Louisville Industrial Real Estate Market

For the last several weeks I have been working on a report for a client detailing the state of the Louisville Industrial Real Estate market.   Most of us have at least anecdotal evidence that things there are getting better but it was really amazing to gather some hard facts.

Last year (2014) marked the return of spec Industrial projects.   The Louisville market added more than 2 Million square feet of industrial space and the overall vacancy rate still declined.    Some estimates claim that the vacancy rate for Louisville industrial space is below 4%.     There were 9 industrial leases signed for 200,000 SF or more totaling nearly 2.7 Million SF.  

According to the Federal Reserve's Burgundy Book for the Louisville region, the two main factors for this are the improvement in the job picture and decline in fuel prices.     Jobs, of course will vary with the economic conditions.   The decline in fuel prices however seems to be largely due to the fracking revolution.    This revolution is leading the US to energy independence perhaps as soon as one year from now.    And it is fundamentally changing the world's energy market as the US becomes the world's number one energy producer.    This bodes very well for the US economy in general and especially benefits two key industries of manufacturing and transportation locally.  

The key players in our industrial market are all bullish on their prospects.   Ford expects car sales to continue to increase.   UPS experienced 8% growth last year and expects things to continue to improve.   Electrolux saw an increase in appliance sales in North America of 6% last year and expects the demand to increase as the North American residential real estate market continues it's comeback.

In short, things are looking good and it looks like we can expect this to continue for a while.

It's really nice to be able to share some good news.

Have a great day!

David

David W. McCoy
Vice President
Commonwealth Commercial Real Estate
dmccoy@ccre.biz

BTW - I am licensed in KY and IN.  I specialize in commercial properties and handle Office, Industrial, Land, Investment and Retail properties.  I work with buyers, sellers, landlords, tenants and investors.   I also work with international real estate and internationals looking for real estate.     Please let me know if I can help you.

Brazilian Dreaming

I got my tourist visa to go to Brazil!  

The end of next month, I will be traveling to Brazil with a group from GLI  (Greater Louisville Inc - our local Chamber of Commerce)   for a 9 day trip to Sao Paolo and Rio de Janeiro.     This is a cultural exchange trip for members of the Louisville community.    

I am looking forward to meeting the people going on the trip as well as those we will meet while we are in Brazil.    I have been surprised to learn we have a small Brazilian community in Louisville.  I have discovered this quite by chance when several Brazilians have introduced themselves after hearing me casually mention my upcoming trip. 

Admittedly, I am primarily going because of GLI's trip offering BUT here is why I want to go -

In recent years, Brazil's economy has been booming while at the same time the US dollar has been devaluing.   The combination of these factors has caused US goods and real estate to be very inexpensive for Brazilians.  Brazilians have responded by investing heavily in the US.     A buddy of mine from the Miami area told me that in one year, Brazilians pretty much absorbed the entire vacant inventory of condos that were left from the housing crisis.   In fact, he tells me that there are now billboards all over Miami in Portuguese.  

It may be a small chance that someone in Brazil will want to do something in Louisville, KY but perhaps a bigger chance that someone in Brazil will want to do something in the US.   Also, with Brazil's economy booming, if someone in the US wants to invest there, I think it would be nice to have met a few contacts.    I have some referral networks that would allow me to find people to help with Real Estate all over the world and those are very useful.   But I have found that when possible, meeting people face to face makes those connections stronger.

In any event, for me, I get to see first hand the land, people, culture (and real estate) in Brazil and hopefully, I get to build my network of friends and business connections.  

SO, with that said, if you happen to know someone interested in real estate in Brazil OR someone in Brazil interested in finding real estate in the US, let me know.

Wish me luck!  It's going to be a great trip!

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299

office: (502) 379-6005
cell: (502) 905-5274
e-mail: DMcCoy@ccre.biz

BTW - Call me if you need help with real estate! I am a licensed real estate broker in Kentucky and Indiana.  I specialize in Commercial Real Estate and Global property.   I work with Buyers, Sellers, Landlords, Tenants and Investors.     I handle Office, Industrial, Land, Investment and Retail properties.  Heck I can even set you up with help on Residential Real Estate.   Give me a call.  I would love to help.   You can reach me by my contact information above.  

