2009 Branson Commercial Real Estate Outlook

8/4/2019 2009 Branson Commercial Real Estate Outlook

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2009COMMERCIALREAL ESTATE FORECAST

WHA T A YEA R! ! ! ! ! !

P r e p a r e d B Y ; C o m m e r c i a l O n e B r o k e r s L L C5 0 0 W e s t M a i n , S u i t e 3 0 2 - A , B r a n s o n F i n a n c i a l C e n te rB r a n s o n , M O . 6 5 6 1 6w w w C o m m e r c i a l O n e B r o k e r s . c o m 4 1 7 - 3 3 4 - 3 1 4 9

I N S I D E TH I S I SSUE

1 What A Year

2 Residential Sales

Drop

3Office MarketOverbuilt

4 Retail Holds Its Own

5 Hospitality Reflect

National Market

5 Visitor Trends

6 Professional Property

Management

7 Our Thoughts And

Opinions

2 0 0 9 R ea l Es t a t e Re p o r t

Pub l i s hed By Commer c i a l One Broker s LLC.

M a r c h 2 0 0 9 Ad d i t i o n 3

On behalf of The Commercial One Brokersteam, we are happy to present the2009 Commercial Real Estate Forecast for the Branson/Hollister market.

Needless to say, 2008 was a difficult year for anyone in either the commercialor residential real estate business.

Commercial One Brokerscontinues to collect and report vacancy andabsorption rates in the various commercial market sectors in order to provideassistance to you in making lending, investment or leasing decisions. We alsoattempt to collect information on all new up-coming commercial projects inorder to project growth or contraction of the various commercial marketsectors. We now track nearly three million total square feet of office and retailspace in our data base. No other commercial real estate firm can provide youthis local insight and this degree of detail.

Branson began to feel the negative effects of the national economy mid-year2008. In addition to the weather catastrophes that plagued our area in thefirst half of the year along with the high gas prices, it is rather amazing thatour market has held up as well as it has. By and large we are not significantlyover-built in any commercial category other than Class A office. When themarket does return, Branson will show positive absorption and priceappreciation much faster than those high-flying markets that must first absorblarge amounts of un-sold and vacant inventory.

We believe that this area currently offers some great buying and leasingopportunities that have not been available for several years. As the leadingsource for commercial real estate in the Branson / Hollister markets we are

excited to work with all of you in the coming year. Commercial One Brokersisyour source for local commercial real estate knowledgethat is all we sell.

Sincerely,

St ephen N. Cr i t chf ield Robert Huels, Jr . CCIM Doug EdensBroker/ Par t ner Broker/ Par t ner Broker/ Salesperson

Hospitality

Commercial One Brokers LLC


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Page 2 2009 REALESTATE Forecast

Because much of the commercial business is affected by household growth,we also watch the areas housing market. As reflected in the chart to theleft, residential sales peaked in 2005 and have slowly dropped each year

since.

The slow down in area sales have been created by the slow down in thenational economy and the inability of those relocating to the Tri-Lakes areato sell existing homes in other parts of the country.

Based on sales information collected from The Tri-Lakes Multiple ListingService by Cooper Real Estate Consulting the number of closings in the Tri-Lakes area dropped a total of 26% from 2007 sales. In addition, Cooperprojects that the total number of listings dropped by 89 units from last yearsnumbersalthough nearly an all time record number (see chart to the left).The bottom of the chart reflects the number of listings in 2003 and the top

line are the listings for 2009. During the past five years, there have been onaverage of 1,500 to 1,900 homes listed an on the market in the MLS. As ofDecember 31, 2008 2,447 homes were listed in the system.

Our 2008 report projected that sales volumes would drop to the levelsproduced in 2003 of 1350 to 1400 units. The final closing numbers reportedat the end of 2008 totaled 1320 units. It is generally agreed, that the localmarket is approximately 6-12 months behind the national market and we willcontinue to see slowing sales even as the national sales begin to stabilize.The good news is the area is not markedly over-built and this market shouldeasily rebound when the national market does.

The average sales price as reported by the MLS is down just 3.9% whencompared to last years sales. Other more detailed analysis argues that mostof the sales price drops were in the over $350,000 and up price ranges withthe average prices of homes sold in the $250,000 and under range could haveshown no decrease in prices or even some small appreciation. Of course theforeclosure sales, although small also would affect the overall numbers.

