How Do I Calculate the Value of My Commercial Real Estate Property?
Whether you are looking to buy or sell a commercial real estate property, it’s important to be very clear on its value. Value is defined as the most feasible price the property could reasonably earn in an active, open, and competitive market when the transaction is approached fairly and knowledgeably by both buyer and seller. There are three different approaches that are typically used to appraise a commercial property and choosing the right method for your particular investment is essential to ensuring that it is priced correctly. Let’s look at these three approaches separately.
The Income Approach
Also referred to as the Income Capitalization Approach, this tactic is the one most commonly used in commercial real estate transactions. The value is established here by estimating the property’s income using the capitalization rate (commonly referred to as merely the cap rate). The cap rate is the net operating income of the property divided by its current market value (or sales price).
An example might look something like this: Take a property with a gross potential income of $500,000, subtract a 10% vacancy factor of $50,000 and you will be left with an effective gross income of $450,000. Deducting from this the operating expenses of the property (we’ll say $150,000) will help you to arrive at a Net Operating Income (or NOI) of $300,000. Divide this by the cap rate (8%), and you will come to your fair market value price of $3,750,000.
The Replacement Cost Approach
Frequently shortened to The Cost Approach, this is a much more complicated route of valuing commercial real estate properties. It first considers the value of the land on which a building exists (value without the inclusion of the building). It then factors in what costs would be incurred to build an exact reproduction of the current existing building and adds that number onto the land value. Lastly, the depreciated value is considered, and the actual property value number adjusted accordingly.
The Market Value Approach
Sometimes called the Sales Comparison Approach or the Comparable Approach, the Market Value Approach is quite arguably the simplest method to determine the value of a commercial real estate property. This type of method compares the property in question to other properties of similar use and size, which have been sold or placed on the market in the surrounding area. A range of value is established from the findings of the market research, and from there, the number is adjusted based on the physical characteristics of the property being valued.
Factors that will likely be considered are discrepancies in the dates of the sale, age and condition of the property, square footage of the actual building and size of surrounding land, location, land to building ratio, local tax policies, and other physical characteristics based on the importance they hold in the current market and the effect they have on the particular property being valued. Basically, this number is determined by what a purchaser is likely willing to pay in an open, fair, and competitive market at any given time. A buyer may put a less or greater personal value on a property based on how it serves their needs, but this is an easy way to determine a baseline to begin negotiations between two parties.
Which Approach is Right for Me?
Now that you have a much clearer picture of each of these fundamental valuation tools, you may be wondering which method is right for your commercial real estate property. The short answer is that each of these modalities is valuable depending on your situation. For example, it’s going to be harder to determine cap rates and comparable selling prices for a property that is located further away from similar properties; in which case, The Replacement Cost Approach may make the most sense. If you have access to the data needed to determine the cap rate, The Income Approach will be sufficient. If you have a property where vacancy rates fluctuate (such as a multifamily building), this may not work out so well; in which case, you might consider The Market Value Approach of using comparables.
Looking for Commercial Real Estate in the Gulf South region?
If you’re ready to sell your commercial real estate property or looking to invest, it’s imperative that you are clear on a property’s actual worth. Working with a professional can help you avoid mistakes and pitfalls. At Stirling Properties, our experienced team of commercial advisors is here to make your venture a success. With offices throughout Louisiana, Mississippi, Alabama and the Florida Panhandle, we have specialists in all aspects of commercial real estate including retail, office, industrial, healthcare and multifamily sectors. You can’t go wrong having us on your side. Please take a look at our extensive database of commercial properties and contact one of our expert team members today!
Club 4 Fitness continues to flex its muscle across the Gulf South
Club 4 Fitness continues a rapid expansion effort across the Gulf South region with the addition of four new locations in Alabama and Louisiana. Justin Toomey, Broker Associate with Stirling Properties, and Kenneth Herring, Broker with Kerioth Corporation, worked with the all-inclusive fitness facility to identify and secure the latest retail locations.
Club 4 Fitness will occupy 47,061 square feet of retail space in McGregor Square located at 3930 Airport Blvd in Mobile, Alabama, and plans to open in the second quarter of 2019. Buff Teague and Leigh Dale Younce with JLL represented the landlord at McGregor Square.
The Club is also leasing 26,500 square feet of space in Wildwood Center located at 265 Lakeshore Parkway and 30,187 square feet at Brook Highland Plaza in Birmingham, Alabama, as well as 33,387 square feet at Country Club Plaza in Slidell, Louisiana. These three locations are expected to open in the fourth quarter of 2019 or early 2020.
The company currently has 14 fitness facilities operating or coming soon throughout Louisiana, Mississippi and Alabama, with more on the way. Plans are in place for an aggressive expansion effort across the southeastern region over the next few years.