August Big Event

This has been an extraordinary year for me.   It seems as though I am having an extraordinary event nearly every month.    This year, I went to Costa Rica for an International Real Estate Conference (which was really cool but not today's topic.)   I sold my house, which I have lived in for 22 years.   I have moved to a temporary situation and am still looking for a new place.  I participated in my first Half Ironman competition in Muncie Indiana.    I welcomed a new grandson into the family with my daughter and her husband.   I have been learning Russian and started learning Portuguese.    On the agenda I will be traveling to Brazil in September and plan on going to San Francisco in November.   BUT the big event for me this month is the Ironman competition.

On Sunday August 25th, Louisville will be hosting what I believe is our 7th full Ironman competition and I will be participating.  The competition involves a 2.4 mile swim in the Ohio River, a 112 mile bike throughout Louisville and adjoining counties and finishes with a full marathon (26.2 miles).   I will have 17 hours to complete it.  

This is one of the great unknown events in Louisville.   People are aware of it but I would say that most people are not aware that it is a really big deal.  We have participants come from all over the country and really all over the world.    Approximately 3,000 people will be competing including a number of professional athletes and it is a qualifying event for the Kona Ironman.    I am told the event pumps approximately $5,000,000 into our local economy.

I understand that doing an Ironman is not everyone's cup of tea BUT if you want to see something really cool and inspiring, come down to Fourth Street Live Sunday night and watch some of the participants cross the finish line.   Watch their expressions as it is announced as they cross the line, "You're an Ironman!"    

Afterwards, probably sometime Monday afternoon, I will be having a follow-up ceremony.   I will be putting my 140.6 sticker on the back of my car, drinking my favorite adult beverage with some friends and family and singing the National Anthem.  And then I might just download an "ironman" ring tone to my phone.

Have a great day everyone!    

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY 40299

cell: 502-905-5274
ofc: 502-379-6005
e-mail: DMcCoy@ccre.biz

BTW - I am a licensed real estate broker in the States of Kentucky and Indiana.  I specialize in Commercial and International Real Estate.  I handle Office, Industrial, Investment, Land and Retail properties.  I work with Sellers, Buyers, Landlords, Tenants and Investors.  Heck I can even set you up with Residential real estate help.     Give me a call if you need any help with real estate. 

Commercial Land - Market Activity and Analysis

As luck would have it, I have several Commercial Land listings again.  Recently I have shared some analysis of the Commercial Land - market activity with some of my land clients.  So I thought I would share it here as well.  

 

In general, there was sort of a bump of activity last year (2012) and there were signs of interest  with a number of calls in the first quarter 2013 on land but it seems that things have quieted down a little as we enter into the summer.  

Looking back at Commercial Land sales, I found that KCREA (Kentucky Commercial Real Estate Association – our Commercial Information Exchange) reported 23 sales of commercial land larger than 5 acres for the 12 month period beginning 4/1/2012.    So about 2 sales per month.   Interestingly, 8 of those 23 were foreclosure sales, auctions or bank sales.   In April of 2013, there were 253 commercial land properties larger than 5 acres which were listed for sale on KCREA.  So there is presently about an 11 year supply of land on the market.

It is no longer news that commercial land in general depreciated about 40% since 2008.  What this tells us is that with roughly a third of the commercial land sales being distressed sales, and an 11 year supply of land at current consumption rate, we can see this downward pressure on prices is still with us.  

On the positive side, the metro market area’s Industrial occupancy is very high and we are beginning to see a shortage of Industrial space.   This has led to some Industrial spec projects for the first time in quite a while.  If this demand continues and if financial institutions begin to loosen their credit somewhat and allow more of these projects, we should expect to see the demand for commercial land to increase in tandem with this activity.  

Of course, land is not a homogenous product.   Location, size, zoning, traffic, roads, visibility, availability of utilities are all factors in addition to price as projects come available.   Each of these will ultimately be a factor in the demand for a particular parcel when new projects are being considered.  

Let me know if you have any questions. 

 

I hope you have a great day!

