Commercial Real Estate Mid Year Recap

Mid Year Recap

Busy times continue into the first half of 2015 for commercial real estate in Northern Michigan.  Inventory is down, sales are up and leasing activity is strong!  Prices have increased by some measures, but slipped by others and it is probably to early to tell if our local sales will reflect the same increases in value that have been occurring nationally.

When comparing the first half of 2015 to the same time period in 2014, commercial property sales in Grand Traverse County have grown from 22 sales last year to 36 for the start of this year.  This increase is echoed by the larger northern Michigan region as well, where total sales for all Northern Great Lakes Realtors MLS (NGLR) have grown from 63 to 86 sales.  Those are remarkable 63% and 37% gains in the number of transactions for the first half of the year.

For investment properties nationally, Cap rates have hit all-time record lows (retail average asking price was a 6.4% Cap rate) pushing prices higher.  As prices have risen for investment properties nationally, more sellers have put their property on the market, trying to capitalize on the record low Cap rates.  This has led to a 20% increase of available net leased properties on the market this quarter compared to previous quarters.  The opposite is holding true in the local market where inventory is down.  As more sales occur in our region, there become less properties available for purchase bringing the total number of properties for sale down.  For the first half of 2014 we had 143 new listings in Grand Traverse County.  The first half of this year we have only had 98 new listings, making the 36 sold an even more impressive 37% of the new inventory (up from 15% the prior year).  Leasing activity has followed this same pattern with 49 new leases this year (43% of the new listings), compared to only 32 new leases last year (24% of last year’s new listings).

It’s always difficult to judge prices by a small number of sales as the average can change significantly with a very large or small sale.  The last few years we have had some large sales at the end of the year that have brought the average price way up from where it was in the first half of the year.  With that disclaimer, the average sale price for the GT County for the first half of the year was $267,600 compared to $200,800 last year.  While this represents a 33% increase in prices, it should be noted that the average sale price for all of last year was $376,100 which would indicate a decrease of 29%.  Prices for the entire NGLR area have slipped from $294,000 to $202,800, indicating that a decrease might be more accurate.  However, looking at the way total sales prices have increased in the second half of the year the past 3 years, it is probably too early to pass judgement on the direction of prices in our local market.  Nationally prices are on the rise and we shall see if that holds true for our area as the second half of the year unfolds.

Dan Stiebel, CCIM

 

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Dan Stiebel

Dan Stiebel

Associate Broker
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