“Stirling Properties is proud to work with Club 4 Fitness to bring its quality fitness concept to our local markets in the Gulf South,” said Toomey. “As consumers continue to prioritize health, the fitness industry is growing faster than it has ever before—a trend creating significant opportunity for the commercial real estate sector and property owners trying to backfill empty retail space.”
Fitness and health clubs have morphed into a more than $30-billion-a-year industry in the U.S., with growth by at least 3-4% annually for the last ten years. According to research, there are currently more than 36,000 health and fitness facilities across the country boasting more than 60 million members.
Spending in health clubs is growing
(Compiled data from ICSC)
“We anticipate these numbers to grow even more—possibly double over the next 10-15 years—further signifying a very successful future for Club 4 Fitness and other fitness facilities,” said Toomey.
For leasing information, contact Justin Toomey at jbtoomey@stirlingprop.com or (251) 342-7229.
Stirling Properties Welcomes Walk-On’s Bistreaux & Bar to Fremaux Town Center in Slidell
Walk-On’s Bistreaux & Bar at River Chase in Covington
Stirling Properties and CBL Properties are pleased to announce that Walk-On’s Bistreaux & Bar is coming to Fremaux Town Center mixed-use development in Slidell, Louisiana. This marks the 2nd Northshore location for the award-winning, family-friendly restaurant and bar.
DBMC Restaurants, dba Walk-On’s Bistreaux & Bar, recently closed on the purchase of 1.5 acres of property located at the corner of Fremaux Avenue and Town Center Parkway, near the entrance to the retail center. Construction on the site began last month. The restaurant will occupy approximately 8,000 square feet of space and is expected to open in June of 2019. DBMC Restaurants is a veteran restaurant group that currently operates three restaurant brands across six states. It is one of the largest franchisees of Walk-On’s with growth plans to add four more restaurant locations this year.
“Although we have a broad reach across the South, we strive to keep a small company culture—and being based out of Baton Rouge, we are very excited to open this Walk-On’s in our backyard,” said Jason Gisclair, President of DBMC Restaurants. “Walk-On’s Bistreaux & Bar is a great brand with Louisiana roots and a Louisiana inspired menu, making it a perfect fit for the Slidell area. We look forward to becoming part of Fremaux Town Center and the local community.”
Stirling Properties’ Senior Sales & Leasing Executive, Ryan Pecot, represented the property owners in the sale. Tommy Vervaeke of Carlton & Associates Real Estate worked with Walk-On’s to secure the location.
The popular sports-themed restaurant started by two LSU students in Baton Rouge has thrived over the years and expanded into multiple locations with another 100 locations in the works across 15 states. Currently, there are 17 Walk-On’s franchises operating in Louisiana. This marks the 2nd location for the Northshore area, with the first opening at Stirling Properties’ River Chase development in Covington.
“Stirling Properties is excited to welcome Walk-On’s Bistreaux & Bar to Fremaux Town Center and the Slidell community,” said Townsend Underhill, President of Development with Stirling Properties. “We have worked with this operator in the past, and we know what a great group of community-oriented people they are. Walk On’s will be a great addition to our Fremaux Town Center development and will further enhance the dynamic restaurant and retail assortment for our area.”
Fremaux Town Center, anchored by Dillard’s, Dick’s Sporting Goods, Kohl’s, and Best Buy, is part of the roughly 350-acre regional mixed-use development located at the southwest corner of Interstate 10 and Fremaux Avenue in Slidell, Louisiana. The retail center includes more than 640,000 square feet of shopping and restaurant options, and is jointly owned and operated by CBL and Stirling Properties. The adjoining Fremaux Park includes Retreat at Fremaux Town Center luxury residential apartment units, Springhill Suites by Marriott (soon under construction), Saltgrass Steak House (coming soon), and the recently announced Dana Inc. Service & Assembly Center. Additional phases are coming soon with added residential, retail, industrial and office park.
For leasing information, contact Ryan Pécot at 337.572.0246 / rpecot@stirlingprop.com or Michael Oswald at 423.490.8272 / mike.oswald@cblproperties.com.
Stirling Properties Celebrates Groundbreaking of Dana Incorporated Service and Assembly Center in Slidell, Louisiana
Marks 1st of industrial expansion efforts in Fremaux mixed-use development.
