Every business has key statistical market data it monitors and digests in order to effectively serve its clients and be competitive in the marketplace. In the commercial real estate world, monitoring market values through transactions of both sales and leasing, as well as knowing key statistics such as vacancy and absorption rates are critical. Our company reviews this data on a regular basis using various data sources such as Conn-Comp, CoStar Realty Information, MLS, and CERC. It is also the data we use when determining value ranges when we are asked for a “Brokers Opinion of Value (BOV)”. Although there are three (3) methods of establishing a property’s value (Income Approach, Replacement Value, Direct Sales Comparison), the primary method most brokers use for non-income producing property is the Direct Sales Comparison. That is the focus of this review. We thought we would share some of those key indicators with you………
For purposes of this month’s discussion, we have focused on sales of industrial and office properties in the New Haven County, CT market area………….
Industrial Building Sales/Values: Since January 1, 2010, there have been 30 recorded sales of industrial/flex buildings ranging from 4,130 – 176,975 SF with an average size of 29,832 SF and a median of 15,640 SF. Sale prices ranged $18.95 – $89.93/SF with a combined average sale price of $43.92/SF and a median of $33.82/SF. It is typical to see significant price ranges when reviewing industrial building sales. More than any other building type; building age, ceiling heights, power loads, amount of office space, environmental conditions, etc. have a significant impact on value. However, newer (built within the last 20 years) “fully air-conditioned” buildings tend to have more consistent value with ranges in the $55.00 – $80.00/SF, while older functionally obsolete or buildings with some level of deterioration sell for lower values…..A sampling of some 2010 sales are; three (3) building portfolio sale of 15 – 45 Northeast Industrial Road, Branford (153,125 SF) by an investment group for $3.5M or $22.86/SF; Fastenal Corporation’s purchase of 61 North Barnes Road, Wallingford (176,975 SF) for $6.0M or $33.90/SF; and 312 Woodmont Road, Milford (12,036 SF) by Tri-State Rentals, LLC for $1.0M or $83.08/SF.
Office Building Sales/Values: At the end of the 3rd quarter 2010, data indicates that there have been 29 office sales in the New Haven County market with a building size between 1,494 – 99,850 SF with an average size of 15,880 SF and a median of 5,292 SF. The sale price range was between $74.23 – $383.92/SF with an average of $153.42/SF and a median of $142.65/SF. However, after reviewing the data more closely, there were four excessively high sales which we felt were not representative of the general market and therefore needed to be eliminated from our calculations. As a result, the average adjusted sale price was $123.37/SF with a median of $104.04/SF. We feel these number are more representative of the true value of office buildings in the marketplace……….Some 2010 sales include; 59 Elm Street, New Haven (99,850 SF) for $9.722M or $97.37/SF; 215 Cherry Street, Milford (6 building portfolio, 77,896 SF) for $13.M or $166.89/SF; 1764 Litchfield Turnpike, Woodbridge (52,906 SF) for $5.07M or $95.83/SF.
Finally, above we mentioned that this is data that an experienced broker would use to establish a value of a property which they are preparing or proposing to go to market with. However, in order to more accurately determine the true value range of any given property, we need to segregate the data and extract those sales which more closely resemble the features and possible deficiencies of the property. We stress the term “range” because no property has an absolute value, it is a high and low value which a broker wants to establish. The final value is determined after the negotiations between a Buyer and a Seller has been settled.
Happy hunting!
FredP
