Branson Commercial Real Estate Report

8/13/2019 Branson Commercial Real Estate Report

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Commercial Market Repo

1 Market Remains

Stuck2 Ofce Market

2 Retail Market

3-4 Residential Market

4 Hospitality Market

5 Industrial Market

5 Land Sales

2014 Real Estate Report

Published byCommercial One Brokers

LLC.

Inside This Issue

February 2014 Edition 8

The Market Remains Stuck...

500 W. Main, Suiute 302-A, Branson Financial Center Branson, MO 65616

CommercialOneBrokers.com 417-334-3149

Just as the national economy goes, so goesthe local commercial real estate market. Littleto no growth occurred in any o the marketsegments with the office market rolling back-wards when compared to last years peror-mance. No new inventory was added to anyo the commercial market other than the con-struction o the CVS Pharmacy and the ad-ditional retail built or users at Branson Hills.Te balance o the construction increase was

primarily due to rebuilding o several prop-erties destroyed by the tornado such as theAuto Museum located on Hwy. 76. Overall,we would label the market as flat.

Afer several years o flat to slightly downvisitation, visitor counts and tax collectionsimproved 2013. Te majority o the Bran-son visitors are middle to upper middle in-come amilies who average approximately$80,000 year as the amily income. Tis de-mographic was particularly hard hit by therecession, job loss and general economicunsettledness during the last five years. Be-cause Branson is an affordable destination,Branson was able hold at least its own whencompared to some o the other high flyingdestinations such as Las Vegas.Jerry Jeschke o Jeschke Appraisal has pro-vided a residential summary o the marketas it affects both the retail and office mar-kets. Like the overall commercial market,the residential market remained flat when

compared to the previous year, even thoughthe $300,000 and up categories finallyshowed some improvement.

Again, Commercial One Brokers complet-ed another successul year, along with oursister company Maples Properties o Bran-son LLC. Our management company hasenjoyed steady growth and now managesmost o the major commercial properties

in Branson having just added the Shoppesat Branson Meadows to our portolio. Wecontinue to add and update our commer-cial databases or all multi-tenant proper-ties o five thousand square eet and above.

Now in our eighth year, we are lookingorward to continuing to serve our exist-ing and new clients in 2014. As always, wewould be happy to hear your comments, orquestions regarding this report or issues ingeneral.

Sincerely,

Stephen N. Critcheld, CCIMBroker/Partner

Robert Huels, Jr. CCIMBroker/Partner


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417-334-3149

Office MarketSoftens from prior year

After a positive increase in occupancies in2012, the ofce market momentum was lostin 2013. The market occupancy rate lostthree percent (77% to 74%) and added justover ten thousand square feet of additional

vacant space equaling a negative net occu-

pancy rate for the year. National occupancyrates are also stuck in neutral and arereported at 83%. After several years of mar-ket demand for smaller ofce suites of onethousand feet or less, this market segmentshrunk. Several tenants did not renew leas-es and/or vacated their space for their homeor less expensive class C retail space.The majority of the available ofce space isstill found primarily in one building. TheManchester 5 building still remains mostly

vacant with just two tenants. The availablespace consists of primarily three thousandsquare foot suites that are currently in a

warm white box condition.

Overall market rental rates have remained

at, but after several soft years the 2013rates appear to have bottomed out and con-tinue to range from $6.00PSF to $10.00PSFNNN. Common Area costs continue toincrease due to commercial insurance costs,utilities and maintenance cost increases.Landlords and management companies aresensitive to these cost increases as it hasa chilling effect on the landords ability toincrease base rents. The traditional ofceseems to be a passing trend. Tenants are

beginning to look for open ofce areaswhere people can collaborate. Workstationsize is smaller so people can communicatemore freely and tenants are able to makedue with less space and lower operatingoverhead.

Retail MarketVacancies continue

to enjoy low rates

The retail market continues to enjoy ninety

percent occupancy levels. Off of the highvacancies of 13.63% in 2010, the retail market is

now enjoying a 10.04% vacancy rate. Of coursethe 2012 tornado removed some inventoryand helped to improve occupancies, but the

retail category overall remains a positive. Over100,000 feet was removed via the tornado. It

was recently announced that the 47,000 sq. ft.

Branson Mall has begun repair and remodeling

and will go on the market later this year. The54,000 sq. ft. Branson Heights shopping center

remains off of the market and the site has beencleared. Nothing is anticipated to happen withthis property this year. We expect at least one

20,000 sq. ft. plus strip center may well be add-ed to the retail inventory this year in addition to

the Branson Mall space.

