Headlines are being made across the commercial real estate world as investors purchase leased or partially leased properties in industrial, office, retail and multi-family buildings as investments. While these sales are predominately made by large institutional buyers, there has been a significant increase in small capital investors attempting to purchase 1031 (tax deferred exchange) properties to replace their sold assets. A potential benefit fueling this trend among small investors is the ability to postpone paying capital gains taxes.
We’ve also seen an increase in owner occupied building sales in the past 18-24 months with buildings being purchased by Metro Atlanta businesses for their own occupancy.
Why is owner-occupied activity increasing?
1. Favorable loans:
- 5 year term, 15 year amortization at 3.6% with 85% financing available
- 10 year term, 20 year amortization at 4.17% financing available
- 15 year term, 25 year amortization at 4.33% financing available
2. The leasing market is strong. Business owners are taking advantage of the low interest rates and realize the cost to purchase an existing property is less than building a new facility, and in many cases less occupancy costs than leasing.
From January 2018 to July 2019, industrial sales in Cobb County ranged from $27 - $125 SF for locations between 15,000 SF - 75,000 SF. McWhirter Realty Partners represented the following owner-occupied sales:
3075 Jonquil Drive, Smyrna, GA- 50,000 SF building - $2,325,000 or $48.13 SF
1178 Hayes Industrial Dr., Marietta, GA38,240 SF building – $2,304,000 or $60.25 SF
1755 S. Cobb Industrial Drive, Smyrna, GA= 20,000 SF building - $1,500,000 or $75 SF
We anticipate that this trend of high-volume owner-occupied sales will continue until the lending environment becomes less favorable and/or construction costs decline.