 

Side note - I am a licensed real estate broker in Kentucky and Indiana and I specialize in Commercial Real Estate.  I handle Office, Industrial, Retail, Commercial Land, Investment and International Properties.   I work with Sellers, Buyers, Landlords, Tenants, and Investors.   Heck I can even set you up with a Residential specialist if you need help.   If you need any help with real estate, give me a call or send me an e-mail.  I would love to help.   

 

David

 

David W. McCoy

Associate Broker

Commonwealth Commercial Real Estate

10444 Bluegrass Parkway

Louisville, KY  40299

 

office: (502) 379-6005

Cell: (502) 905-5274

e-mail: DMcCoy@ccre.biz

 

 

Costa Rica Real Estate

I spent last week in Tamarindo Costa Rica at a Real Estate Conference on International Real Estate.    While there we visited several real estate developments in the Tamarindo area.   Tamarindo is a beautiful place.   It is on the Pacific coast of the country and the view of the Pacific is breath taking. 

It is a tropical environment on the coast, being about 11 degrees off of the equator.   But there are also the mountains and the rain forests which can be much cooler.   There is a dry season and a rainy season.   The rainy season starts in May and lasts through November.  October and November are normally the rainiest and I am told that many places close for the month of October.   

Costa Rica is a democracy with a stable government.   The official language is Spanish.   The literacy rate is about 97% and English is taught through the senior year in high school.  I would not claim that everyone is fluent in English but the majority of people understand enough English that getting around is almost never a problem.   In fact, everywhere I went the signs and menus were in both Spanish and English.   

Property rights are strong in Costa Rica.   The laws protect ownership rights of property owners and investors.   There is a national property registry that records all ownership.   They feel so strongly about the rights that the real estate attorneys in Costa Rica do not recommend title insurance.

Costa Rica has been actively encouraging foreign investment as well as retirement for many years and there is a large population of retired expats in the country.   There are people from Germany, Italy, and really all over although the majority immigrated from the US.   While retirement is one of the big draws, I met all kinds of people who moved there because they liked the climate and the country and the relaxed pace of life.   In fact, many of the people who moved to Tamarindo are surfers.

The economy struggled when the US economy had its downturn back in 2008.   Although unemployment presently is at nearly 11%, the country still has one of the stronger economies in Central America.   Nicaraguans come to the country looking for work and provide very inexpensive labor.  Many Nicaraguans will come and stay for the week, moving from house to house of Costa Ricans working as cooks, maids, landscapers and the like and then returning to their families in Nicaragua for the weekend.

With the efforts to attract retirees and foreign investment, Costa Rica has been developing its infrastructure.    Developments in Tamarindo have water, sewer (or septic systems), and electricity.   (Everywhere I went, the water was safe to drink.)    Cell phones work there and internet is available.  

A new airport in Liberia just came on line in 2012 and provides great access to the Pacific coast.   The trip from the airport to Tamarindo was a little less than an hour.   Still getting around can require a sense of adventure.   While there are some good roads in the country, probably the majority of the roads are still dirt.   Because of the mountains, some of the roads can be very steep.   Most of the roads are not named.    A lot of the people use 4 wheel drive vehicles to get around. 

It's a beautiful place with a perfect climate.  Property rights are strong.   There is good infrastructure.   You can see why Costa Rica has developed one of the best reputations for investment in Central America.   

If you are curious and would like to know more, I expect to have a link to the Costa Rica Global Association of Realtors available in the near future!  When I do, you can browse those listings and see for yourself.   AND if you need any help with real estate there, let me know.  I can definitely get you started. 

Thanks for reading.   Have a great day.

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299

ofc: (502) 379-6005
cel: (502) 905-5274
e-mail:  DMcCoy@ccre.biz

Fair Taxes

Well I've been sitting on my hands and biting my tongue for about 3 months and finally I decided to weigh in. 

We hear a lot from our President and in his campaign about instituting fairness in taxation.   Some of my young friends have expressed nearly rabid opinions to me about how unfair things are.   As I mentioned in a previous post, fairness is a difficult thing to define or measure.     So instead of doing that, let's have a simple case study - me.

It is no secret that the last several years have been extraordinarily difficult for real estate.   Homeowners, real estate brokers, builders, people in the construction industries have all suffered tremendously in this economy.    I for one have been barely scraping by for the last 4 years.    My job has no base salary.   I am only paid if there is a lease or sale by commission only and there is no guaranteed minimum wage. 

