In This Issue: Announcements Market Overview Quarterly Trends: Industrial Office Retail Multifamily News & Views: Restaurant Appraisals Valbridge Property Advisors is now the largest independent commercial property appraisal firm in the U.S. with 70 offices, 200 MAIs, and 675+ staff across the nation. ANNOUNCEMENTS Appraising Restaurants & Specialty Property Types in Los Angeles Restaurants are just one of the many specialty property types our office regularly appraises across the Los Angeles and Inland Empire area. In fact, in 2017, we appraised 22 restaurants, including notable national franchises, fast-food, sit-down, full-service, and limited-service locations. Please see the last page of this newsletter for an inside look into restaurant appraisals: Restaurant Appraisals and Why You Need An Expert When Buying & Selling. Sean Milota promoted to Business Development & Relationship Manager After outstanding performance in his previous role as a real estate analyst, Sean Milota has been promoted to the position of Business Development & Relationship Manager for the Los Angeles-Inland Empire office. He is already doing an excellent job and you ll be hearing from him soon, as we find ways to provide even better service to our clients and friends in 2018. Valbridge Property Advisors Los Angeles-Inland Empire employs 13 professional staff and is led by two MAIdesignated members of the Appraisal Institute. Senior Managing Director: Calvin Cummings, MAI (626) 498-2990 ccummings@ Senior Appraiser/Director: Rob Saia, MAI, SRA Senior Appraisers: David Kwon Karl Roos Scott Shepherd Randy Walker Troy Webb Prepared by: Sean Milota Business Development & Relationship Manager (626) 551-4069 smilota@ www. Valbridge Property Advisors opens new office in Chicago Recently, Valbridge Property Advisors opened its newest location, a Chicago metro office. This is the 70 th location to open in the US, and is helmed by Senior Managing Director Gary DeClark, whose major activities center around unique and unusual property analysis and litigation support potential. Recall that the resources, expertise, and knowledge of all 70 of our Valbridge offices are available to you as one of our clients, and that all of us are ready to assist you with portfolio work throughout the continental United States. Valbridge makes a strong showing at Estate Planning Conference In mid-november, Valbridge Property Advisors presented at the NAEPC, the National Advanced Estate Planning Strategies Conference, in New Orleans, LA. We know that current valuations for estate planning are important for future plans, including sales, gifts to heirs, and planning for estate taxes. Valuations are also important for real estate and business because they typically represent the most valuable assets in an estate, and a current valuation is essential in developing a solid tax plan strategy. It is critical to update valuations periodically to ensure that the plan is still working: increases in value over time may necessitate adjustments, and new incoming tax code provisions for 2018 may impact you. We are always here to advise on and carry out any real estate appraisal or consulting work to assist you. We are pleased to bring you quarterly market trends for rental rates, pricing, and capitalization rates for industrial, office, retail, and multifamily properties in the greater Los Angeles and Inland Empire markets as reported by CoStar. We have been proudly serving the greater Los Angeles and Inland Empire commercial markets since 2002. For an appraisal consultation or quote for any type of commercial property, please call us at (626) 486-9327, or email us at LA@.
Market Overview Industrial industrial space increased 10.6% from 3Q2017 to $11.20/SF/Yr. at the end of 4Q2017. industrial space increased 25.3% from 3Q2017 to $8.66/SF/Yr. at the end of 4Q2017. Price/SF Average price/sf decreased in 4Q2017 with 101 transactions totaling 5,089,405 square feet averaging $136.75/SF compared to $152.30/SF in the previous quarter. Price/SF - Average price/sf decreased in 4Q2017 with 49 transactions totaling 5,777,005 square feet averaging $103.82/SF compared to $116.28/SF in the previous quarter. Cap Rates - Cap rates have been lower in 2017, and averaged 5.14%, compared to the first nine months of last year when they averaged 5.34%. Cap Rates - Cap rates have been lower in 2017, and averaged 5.83%, compared to the first nine months of last year when they averaged 6.01%. Office office space, all classes, increased 1.2% from 3Q2017 to $35.03/SF/Yr. at the end of 4Q2017. office space, all classes, increased 3.5% from 3Q2017 to $21.28/SF/Yr. at the end of 4Q2017. Price/SF - Average price/sf decreased in 4Q2017 with 46 transactions totaling 3,891,931 square feet averaging $350.30/SF compared to $462.13/SF in the previous quarter. Price/SF - Average price/sf increased in 4Q2017 with 13 transactions totaling 585,067 square feet averaging $158.77/SF compared to $154.28/SF in the previous quarter. averaged 5.73% compared to the same period in 2016 when they averaged 5.57%. averaged 6.89% compared to the same period in 2016 when they averaged 6.76%. Retail retail space decreased 1.7% from 3Q2017 to $30.15/SF/Yr. at the end of 4Q2017. retail space increased 0.8% from 3Q2017 to $17.27/SF/Yr. at the end of 4Q2017. Price/SF - Average price/sf increased in 4Q2017 with 32 transactions totaling 1,327,416 square feet averaging $305.75/SF compared to $254.69/SF in the previous quarter. Price/SF - Average price/sf decreased in 4Q2017 with 25 transactions totaling 1,648,765 square feet averaging $159.61/SF compared to $233.86/SF in the previous quarter. averaged 5.45% compared to the same period in 2016 when they averaged 5.44%. averaged 6.34% compared to the same period in 2016 when they averaged 6.30%. Multifamily Rents - Rent growth has begun to moderate as the rent-toincome ratio is approaching its limit. LA rent gains to rank near top of national markets for the foreseeable future. Price/Unit - The average price per unit has passed $215,000. Total sales volume slightly lower than 2016 pace. Cap Rates - The average cap rate is at an all-time low near 4.0%. High prices and declining cap rates may deter investors from pursuing short-term gains. Rents - Rent growth in IE exceeded both LA and OC. If this continues, the window of affordability for IE may start to shrink. Price/Unit - Average price per unit is near $150,000. The market can depend on steady demand from a growing student population projected over next 10 years. Cap Rates - Cap rates increased in 4Q2017, and averaged 5.10%, compared to the twelve months of last year when they averaged 5.03%.