Pictured L to R: Michael Unrein, Dave Hunt, Craig Nichols, Ed Greif, Mayor Greg Cromer, Parish President Pat Brister, Don Shea, Councilman Val Vanney, Councilman Kenny Tamborella, Councilwoman Leslie Denham, Debe Levis, Townsend Underhill
Stirling Properties and St. Tammany Parish community leaders celebrate the groundbreaking of the new Dana Incorporated (NYSE: DAN) Service and Assembly Center at Fremaux Park in Slidell, Louisiana. A formal turning-of-the-dirt ceremony was held with Honorable Pat Brister, St. Tammany Parish President; Honorable Greg Cromer, Mayor of Slidell; Ed Greif, General Manager of Off-highway for the Americas with Dana Incorporated; Don Shea, CEO of East St. Tammany Chamber of Commerce; and Townsend Underhill, President of Development with Stirling Properties. Fremaux Park is the mixed-use property surrounding the Fremaux Town Center retail development.
Stirling Properties is developing the nearly 32,000-square-foot industrial facility located at the corner of Town Center Parkway and Old Spanish Trail for Dana. The new site will house the relocation and expansion of its service and assembly center, which specializes in repairing and refurbishing large-scale industrial gearboxes. The company’s current operations in Slidell will transition to the larger facility to meet the growing demand for industrial gearbox service, repair, and refurbishment.
Construction on the site began in November and is expected to be completed in the summer of 2019. Bradley Cook, Sales & Leasing Executive with Stirling Properties, worked with the company to identify and secure the location.
Bradley Cook, Debe Levis, Marc Bourgeois, Billie Semmes, Townsend Underhill, Cher Levis Hunt, Dick Cyr, Patrick Malik
Dana is a world leader in highly engineered solutions for improving the efficiency, performance, and sustainability of powered vehicles and machinery. Dana supports the passenger vehicle, commercial truck, and off-highway markets, as well as industrial and stationary equipment applications. Founded in 1904, Dana employs more than 30,000 people in 33 countries on six continents.
“Dana in Slidell has a highly experienced team of service and repair professionals who are committed to meeting the needs of our customers,” said Dave Hunt, director of service and manufacturing operations for Dana Off-highway Drive and Motion Technologies. “This new facility will grow our service and repair business, while expanding our capabilities to manufacture gears on-site, reducing lead times for our customers.”
“A project of this scope—with projected growth to double in size and employment—this is a tremendous opportunity for Slidell and the entire parish,” said Greg Cromer, Mayor of Slidell. “Fremaux Park is a great development with retail, residential, and business all combined. It’s what we want to do—live, work, and play in one place. This is exactly how we want to grow our community, and this is how we are going to do it. We thank Dana for helping to lift up our community and becoming a good corporate partner, and we look forward to a long relationship with them.”
“I want to thank Dana Incorporated for choosing Slidell — and St. Tammany Parish, to locate this facility. We know you have a choice and we appreciate you choosing us. We look forward to the economic invigoration and diversity this facility will spur,” said Pat Brister, St. Tammany Parish President. “We appreciate the upcoming employment opportunities for our educated and ready workforce. We look forward to a good working relationship with Dana.”
“Stirling Properties is thrilled to welcome Dana to Fremaux Park and celebrate the groundbreaking of this site,” said Townsend Underhill, President of Development with Stirling Properties. “This is a huge economic win for Slidell and the surrounding greater New Orleans region. Dana is a world-wide company with a global footprint. This new facility will be a unique operation nationally—and the building was designed with ample flex space to allow for future expansion. We look forward to working with Dana and having them as an anchor tenant in the Fremaux Park development.”
Fremaux Park is part of the roughly 350-acre regional mixed-use development located at the southwest corner of Interstate 10 and Fremaux Avenue in Slidell, Louisiana. It includes Retreat at Fremaux Town Center’s 296 luxury residential apartment units, Saltgrass Steak House (coming soon), and Springhill Suites by Marriott soon under construction. Additional phases are coming soon with added residential, retail, industrial, and office park. The adjoining Fremaux Town Center, anchored by Dillard’s, Dick’s Sporting Goods, Kohl’s, and Best Buy, includes more than 640,000 square feet of retail and restaurant options.
For leasing or sales information, contact Ryan Pécot at 337.572.0246 / rpecot@stirlingprop.com or Bradley Cook at 985.246.3720 / bcook@stirlingprop.com.
Excitement Grows As The Fort Moves To Completion
Congratulations to Angie McArthur & Jeff Barnes, leasing agents with Stirling Properties, on the launch of the new container park in Spanish Fort Town Center!
Stirling Properties is so excited, we can’t CONTAIN it! The Fort, a new container park coming to Spanish Fort Town Center, is 100% leased and on-track to open in December. An official opening date and grand opening festivities will be announced soon.
Upon completion, The Fort will consist of approximately eight shipping containers that will be repurposed and transformed into functioning restaurants and shops, and will share a common open-air environment where patrons can sit and dine.
All tenants in the container park have been secured, including Beakers Coffee/Sno Biz, Blues Burger, Deuce Coop, Dickey’s Barbeque Pit, Dragonfly Taco Bar, Happy Pizza, Soul Bowlz, and Tap Station. There will also be a retailer on-site stocked with “The Fort” official merchandise.
