Net Lease Supply Limited, Demand High
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LOS ANGELES-Due to limited supply and very high demand, net lease brokers plan to remaining bullish through 2014, according to speakers on the finance and investment panel at the Net Lease West 2013 conference this week. Moderated by Sean O’Shea, managing director at BRC Advisors, the panel welcomed industry experts Rob Bickel, managing director at JLL; John Glass, SVP of investments at Marcus & Millichap Real Estate Investment Services; Michael Kaplan, COO at Barry Slatt Mortgage; Bob McRae, VP at EverBank; Will Pike, SVP at CBRE; and Jereme Snyder, EVP at Colliers International.
According to Glass, the net lease business is up 51% but there is not enough product. “Demarcation in the first quarter of 2013 was because of lack of product,” he says on the panel, adding that will change at the end of the year because a lot of product has come online in the last 30 days. Within the 51% increase, dollar stores, drug stores and convenience stores are running at a 38% increase. The only sector experiencing a lull are freestanding banks, which are down 21%.
When asked to identify the buyers, Pike commented that the industrial sector is driving demand, but the private market is also as aggressive as ever. “I like where we are. This is a great lending environment and I am rather bullish,” he said.
While some were comparing the industry to 2007, Kaplan believed that it was actually closer to 2005. “We still have underwriters doing a lot of good underwriting and there is a lot of liquidity in the market,” he said. “CMBS loans are back in a big way, and they are good for the market.” He has done several loans with drugstores recently, noting that because cap rates have fallen, CMBS loans have bolstered the market.
Finally, the panel focused on $1 million to $5 million product, many believing that they are dominating the market. “Smaller is better,” said Glass. McRae added that it is important to look at deals on a risk basis. The panel agreed that, generally, real estate quality and location become secondary to credit quality and risk.
Before the finance and industry panel, industry experts discussed the state of the market during the Town Hall Panel. Those experts also agrees that risk tolerance is the key to locating what might be deemed a “good” deal.
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