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INDUSTRIAL-FLEX INVESTMENT SALES OVERVIEW

MARKET HIGHLIGHTS

HOUSTON
Cap rates and per square foot sale prices for institutional quality distribution buildings are setting market records. Cap rate expectations for a new Class A institutional distribution building, with a strong credit, long term tenant, are getting to be sub 4.5%. And the per square foot sale prices associated with those deals are pushing north of $85/sq. ft. Additionally, more and more developers are circling the market trying to find land sites to build new industrial parks. This includes developers who already have existing properties in the market as well as more and more developers from out of town looking to get into the market. A lot of this is driven by the large amount of equity being raised nationally that investors are looking to place in industrial real estate.

AUSTIN
The cumulative monthly value of industrial sales as of September 30, 2021 in the Austin area at $971.4 million, an increase of more than 200% compared to this time last year at $305.8 million. The primary capital composition for buyers so far in 2021 was made up of 59.4% private investors and 35.0% institutional investors. For sellers, the largest percentage of investors was 51.7% private, and 31.9% institutional. A recent notable transaction involved the sale of Harris Ridge Business Center, a 387,838-sq.-ft. industrial park in far northeast Austin. Harris Ridge consists of five buildings that were constructed in phases between 2008 and 2021. The park was fully leased at the time of sale to a list of 11 tenants. TA Realty purchased the property from HPI Real Estate Services for an undisclosed price.

SAN ANTONIO
The third quarter sales volume for San Antonio industrial properties was $42.5 million, compared to third quarter 2020 at $141.8 million. The primary capital composition for buyers in Q3 2021 was made up of 47.4% private investors, 21.5% cross-border investors (a transaction is defined as cross-border if the buyer or major capital partner is not headquartered in the same country where the property is located), and 16.4% user/other. For sellers, the majority was 70.7% private and 15.1% institutional investors. In a recent transaction, Comet Signs has sold its corporate headquarters facility located at 5003 Stout Drive in the South submarket of San Antonio, but it will continue to occupy the property. Exeter 5003 Stout LP acquired the 166,000-sq.-ft. warehouse from the custom sign maker. As part of the transaction, Comet Signs entered into a long-term lease with the buyer to remain in the facility. Financial terms of the sale were not disclosed.


MULTIFAMILY INVESTMENT SALES OVERVIEW

MARKET HIGHLIGHTS

HOUSTON
Investors have responded to improving market conditions as sales activity has surged over the past few quarters. The cumulative quarterly sales volume is $1.7 billion as of Q3 2021, a 70% increase from this time last year. A mix of private and institutional buyers continue to drive transaction volume. Out-of-state buyers drove investment last year, and this, too, has carried into 2021, accounting for more than 70% of buyer volume so far this year. Houston cap rates have continued to compress since the start of the pandemic and, at 5.6%, are only slightly above the national benchmark of 5.3%.

AUSTIN
More than $3.1 billion in sales volume was realized in 2019 while 2020 came in less at around $1.4 billion in sales volume. So far in 2021, the sales volume is almost at $1.8 billion. Private and institutional buyers drive transaction volume, accounting for more than 85% of trades during the past 12 months. Cap rates have continued to compress since the start of the pandemic and, at 4.6%, are below the national benchmark of 5.3%. During the past five years, quarterly cap rates have remained between 4.6% and 5.2%.

SAN ANTONIO
Investment has come rushing into San Antonio, both in the form of development, followed by acquisitions of new, well-leased properties. The market saw new peaks set for sales volume year after year, and based on recent movements, 2021 could surpass past levels. It may point to the fact that liquidity shouldn’t be as much of a concern in San Antonio as it has in years past. Pricing is up as well across the quality spectrum as the search for yield continues in today’s multifamily environment.


OFFICE INVESTMENT SALES OVERVIEW

MARKET HIGHLIGHTS

HOUSTON
The cumulative monthly value of office sales as of September 30, 2021 in the Houston metro at $2.6 billion, an increase of 25% compared to this time last year at $$2.1 billion. The primary capital composition for buyers so far in 2021 has been made up of 71.9% private investors and 17.4% institutional. For sellers, the majority was 57.5% private investors and 28.3% institutional. Among the largest deals that did occur, investors took advantage of the weak economic climate caused by the pandemic to acquire high vacancy, value-add properties at an attractive basis with the potential for better risk-adjusted returns.

AUSTIN
The largest office transaction in Austin’s recent history took place this year, as Kilroy Realty announced it had closed a deal on Indeed Tower for $580 million. The 36-story building located at the intersection of W. Sixth and Colorado streets is approximately 730,000 sq. ft. and currently 63.2% leased. The Austin office market’s primary capital composition for buyers so far in 2021 was made up of 29.5% institutional investors, 29.3% REIT/listed, and 18.1% private. For sellers, the majority was 63.8% institutional investors, and 20.0% private investors.