Last month, The Spanish Fort City Council approved the new development as an entertainment district, allowing patrons over the age of 21 to openly carry alcoholic beverages outdoors. This is a significant designation for The Fort, making it easier for visitors to move freely through the shared space of restaurants and shops.
Property owners, Dallas-based Cypress Equities, broke ground on the container park in September and the containers arrived on site in October. The Fort was initially expected to open in November of 2018, but construction delays due to inclement weather have pushed the opening back to December.
Angie McArthur, Broker Associate, and Jeff Barnes, Senior Investment Advisor/Broker Associate with Stirling Properties, serve as the leasing team for Cypress Equities and have been working with the overall Spanish Fort Town Center project since 2015.
“The addition of such an innovative concept has already created a new wave of energy and anticipation for Spanish Fort Town Center,” said McArthur. “And all of the excitement around The Fort has translated to new leases within the retail center. It’s thrilling to see the momentum of this project moving into the new year—and as a result, we look forward to welcoming new tenants to the space very soon!”
Spanish Fort Town Center, anchored by Bass Pro Shops, Kohl’s, and JCPenney, is a 230-acre premier master-planned development located at the intersection of Interstate 10 and U.S. Highway 98 in Baldwin County. The center includes 450,000 square feet of retail and restaurant space, an apartment community, hotels, banks, and entertainment options.
Over the last year, Stirling Properties has helped to successfully secure more than 44,000 square feet of new leases for the retail center, adding Urban Air Trampoline and Adventure Park, Beauty World (currently under construction next to Kohl’s), Direct Furniture, Oishi Japanese Bar & Grill, and Tots2Teens Fun Salon to the diverse tenant lineup. McArthur and Barnes are also currently in negotiations with various retailers that will add another 30,000 square feet of shopping and dining options to the center.
In conjunction with the new container park, Spanish Fort Town Center is also launching “The Village,” a unique boutique retail concept that will consist of small and specialty shops such as food options, fitness providers, clothing, gifts, candles, accessories, and salon services. Spanish Fort Village will deliver a pedestrian- and family-friendly, urban environment unlike anything else in the market area. Leasing for space is currently underway. These units are located across from Urban Air Trampoline and Adventure Park and The Fort.
For Spanish Fort Town Center leasing & sales information, contact Jeff Barnes, CCIM, at (251) 375-2496 / jbarnes@stirlingprop.com or Angie McArthur at (251) 375-2481 / amcarthur@stirlingprop.com.
5.11 by Karl Malone coming to Metairie, Louisiana
“The Mailman” delivering purpose-built apparel and gear to local market.
5.11 by Karl Malone in Ruston, Louisiana
Stirling Properties commercial real estate company announced that 5.11 by Karl Malone retail store is coming to Lafreniere Plaza Shopping Center in Metairie, Louisiana. This is the second Louisiana retail location for the company.
5.11 by Karl Malone will offer men’s and women’s apparel and clothing, footwear, bags and packs, accessories, and professional gear by 5.11 Tactical, the world’s leading innovator of purpose-built gear. The global brand features superior tactical apparel and gear for law enforcement, first responders, tactical operators and recreational enthusiasts from head to toe.
NBA Hall-of-Famer Karl “The Mailman” Malone will operate the Metairie location. The store will encompass 5,070 square feet of retail space at 6601 Veterans Memorial Boulevard and plans to open by January of 2019. Malone also operates the only other Louisiana franchise in Ruston that opened late last year.
“We are excited to bring 5.11 purpose-built gear to the Metairie market and surrounding New Orleans area,” said Malone. “The 5.11 brand is built on the foundation of durability, quality and value. Our store will be well stocked with the perfect performance clothing and accessories for any professional or recreational mission.”
The FBI training academy adopted the original 5.11® pant as its training pant in 1992, forging a decades-long relationship that drives 5.11®’s commitment to public safety and the first responder community. The company began developing a more extensive law enforcement line in 2003 working with public safety professionals to create gear that meets the needs of real people in the field. In 2012, 5.11 expanded its women’s collection to include premium uniforms, covert clothing, fitness apparel and more. Today, 5.11® is expanding into the outdoor and fitness markets with products like the Vaporlite short and the ABR trainer.
Carly Plotkin, Sales and Leasing Executive with Stirling Properties, is the listing agent for Lafreniere Plaza Shopping Center. Karla Smith of CBRE represented 5.11 by Karl Malone in the lease transaction. The retailer will join co-tenants HomeGoods, T.J.Maxx, Sandro’s Trattoria, State Farm, Subway, Pickleberry Kids, and several others in the center.
For leasing information, contact Carly Plotkin at cplotkin@stirlingprop.com or (504) 620-8120.