The hottest segments of the market as reported by Cooper were generally$175,000 and under in both Stone and Taney counties. This segment of themarket continues to have the highest number of overall sales since itattracts the largest number of prospective buyers. Cooper reports that 56%of the Stone County market is under $175,000 while 71% of the Taney County

market is under $175,000. Overall, 77% of the entire Tri-lakes marketappears to be in the under $225,000 price range.

Sales and listing activity seem to confirm the fact that the lower to mid-priced homes are still in balance to perhaps in short supply and thehomescertainly over the $500,000 price range are over-supplied and willtake some time to get supply back into balance.

Again, the Midwest and the Tri-Lakes area has not seen the severe marketdrops than many of the high-flying parts of the country have.

Re sid e nti a l Sa le s Drop 26% In 2008

Source:

Cooper Real Est at e Consult ing,Tr i-Lakes MLS and Commercial OneBroker s LLC.

Year End Home Sales

0

500

1000

1500

2000

2500

1995

1997

1999

2001

2003

2005

2007

Active MLS Listings

1349

1479

1353

1877

2536

2447

0 500 1000 1500 2000 2500 3000

2003

2004

2005

2006

2007

2008

YEAR annual sales

2004 1982

2005 2203

2006 2126

2007 1774

2008 1320

Commerci al One Broker s LLC


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Page 3 2008 REALESTATE REPORT

will also be available and added to

OFFICE M A RKET CONTINUES TO BE OVER- BUILT

Vacancy rates have reached 36% as the local office market suddenly softened in the last quarter of2008. After improving to less than 20% during mid year last year, the national financial issues have hit

the local real estate, mortgage brokers, construction and title companies who have either moved tosmaller less expensive offices or have gone out of business.

In addition to the sudden increase in vacancies, a new 36,000 sq. ft. speculative Class A building hasbeen put on the market and is nearing completion.

Several 9000 to 10000 sq ft. buildings are alsobeing built in Branson Hills. Two of the buildingsare pre-leased however; some additional space

the market.

Average Leasing Rates$12.69 per sq ft per yr. NNNRental Rates Range From $8.00 to $16.00per sq ft. per year NNN36% Vacancy RateSource: Commercia l One Broker s LLC. Dat a Base.Includes all mult i-t enant pr opert ies of 5000 sq ft . l ocated in t he

city limits.

MANCHESTER 5 OFFICE BUILDINGHWY 248

Commercial One Brokersrecently completed a lease with The Veterans Administration for over 25,000sq. ft. in the Executive Center at Gretna and Hwy 248. It is expected that the VA will be able tooccupy this space by late April. The VA clinic will employ approximately 80 professionals and areexpected to see over 8000 patients a year at this new facility.

Effective rental rates have remained at an average of $12.69 per sq ft. market wide, but concessionsare now being offered either through a rate ramp up, increased tenant improvement allowances orfree rent for a period of time in return for a 3 to 5-year lease term. Market wide rental rates rangefrom approximately $8 a sq. ft. to just over $16.00 per sq ft NNN depending upon location and qualityof facility. Due to downsizing, demand for smaller suites (1000 sq ft or less) have increased noticeably.

BRANSON FINANCIAL CENTER

Future VA ClinicHCW Office Park at Branson Hills



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RETA IL SECTOR HO LDS ITS OWN

A market-wide negative absorption rate that totaled over 43,000 sq ft has increased the retailvacancy rates from 8.59% in mid 2008 to 12.57% by December 31, 2008.

The Branson area retail market has remained remarkably stable. The retail sector was stronger inthe first half of 2008 then softened the second half. Some store closings have occurred, however,much less then the national or even the state markets have experienced. Until recently, Bransonhas not been high on the list for expansion of most national retailers until the opening of BransonLanding and the Branson Hills development.

Most of the drastic downsizing and outright closings have been these national retailerssome ofwho were located at The Landing. Regional and local retailers have always come and gone, andthe frequency of closings does not seem to have increased dramatically as yet. Additional squarefootage has been added to the market and was the major contributing factor for reduction of theoverall occupancy rates last year.

