcare, public infrastructure, and multifamily housing/apartments.

With respect to the conditions of the banks, there were 157 failed banks in 2010, more than any year since 1992, but the level of assets associated with these banks was 45.7 percent less than the assets associated with the banks that failed in 2009. Although the Federal Deposit Insurance Corporation’s (FDIC’s) list of “troubled” banks increased to 860 as of Sept. 30, 2010, the number of bank failures is expected to decline in 2011.

Credit activity was mixed across the U.S. during fourth quarter 2010, and while loan demand for commercial real estate has been stabilizing in some areas, it remained soft or has been declining in other areas.

Transaction Analysis

Real Estate Research Corporation’s (RERC’s) transaction analysis showed that total volume increased for all property types, except for the retail sector, on a 12-month trailing basis during fourth quarter 2010. However, on a quarter-to-quarter basis, total volume
increased for all property types, including retail, during fourth quarter.

The size-weighted average price per square foot/unit for the office and apartment sectors overall increased approximately 10 percent on a 12-month trailing basis, while the size-weighted average price for the retail sector decreased approximately 5 percent during fourth quarter 2010. The size-weighted average price for the industrial sector remained unchanged from the previous quarter.

RERC’s 12-month trailing weighted-average capitalization rate decreased for all property sectors during fourth quarter 2010.

Office

• The majority of RERC’s investment survey respondents stated that distressed office properties—many of them well-located, free-standing properties—were attractively priced, selling well, and even outselling other properties. Other respondents, however, stated that the office sector was risky due to oversupply.
• Volume for the office sector increased by more than 40 percent during fourth quarter 2010 on a 12-month trailing basis, although the majority of the increase was due to sales of more than $5 million. The size-weighted average price per square foot of office space rose approximately 10 percent, while the 12-month trailing weighted-average capitalization rate declined to 6.7 percent during fourth quarter. Volume and price for transactions of less than $2 million declined.
• According to Reis, Inc., the vacancy rate for the office sector remained flat at 17.6 percent during fourth quarter 2010. In addition, net absorption increased 2.5 million square feet for the quarter, the first increase since the end of 2007. Asking and effective rents also increased during fourth quarter.

Industrial

• According to RERC’s investment survey respondents, industrial properties offered a good investment opportunity during fourth quarter 2010. Many respondents said that both normal and distressed industrial properties were selling well, depending on location.
• Total volume for the industrial sector rose 20 percent during fourth quarter 2010, while the size-weighted average price per square foot remained flat on a 12-month trailing basis. The 12-month trailing weighted-average capitalization rate for the industrial sector declined 50 basis points to 7.7 percent. According to RERC’s analysis, the volume for industrial property transactions less than $2 million, of $2 million to $5 million, and those of more than $5 million each increased on a 12-month trailing basis, although price was mixed among these groups.
• According to CBRE-EA, the national industrial availability rate fell by 30 basis points to 14.3 percent during fourth quarter 2010. Although availability remains high, low construction and an improving economy should further reduce availability going forward.

Retail

• The majority of RERC’s fourth quarter 2010 investment survey respondents stated that distressed retail properties were selling well due to reasonable pricing, and several respondents noted that the retail sector was considered an attractive investment. Furthermore, retail sales were strengthened by holiday sales, though sales slowed in December.
• Retail sector total transaction volume declined by 2 percent on a 12-month trailing basis during fourth quarter 2010, while the size-weighted average price per square foot fell nearly 5 percent. The 12-month trailing weighted-average capitalization rate decreased 20 basis points to 8.2 percent. However, the volume of retail property transactions that totaled less than $2 million increased on a 12-month trailing basis, while the volume for transactions greater than $5 million declined compared to the previous quarter.
• According to Reis, Inc., the vacancy rate for the retail sector remained unchanged at 10.9 percent during fourth quarter 2010. In addition, the lowest number of completions was recorded since 1999, with only 594,000 square feet of neighborhood/community center space brought online during the quarter. Both asking and effective rents declined.

Apartment

• According to RERC’s investment survey respondents, the apartment sector was the most attractive property investment during fourth quarter 2010. Respondents said demand was strong, although pricing and location could be challenging.
• Apartment sector total volume increased about 30 percent from the previous quarter on a 12-month trailing basis, while the size-weighted average price per unit rose about 5 percent. The weighted- average capitalization rate decreased 10 basis points to 6.1 percent. In addition, the volume of apartment sector transactions that totaled less than $2 million increased nearly 10 percent on a 12-month trailing basis.
• According to Reis, Inc., the national vacancy rate for the apartment sector dropped sharply to 6.6 percent in fourth quarter 2010. In addition, occupied stock increased by nearly 58,000 units for the quarter, with absorption for the year 2010 totaling over 227,000 units. Asking and effective rents continued to increase at approximately 0.5 percent.

Commercial real estate icon Sears Tower renamed

admin — Wed, 12 Aug 2009 11:06:12 +0000

Sears tower Picture

Just read an article that an icon has changed names in Chicago. The Sears Tower has been renamed The Willis Tower after The Willis Holding Group, a company leasing 142,000 sq ft of space in the building. I know this happens frequently but I don’t like it. I guess if I was the one that negotiated the lease, I would be happy for whatever it was named, but to a lot of people this changes my youth. I remember learning about the former”Sears” tower years ago as a kid, following it as it was competing to be the tallest in the world. Being from Kansas City it reminds me that sometime we will probably see a name change for Kaufman Stadium and other city landmarks. Care to offer your opinion??