During that period of time, I never recieved any government assistance of any kind.   And in fact, being considered self employed, I would not even be considered eligible for unemployment benefits unless I was unable to make any money at all for an extended period (which I beleive is one year.)   To survive the economic calamity, I had to exhaust my savings and I had to borrow to the maximum amount possible against my home.  Still I was luckier than many.  I never had to declare bankruptcy and I never had to have my home in foreclosure.  

Now, I am thankful to be having my first good year in four years.   Still, I am a long way from recovering.  I have much larger debts to pay off and I would need probably another 4 good years to be back where I was before all of this began.  

With this good fortune also comes  an increase in taxes.    In a way, I am grateful that I am back to where I can even consider taxes a problem BUT my issue is that taxes should be reasonable.   Although I am having a good year, I definitely cant be considered one of the wealthiest in the country.   Say whatever you want, but I am telling you from my personal experience that our current tax structure kills growth.

Getting past the rhetoric and into some hard numbers to illustrate my point.    Consider the following taxes, I have to pay:

• Federal Income Tax - rate approximately 28%
• Medicare, FICA, SSA taxes PLUS self employment tax - approximately 15.5%
• State Income Tax - rate approximately 6%
• Local Income Tax - rate approximately 2.2%
• State Sales Tax - 6%
• Property Tax - Approximately 1% of the assessed value (this is low because these taxes just increased)

Looking at the income portion only, the combined governments are claiming 51.7% of my income in taxes.     The property tax on my home is approximately another 1 to 2% of my income, bringing the total forward of now nearly 54% of my income.   

Next there is 6% sales tax.  There is tax on my energy bills.  There is tax on my phone bills.   There is tax on gasoline.   There is tax on my insurance bills.    There is tax for licensing my car.   There is a tax for having a pet.   There is a tax on healthcare.  Now with Obamacare, there is tax for not only healthcare but also for health insurance. 

The bottom line here is that it is EASY to get to 60% of your income going to taxes.  In fact, it really isn't too hard to get to 70% when you consider all the ways that the government(s) tax(es) you.  

How is it fair to have to send two thirds of your income to the government and only be allowed to keep one third for your family?    How can we claim that we are promoting growth when someone has to make three times the amount that they lost just to break even?

I am not an anarchist.  I beleive that the government serves an important purpose.  So I am not advocating no government or no taxes.   HOWEVER, there is something wrong when the government wants to cry foul and vilify people who are paying taxes.    If the government is having to take 60 to 70% of a citizens income and STILL can't balance its budget, that government is spending too much.  

I hear the news and the current administration attacking the Tea Party movement.   I would not identify myself as a member of this movement but I have to come to their defense.  For all of the President's talk about fairness, I would say that the very underlying principle of the Tea Party is really about fairness.   There ought to be a reasonable limit on government spending and there ought to be a reasonable limit on the maximum amount of taxes (all taxes) that an individual should have to pay.    

Stepping off my soapbox.   Just my opinion. 

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299

BTW - I also offer advice and opinions on Real Estate.  In fact, I am a Commercial Real Estate Broker and I specialize in Commercial Real Estate.  I handle Office, Industrial, Retail, Investment and Commercial Land properties.  I help Landlords, Tenants, Buyers, Sellers and Investors in Sales and Leasing properties.    I would love to help you as well.

ALSO - I am sure that my Managing Broker would appreciate me stressing that the opinions expressed here are my own and do not necessarily represent the opinions of Commonwealth Commercial Real Estate, its employees or brokers.    I am happy to hear comments either pro or con and you may feel free to post them if you would like.   I am not however happy to have hateful or inappropriate comments and I will exercise my right to delete those which I deem so.  

Another Commercial Real EstateTax Trick

Seems like there is always more to learn.  I attended a conference on Monday and learned a new accounting trick for commercial real estate.   There is a procedure known a Cost Segregation which can allow you to reallocate some of the cost of the building in a way that can allow you to accelerate the depreciation.