We at Commercial One Brokershave been busy with new tenants looking at the availability as wellas, yes, some upgrading in local as well as increased space for several retailers in the area. Whilenationally the retail sector has seen numerous closings of larger retailers, Branson had severalcoming on-line in late 08 and early 09. New smaller regional stores are looking to our market forexpansion and the much smaller Mom & Pop start ups are still springing up throughout the area.Within the last few weeks however, we have been advised by several of the regional retailers thatthey are putting their expansion projects on hold until more is settled with the national economy.

Over all, our companys leasing activity has shown major increases for the first quarter of 2009over last years activities for the same period. Upon analysisthe leasing activity has been either atthe high end of the rate scale and or at the lowest end of the scale. The mid-range ($14 to $15 per

sq ft. NNN) has seen the softest demand.

In our communications with local banks and regional financial institutions, we are not currentlyseeing a large amount of default issues in this sector, but do concur that the possibility is verystrong for some failures to occur. Credit is going to be hard to come by and retailers will be underthe gun, pinched by contracting consumer spending.

Communication and negotiations will be the key to evading future vacancies. It is important thatlandlords or landlord management representative know when tenants are in trouble and stay aheadof the curve when a vacancy is inevitable. Re-leasing the space will take time and the sooner theproblem is identified the better. Several of the late 2008 vacancies have been filled due toadvanced knowledge of the tenants financial situation.

The Commercial One Brokersteam are first and foremost salespeople and inherently optimistic.The numbers we are tracking do show a decrease in occupancy and a definite slow down in leasingactivity during the last half of 2008. As with previous forecasts, we believe the properties that arewell located and that are well maintained will retain stronger occupancies and will be more stable,while those built in lesser locations and are poorly designed and managed, will suffer moretransience and lower rental rates.



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HOSPITALITY MARKET

REFLECTS NATIONAL MARKET CONDITIONS

OPERATING PERFORMANCEAfter several years of strong growth, the local hospitality market began to reflect the national marketconditions. Again, this area performed at levels equal to our typical competitors and much better thanthe other hot national markets.

The results also reflect the areas drop in total visitation (- 3.7% ) and the fact that more visitors camefrom closer-in (100 -300 miles) and stayed a shorter amount of time (4.25 nights). We suspect that thesenumbers also were affected by a slow down in timeshare sales and mini-vacs during the last half of theyear. The slow down in the timeshare industry will greatly affect the local occupancy and roomrevenues in 2009.

YEAR OCCUPANCY ROOMRATE

ROOMSUPPLY

ROOMDEMAND

ROOMREVENUE

2007 47.3% $70.17 5,520,883 2,610.043 183,133,919

2008

% CHG

43.1

-8.8%

$73.19

+4.3%

5,583,126

+1.1%

2,407,658

-7.8%

176,210,090

-3.8%

SOURCE: Smit h Travel Research: EOY Perf ormance Compar isonVisi t or Numbers: Branson Lakes Area Chamber and CVB

RESALE MARKETPresently sixteen area motel properties are offered for sale. Three properties were reported sold in 2008for a total of 212 rooms. This reflects a major slow down in hospitality salesagain a fact that isoccurring nationwide. All three of the sold properties were flagged properties and sold for an average of$26,924. per room. It appears that selling cap rates ranged between 11 and 12%.

Tighter financing requirements will severely limit the number of motels sold in 2009. Not only willbuyers be required to make a much bigger equity investment (40% to 50%) and they must also show asuccessful operating track record.

VISITOR NUMBERS

VISITOR TRENDS

Total Visitation down approximately -3.7% More First Time Visitors and slightly fewer repeat visitors On-line bookings continue to increase Increase in number of visitors renting Condominiums during

their stay Of those who flew to Branson only 56.4% flew through the

Springfield/Branson airport Average amount spent per visitor increased to $881.11 from

$826.83

Source: Branson Lakes Area Chamber of Commerce and CVB

7,214

7,330

7,984

8,398

8,089

6,600

6,800

7,000

7,200

7,400

7,600

7,800

8,000

8,200

8,400

8,600

2004 2005 2006 2007 2008

(000s)



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PROFESSIONAL PROPERTY MANAGEMENT

BECOMES MORE IMPORTANT

Last annual report Commercial One Brokers announced we were creating a new property managementcompany by partnering with Maples Properties in Springfield. The new company, Maples Properties ofBranson, LLC, is proud to announce that we are now involved in the management of approximately420,000 square feet of retail and office space in the Branson and Hollister area.