Overall Rental rates have remained steady. The

leading retail locations such as Branson Land-ing, The Grand Village, Branson Hills and Tan-

ger Outlet all demand the highest rents. Rentalrates rage in the $20s plus per sq. ft. NNN.Other locations on the strip will range from $12

to $17 PSF NNN. The remaining locations suchas Hwy 248 and downtown will generate rents

in the $9 to $10 PSF NNN.

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The residential markets in Stone and TaneyCounties remained virtually unchangedin 2013. Total sales volume, includingdetached and attached units was virtuallyunchanged in 2013 with a total of 1,565sales transac-tions versus1,563 in 2012.

The majorityof the salesin the markettranspired withprices below$200,000.Sales of proper-ties with pricesthat were between $0 and $200,000 madeup 79% of the sales in the market in 2013down 1% over 2012. Most of the categorieshave remained fairly similar over the past3 or 4 years, but in 2013 the distribution

changed slightly. There were about 10%fewer sales in the under $50,000 catego-ry and signicant gains in the $300,000to $350,000 and $350,000 to $400,000categories. Those two categories increasedsales volume 17.7% and 24.0% respectively.There was less than a 10% change in sales

volume in all other categories.

Short- and foreclosed sales volumes de-

clined substantially in 2013. The total num-ber of foreclosed and short sales made up

just 18.9% of the total sales volume. Thatnumber is down from 2012 when foreclo-sures and short sales were 27% of all sales

in the market. Saleswith prices between $0and $50,000 had thehighest percentage of

foreclosed/short salesat just under 36% of theannual sales volumein that category. Thenumber gradually de-clines through $350,000.Sales in the $350,000 to$400,000 range increase

to 6.5% of sales in that category and 10.0%in the over $450,000 category. There wereno foreclosed or short sales in the $400,000to $450,000 category. The sales data issummarized on the chart below.

The number of foreclosed or short salesproperties listed in 2013 continued todecline. We observed a high of 473 shortsale/foreclosed properties listed in 2010.That number has steadily declined, 451 in2011, 387 in 2012 and 226 in 2013. Banksand other lenders are becoming more savvyabout holding short and foreclosed prop-erties rather than attempting to sell them

quickly. Banks with larger portfolios arestrategizing to obtain the highest price byholding or renting some of the propertiesrather than liquidating them. Some lendersare limiting buyers to end users for the rst10 to 30 days of the exposure period in anattempt to limit the inventory available tohouse ippers.

Sales prices of residential property re-mained stable in 2013 and we are observ-ing signs that indicate potential increasesin prices in the near future. Traditional

economic theory suggests that as demandincreases and supply decreases pricesshould increase. Over the past year therehas been a slight increase in listing activity(3,472 properties in 2013 versus 3,431 in2012) but the number of properties sold in-creased only 5 sales. Nationally economiststend to evaluate the single family housingby reporting the supply in the number ofmonths. Typically, the national market is

Residential MarketMaintains its footing and performs much like 2013


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considered to be in balance when there isa 6-month supply of housing for sale. TheTri-Lakes market has an absorption rate thatis increasing and a supply that is slightlyincreasing. If the market was considered tobe in balance in 2007, it should be near-ing a balanced market since the supply ofproperty for sale is currently nearly equal to2007 (21.86 months in 2007 versus 26.62months in 2013).

Other signs that prices should be risinginclude builders constructing speculativehouses in the market. In 2013, we beganto observe more developers and buildersentering the market and constructing newsingle family dwelling units. Althoughprot margins continue to remain fairlysmall, new sales of property constructed in2012 or 2013 sold in an average of 113 days

versus the market average that was 189 daysand the sale prices are 10- to 20% higherthan those constructed in 2006 or 2007.

Although labor and material prices continueto rise, land values remain very low allow-ing builders to assemble new property witha very slim prot. There was almost no newresidential construction between 2008 and2011. The limited amount of new housingconstruction has held down demand for

vacant lots. Although the supply of vacantlots is not increasing, demand continuesto be low but is rising. It appears that the

value of vacant lots may have reached aminimum.Condominium sales in the market arebeginning to show a substantial increase.

Although there continue to be somenancing issues since it is not possible toobtain a 30 year xed mortgage on a unitin a development that offers nightly rental,buyers are accepting the secondary marketnancing with higher down payments andadjustable rate loans. The total number ofcondominium sales reported in the markethas increased each year since it reached alow in 2009. The number of sales in 2013reached a number that is just 4 sales shortof the top of the market in 2007. Thesupply of condominiums (new listings) rosebetween 2006 and 2008 reaching a peak of1,140 units listed in 2008. The number ofproperties listed each year declined to 853in 2012 andincreasedslightly in2013 to 926.

