This is a question we’ve gotten a lot lately from our listeners and investors. With the rise of online shopping through Ecommerce options like Amazon, we’ve been seeing some rapid tightening in retail development across the board. With big-box retail winding down and shopping center investments getting tight, many investors and developers are wondering what comes next.
Our guest this week is an expert on spotting development trends and cycles. John McNellis is a developer, speaker and author. Founder and President of Mcnellis Partners development firm, John has been developing a variety of real estate for over 30 years. Although retail and multifamily have been his primary asset classes, John has development experience in several asset classes.
This episode, John joins us to discuss the development outlook for retail and offers advice for investors looking to make the transition to development.
Retail markets challenged throughout the U.S.
Over-building of retail
Influx of online shopping
Retail going through downsizing cycle
Industrial market seeing benefits from Ecommerce boom
Residential: best to start with land and build up
Retail: finding a good tenant for anchor is best strategy
Risk-management is key to long-term success
Rule of thumb: look for investments that earn 2% above cap rate
Don’t build on spec
Transitioning to Development
Find an experienced partner when transitioning to large or mid-size multifamily developments
For first-time developers, find a broker in your area that specializes in the asset class you want to develop
Approach the public with a project before taking it to city officials
Development follows job growth
Urban Land Institute (ULI) is a great resource for developers
Time is money. Property managers spend a lot of money on their time and this is true whether they are managing residential, multifamily or commercial properties. Often times, property managers may get caught up in the timing of things, letting their financial records and organization fall by the wayside. Not only does this cause added stress on the property manager, but it can also hurt the value of a property. When it comes time to sell a property or to refinance, proper financial details mean everything in determining how much the property is valued at.
Dan Pepper knows the importance of organizing and recording all the financial details of a property. Through his company, Palm Companies, a combined investment and property management firm, Dan oversees 190 multifamily units with nearly 50 units managed by Palm. With so many factors to keep track of, paying attention to financial details has become imperative in streamlining property management efficiency. This episode, Dan shares what he has learned about managing properties effectively and increasing property value by organizing and tracking financial details.
Automated Property Management Systems
streamline record keeping, bill pay and rent collection
Appfolio – good mid-market, fully-integrated automated system; 80+ units
Import photos or scans of bills for services and expenses into an easily accessible database
Capitalizing Expenses vs. Annual Expenses
Clearly define and categorize expenses that are capital improvements and what are annual expenses
Buyers can reconcile their investment concerns with detailed records
Lenders can asses precise values on properties
If unfamiliar, google search “capitalizing expenses”
Dan and Palm Companies are focused on multifamily properties ranging between 30-150 units in Southwest Florida. They focused primarily on property management ventures currently, but are open to viable multifamily deals. Palm Companies also has an interest in retail investments. Check out their website for more information.