SAN ANTONIO
Among the notable Q3 2021 office sales in San Antonio were Boyd Watterson Asset Management acquiring Lincoln Center for an undisclosed amount. The 8-story building located at 7800 W. IH-10 in the Northwest submarket is 157,933 sq. ft. and was 83% occupied at the time of the sale. The seller was Primera Partners. Real Capital Analytics data reports the cumulative monthly sales volume for the first nine months of 2021 for San Antonio office properties was up $266.2 million compared to the same time period in 2020 at $247.7 million. The San Antonio office market’s primary capital composition for buyers so far in 2021 was made up of 78.3% private investors, 12.6% institutional, and 9.1% user/other. For sellers, the majority was 80.1% private investors, and 14.2% institutional investors.


RETAIL INVESTMENT SALES OVERVIEW

MARKET HIGHLIGHTS

HOUSTON
The cumulative monthly sales value in the greater Houston area is at $1.5 billion as of September 30, 2021, up significantly compared to this time last year at $547.7 million. The primary capital composition for buyers so far in 2021 was made up of 50.5% private and 39.7% REIT/listed investors. For sellers, the majority was 44.5% private and 41.6% REIT/listed investors. Among recent noteworthy transactions include a joint venture between J. Beard Real Estate Co. and Outlier Capital LLC purchasing Tomball Town Center, a 141,450-sq.-ft. Kroger-anchored shopping center located in the Tomball submarket of Houston. Tomball Town Center was 98% leased at the time of sale by InvenTrust Properties.

AUSTIN
The cumulative monthly sales volume in the greater Austin area is at $565.7 million as of September 30, 2021, up 80% compared to this time last year at $312.8 million. The primary capital composition for buyers so far in 2021 was made up of 72.3% private and 15.6% institutional investors. For sellers, the majority was 51.3% private and 28.2% institutional investors. Among recent noteworthy transactions include Springdale Shopping Center at 7112 Ed Bluestein Blvd. in Austin sold to Edens Inc. by Forge Capital Partners LLC. The fully leased 163,145-sq.-ft. retail center is anchored by an H-E-B grocery store near the intersection of U.S. Highways 183 and 290. The sale price was not disclosed.

SAN ANTONIO
The cumulative monthly sales volume in the greater San Antonio area is at $515.9 million as of September 30, 2021, up almost 60% compared to this time last year at $329.1 million. The primary capital composition for buyers so far in 2021 was made up of 52.9% REIT/listed and 44.1% private investors. For sellers, the majority was 61.7% institutional and 19.2% REIT/listed investors. Among recent noteworthy transactions include NewQuest Properties acquiring HQ Shopping Center, a 116,404-sq.-ft. retail property at 6001 NW Loop 410 in the Northwest submarket. The property was fully leased to tenants such as Best Buy, Ross Dress for Less, Bed Bath & Beyond, and Petco at the time


SELF-STORAGE INVESTMENT SALES OVERVIEW

MARKET HIGHLIGHTS

RATE REVIEW
Self-storage has enjoyed major gains in 2021, nationally and across Texas. The pandemic prompted residential migration that led to greater use of self-storage units across the country. Average rates for climate-controlled, 10 feet by 10 feet self-storage units were up year-over-year in September by 15% in Houston, Austin saw a 16% increase, while San Antonio rates were up 10%, compared to the national average at 11%, according to Yardi Matrix. Following the extraordinary development wave in 2018, the self-storage market in Texas has become significantly oversupplied. Metros such as Houston, Austin and San Antonio were all obliged to limit their new development pipeline to help balance supply and demand. However, due to the high demand driven by pandemic specific influences, almost all major Texas markets registered double-digit rent growth.

INVESTMENT GAINS
Experts are reporting rising occupancy and rates have yielded significant investment gains this year. Street rates are 30% higher than 2018 levels and occupancy levels are pushing 90%, reported self-storage experts. The FTSE Nareit All Equity REITs Index indicated that as of the start of September, self-storage REITs showed year-to-date returns of 55.7% — a higher rate of return than any other type of REIT included in the index. Likewise, the Dow Jones U.S. Select Short-Term REIT Index showed that one week into September, year-over-year returns were 58%. That index includes REITs in property sectors that typically have short-term lease durations, such as self-storage.

DEVELOPMENT
Gains in the self-storage sector haven’t led to a huge spike in development in Texas yet. Yardi Matrix reported that as of September, Houston had 2.1% of its existing self-storage inventory either planned or under construction, at the bottom of the list of top 30 markets tracked. San Antonio had 3.9%, Austin had 5.7% and Dallas-Fort Worth had 7.4%, advancing slightly better. Self-storage development in Texas has been slow in the last couple of years as lenders have been wary because of Covid-19, the existing oversupply and rising construction costs.

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