Developersand sellingagents arereportingincreasedrequests fornew unitsand we areaware of at least 2 projects that have eitherbegun new buildings or begun the processof completing existing partially completebuildings.

Most of the segments of the Tri-LakesMarket remained substantially unchangedin 2012. The supply of foreclosed andshort sale properties is declining and new

construction is exhibiting prices that aresubstantially higher than existing homes.New construction is increasing in the singlefamily and condominium segments of themarket but we have not observed substan-tial increases in selling prices in the existinginventory. We expect the medical industryin the market to continue to expand whichshould drive demand for housing. Basedon the trends we are observing and we ex-pect that the number of transactions in themarket should remain stable. The limitedamount of new construction and decreasein the supply of short sale and foreclosedproperty for sale may result in minor priceincreases. In our opinion, substantial

changes inmarket valuesare unlikely

without a

decrease insupply oran increasein demand.There are noindicatorsthat are likelyto cause

either to change and we would expect themarket to change little in 2014.

The author of this article owns and operates

J. Jeschke Appraisal. His rm has been

operating in the Tri-Lakes Market since 1982

providing data, consulting and valuation

services to a multitude of clients with ap-

praisal and consulting needs for commer-

cial, residential and vacant land properties.

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Hospitality MarketNears end of lender owned property sales

The sale of lender owned properties shouldnear the end this year. Of the seven record-ed lodging sales that occurred in 2013, ve

were lender owned. Of the seven proper-ties listed below, only two could be labeledunder duress. Sale prices typically equat-ed to approximately $6500 to a high of$15,000 per room. With anticipated PIPsor remodeling costs, the investor appearedto limit their total per door investmentto about $10,000 to $13,000. The largestnumber of rooms continues to be concen-trated in ownership of three to four opera-tors. Investor demand remains for interior

corridor properties over the older exteriordesigns. Pressure continues for ownersof older properties to update and refresh

their rooms in order to compete for a moredemanding customer. If the property doesnot have a ag, the owner must be moreaggressive and creative with their marketingefforts in order to intercept the visitor whoarrives with no prior reservations.

According to Smith Travel, both ADRs andRoom Revenues showed increases in theseven to eight percent range over last yearsperformance in addition to small increases

(less than one percent) in both occupancyand demand numbers.

Available Lodging Properties For Sale


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2 0 1 3 C O M P A N Y H I G H L I G H T S

TransactionsNumber of Transactions 68

Gross Leasing and Sales Volume $25,997,709.08Transaction Size from $7,200 to $5,300,000

Leasing Volume. 47,187 sq. ft.

Property ManagementManagement Portfolio reached 835,000 sq. ft.


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The occupancy rate for industrial property dropped from 74.22% last year to a current rateof 67.63%. The majority of the vacancies occurred due to warehouse space vacated by busi-nesses who lost buildings during the 2012 tornado. Several buildings that were destroyedhave now been rebuilt allowing those business to vacate several leased properties in thearea. Our data base includes nineteen properties totally 418,129 sq. ft. The market suffereda negative absorption of approximately 32,000 sq ft. for the year.

2013 INDUSTRIAL SALES

Lease rates range from a low of $3.25 NNN to modied gross lease rates of $4.00 to $6.86PSF. Most offer drive-in doors, few have docks and currently there are no drive-throughs.

We were only able to identify two recorded sales of industrial properties during the year.

2013 INDUSTRIAL BUILDING SALESNote To Bldg 1 Bank Owned Property in the country

Note to Bldg 2 was not offered for sale and the sellers didnt want to sell it.SOURCE: Commercial One Brokers LLC.

Industrial MarketOccupancies fall

Still little tono land sales

activities

It was our belief that 2013would see patient capitalbeginning to invest in land.Unfortunately that hasnthappened other than the largeacquisition, Johnny Morris ofBrass Pro has completed atBranson Creek. Mr. Morrispurchased both The BransonCreek Golf Course and theMurder Rock course as well assome of the surrounding land.Both projects are currentlybeing remodeled and areexpected to open this season.Few users have been active inthe market other than buy-ing existing buildings belowreplacement costs that are ableto be remodeled for their use.During the nal quarter of the

year, more land users did beginto inquire about available sites.

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Branson Commercial Real Estate Report