Our services range from total operations to maintenance only to short term REO rehab and staging. Wehave enlisted a strong team of professionals and are capable of handling all aspects of a property fromconception to occupancy stabilization thru leasing or disposition. Our team will oversee planning andconstruction, budgeting and accounting, maintenance and repairs as well as infill oversight. We havelegal representation available for collections and evictions if necessary and sub-let legal reviews formitigations. This in conjunction with our leasing and sales efforts, allow a property owner to be asinvolved or uninvolved in the operations as they desire.

We believe that Tenants have more appreciation for the properties as they see professional teams ofworkers actively on site working on issues immediately. Landlords experience savings of time and moneydue to our extensive contacts and multi property contracts with service suppliers and vendors.

With the possible increase in foreclosures, we have added a new list of available services to our propertymanagement program. Lenders can have our team take foreclosed properties from possession dayconditions to fully market ready condition and maintained at that level until sale. We offer the servicesof a full REO department to out of town and local lenders.

PARTIAL CLIENT LIST - Leasing and Total Management

Branson Vista Plaza, LP., Houston TX.Vista Plaza Hwy 76

GCP Grand Village, LLC. Green Courte Partners. Lake Forest, IllinoisThe Grand Village Hwy 76

Branson Executive Center L.P. Houston TX.VA Medical Clinic Gretna Rd and Hwy 248

Branson Gretna Plaza, L.P. Houston TX.Gretna Plaza Hwy 248 at Gretna Rd.

JW Franklin Co. Warrensburg, MO.The Falls Shopping Center Hwy 165

Mercury , LLC. Las Vegas, NVDixie Station Hwy 76

First aircraft to land at the

new Branson Airport.

Opening May 11, 2009



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OUR THOUGHTS AND OPINIONSMany of our clients ask us about what we think is going to happen with this market. Of course wedont have any better idea than anyone else, but that doesnt stop us from sharing our opinions.So here are just a few of our random thoughts and opinions as we believe it will affect the areas

commercial real estate marketfor what it is worth.

1. Markets are moving from Greed to Fear.Locally most sellers havent really re-priced theirproperty and or they simply are going to set on the side lines and wait for the prices torise, if they dont have to sell. Cap rates have probably risen by 75 to 125 basis points fortop properties and more than 200 basis points on lesser quality properties.

a. There is a lot of 'hold' and 'wait and see' going on now because absent realtransaction volume, many owners have the attitude that until trades start clearingthe market, they don't know what the real values are. Appraisers are having a verydifficult time valuing properties.

2. Property owners will be walking a tight rope in 2009 with lenders pulling one end andtenants on the other looking for better deals.

a. Building Owners will be getting financing pressure to make sure their buildings areoccupied. The dilemma will beif I lower my rents and give a concession, then Idont get the revenue Ive had. The lender then will say our deal isnt worth asmuch and will either try to call my loan or ask for more equity to be pumped intothe deal.

3. Inflation is coming.it has to with this much money being pumped into the economy. Themoney supply is increasing at never before seen rates. Some of us rememberto muchmoney chasing too few products. Then high interest rates follow. We are going to see thisagain.

4. Through a combination of the tough financial markets and the limited-growth attitudefostered by some area politicians, those who own properties are going to find that theywill be worth a whole lot more when the market does return to something called normal.

5. As is usually the case, those with cash are going to be able to take advantage and receivebig returns in the future and those who arent afraid to lock in good long-term lease termswill surely benefit.

6. A lot of money is setting on the sidelines waiting on a better deal, some confidence orboth.

Five Stages Of The Market After A Slow Down

a. Owners think property is worth more than we are telling them.b. OkIm not selling unless you get me more than it is worth.c. I have to sellwhat do we have to do in order to sell?d. I dont think we will see another good market againe. This is the bottom and the best time to buy.

If you have int erest in t alking furt her about t he areas commercial r eal est at e

market we would li ke to t alk wi t h you.

417-334-3149 500 West Main Street Suite 302 Branson, MO. 65616

www.CommercialOneBrokers.comCommercial One Brokers LLC

2009 Branson Commercial Real Estate Outlook

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