Square Feet Roundtable Shares Thoughts on Real Estate Industry in OKC
Mitchell, Jessica, THE JOURNAL RECORD
A panel of industry representatives offered insight on everything from investment opportunities to advantages of leasing versus owning and growth prospects at the recent Square Feet Roundtable discussion sponsored by The Journal Record.
Mark Beffort, partner of Grubb & Ellis|Levy Beffort, moderated the group, which included Gerald Gamble, president and owner of the Gerald L. Gamble Co.; Gary Gregory, senior advisor with Sperry Van Ness; Judy Hatfield, president and CEO of Equity Realty and Dal Shannon, vice president of Coldwell Banker Commercial's Oklahoma City Office Division.
Beffort: A lot of times what we do is the basics. I'd like to talk more about philosophy, theory and just different thoughts maybe on what people don't know or understand what we do in our business.
Beffort: What are the advantages of leasing versus owning an industrial facility?
Gamble: There's a lease-purchase analysis one can do either by longhand or on the computer model from just the financial standpoint. There are companies that want to own their own facilities. There are other companies that absolutely do not want to own their own facilities.
It has to do with cost of funds and return on investment. A real estate deal might return 8 (percent) to 10 percent on investment. Your business might return 18 (percent) to 22 percent on investment. So a company would rather have their capital in their business, making a higher return than in real estate.
Beffort: We've seen a few significant retail transactions recently. Where's the money coming from?
Hatfield: We're seeing it coming from all over the place. I'll give you two or three examples. We just had one yesterday, California money called in looking for retail. 'We'll pay $125 a square foot.' It made no financial sense from our perspective because the returns didn't justify the per-square-foot costs. But they had money they were pulling out of a transaction after a business sale in California they wanted to reinvest. They felt our upside in the long run was better than their upside so they were willing to do that.
Then that particular group that owned the shopping center said, 'We want to roll into one twice as big.' So they're going out of a 4 million into a 10 million.
Supply and demand is a huge issue. We have a lot of money and not enough available properties.
Also, I still think there is some concern about having all of your eggs in one basket from the standpoint of baby boomers going into the 55- to 70-year-olds. I think real estate, long-term is the best investment.
We're also seeing some new concepts with some of the younger Gen- X folks and some that are in their 30s now. They're putting together investment groups. We're seeing investment groups now - all I've got is $30 (thousand), all I've got is $20 (thousand), all I've got is $10 (thousand). We're starting to put together some groups that are actually allowing those types of investors to go together to purchase the smaller centers.
Beffort: What are the three primary reasons a tenant will move from one location to another?
Shannon: I think the things that come into play the most are the old saying location, location and location. I think rents are probably in the top two or three, but not the most critical one. I think really probably, location still is No. 1. Some combination of image and security would be next and probably three would be budget or cost factors.
If I get somebody to sit down and talk to me long enough, I have 20 questions I like to ask them and through those 20 questions if I boil them down I believe the top three or four would be the areas where people are most interested. Very seldom do I have people call and say, I don't care where it is, just get me the cheapest you can find-
Beffort: Is location an important criteria in looking for an industrial facility? …