Actually this trick has been around for a while but it is not widely known.   It is the result of a decision regarding HCA from I believe 1997.     The IRS then clarified the decision with a ruling in 2004 that specified what was necessary and acceptable to make these determinations.    Until this time, it was only practical for very expensive real estate transactions.  

Bottom line here is that this can lead to big tax savings.   

If you want to know more about Cost Segregation or other Commercial Real Estate issues, give me a call.   I specialize in Commercial Real Estate and handle Office, Industrial, Retail, Land and Investment properties.   I work with Landlords, Tenants, Buyers, Sellers and Investors.    

Have a great day!

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299

dmccoy@ccre.biz
Ofc: (502) 379-6005
Cel: (502) 905-5274

Could it be that the Recession is Over?

Earlier this week, I told some buddies that it has been so long since I saw a crane, I wasn't sure I could recognize one.   One responded, "What's a crane?"  The other told him, "It's a bird with long legs that lives near marshes."

We've been burned before thinking that the Great Recession was over.   Technically, I guess from its true economic definition, the recession has been over for nearly 3 years but this has been a recession without a recovery, so far.  

Perhaps, in Louisville at least, the recovery we have been waiting for is finally here.   We have had several indicators -

• Town Center retail center - known by most as the home of Tinseltown sold in late 2011 for close to twice as much as its purchase price just a few years before
• Cabela's, a large outdoor retailer, announced plans to build a new store by Lowes and Costco at Brownsboro Crossing. 
• Central Station retail center, close to Churchill Downs recently sold to an out of state investor
• River Ridge, in Jeffersonville, Indiana, has a new 1,000,000 SF warehouse being built by a so far undisclosed company
• Bullitt County has another still undisclosed company presently looking for land to build another 1,000,000 SF warehouse.
• The new North Hurstboure Parkway Class A Office building built by Faulkner, the only spec Class A Office building I can think of for the last several years, is nearly completely leased after only being officially open for a few weeks.

In addition, there are less concrete indicators -

• We have been getting inquiries from businesses that are suppliers to some of our larger employers, saying that they need more space to gear up for new contracts and increased activity.
• Whereas last year I would sometimes ask friends to call my phone to be sure that it was working, now our phones are ringing again.
• Several companies are now at least looking at new space.  Much of this is taking advantage of better lease rates while they are still down and long term leases are expiring.   Still, there is more activity than there has been in quite a while. 

As I mentioned in the outset, we have been burned before, so I won't be buying a new car right away.   Still, things are looking more positive than they have in quite a while.   

Hope you have a great day!

BTW - If you need some Real Estate help, give me a call!   I specialize in commercial real estate and work with Buyers, Sellers, Landlords, Tenants and Investors.  I handle Office, Industrial, Land, Retail and Investment properties.  Heck I can even set you up with help for residential properties. 

ALSO - I am sure that my managing broker would appreciate me clarifying that the views expressed here are my own and do not necessarily reflect those of Commonwealth Commercial Real Estate, its brokers, agents, or employees, other than me, of course.    Should you like to make a comment or offer another point of view, you may feel free to do so in the comments or you may contact me directly.   You should not feel free however to make any comments which are inappropriate or offensive.   Should I see any such comments, I will exercise my right to delete them.

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299

ofc: (502) 379-6005
cel: (502) 905-5274
e-mail: DMcCoy@ccre.biz

Economic Development Issues - the case of Amazon.com

This is an interesting article published by CoStar about Amazon.com.    While the issue of economice development funds is interesting in and of itself, Amazon like the rest of the e-tail industry is unhappy about state laws that require it to collect sales tax on on-line sales.    In this case, Amazon abandoned a $100,000,000 proposed facility that would have created 1,250 jobs in SC because the state did not pass a law to exempt Amazon from having to collect the tax.  

http://www.costar.com/News/Article/Amazoncom-Flexes-Real-Estate-Jobs-Muscle-In-Location-Decisions/128728

The practice of Economic Development is in my experience an uncertain science.    States and municipalities regularly compete for large projects that would create new jobs and provide stimulus to the economy.   The results are sometimes unpredictable.  

What are your thoughts on this issue?   Should the state be willing for forgo large tax receipts in exchange for the jobs and the investment in the community?   I think that it is an interesting question.

Have a great day, all.  

David

David W McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299