Industrial Trends
Office Trends
Retail Trends
Multifamily Trends
NEWS & VIEWS RESTAURANT APPRAISALS & WHY YOU NEED AN EXPERT WHEN BUYING OR SELLING According to recent State of the Industry numbers from the National Restaurant Association, restaurants in 2017 will generate $799 billion dollars in sales with more than 1 million restaurant locations nationwide. The restaurant industry is big business in the U.S. and with new restaurants going up every day, there is growing demand for valuation in this industry. Restaurant appraisal goes beyond standard commercial real estate appraising requiring a certain level of art combined with the science of financial data. Restaurant appraisals allow a buyer and a seller to work together to determine the value of a restaurant and reach a selling price. Appraising a restaurant involves assessing its physical assets such as the building, land, and in some cases, equipment and furniture, and examining the financial performance of the establishment such as the recent cash flow, loans, balance sheet, insurance policies, and long term leases. In addition to tangible assets, there are other factors involved in determining value like location, employee base and ease of operation. A restaurant determined to be turn key is guaranteed to command a higher sales price than one that is poorly organized or in need of an overhaul. An opinion of the market value of this involves developing total assets of the business (MVTAB). In many instances, buyers and sellers are interested in the value of the real property, which may involve a long term, triple net lease, an owner operated property, or a tenant with only a short term remaining on the lease. Each of these scenarios requires different data sets and expertise in understanding the market. For instance, does the tenant have 200 locations and a successful 20 year history, or is this their first venture into fast food? This will measurably impact the value of the real property, and your consultant needs to understand these market conditions. Another aspect of restaurant appraising is discussing employee agreements. An appraiser must determine if/what employees will be available after the restaurant is sold. This involves checking to see if employees have signed any kind of agreement relating to being a part of the possible sale or not. Restaurants intangibles, such as the name, logo, trademark, licenses, and recipes, must also be examined to determine if the buyer could operate the business without them and decide which ones will transfer with the sale. An additional important consideration in the valuation of a lease asset is if the corporate franchisor is backing the lease. A lease backed by Yum Brands may produce a completely different value than a Taco Bell franchisee with three units. It is imperative the valuation expert understand these variations in lease terms. Also, the valuation of an owner occupied asset presents a different set of challenges. Is a lender involved? Some lenders require an as dark (vacant) value, others allow for an assignment condition that considers the possibility the property could be leased. This subtle difference could result in a value variance of as much as 50%. It is important the borrower, lender and valuation expert are all fully on the same page before the assignment begins. It may impact which lender a borrower chooses when seeking financing. In restaurant valuation, it is extremely important to focus on an income approach excess earnings approach, which focuses heavily on the market rent, a real estate capitalization rate, and a business multiple. This method is popular across the industry because of the credible results it produces. It is also important for appraisers to differentiate between restaurants and recognize whether the establishment has a regional or national presence. According to Nation s Restaurant News, the restaurant industry is seeing a "gold rush" unlike any in the industry s history from private equity firms and investors looking for the next big thing in upstart chains with 20 or fewer locations. This trend indicates the need for expertise in this specialty market. Valbridge Property Advisor s newly introduced Specialty Practice Group, Franchise Finance and Single Tenant, now offers restaurant appraisal service for both local and national brands. Valbridge Advisors have expert knowledge that can help the buyer and seller of a restaurant examine all the important and complex details to properly appraise and value restaurants. Our Los Angeles Inland Empire practice regularly appraises restaurants, including 22 restaurant valuations in 2017 alone. For more information on restaurant or other specialty property type commercial real estate appraisals, please contact us at (626) 486 9327, or email us at LA@.