March 09, 2018
Springfield/Newington, VA – Transwestern’s Mid-Atlantic Capital Markets Group today announces it has been retained by MRP Realty and institutional investors advised by J.P. Morgan Asset Management as the exclusive agent to sell a portfolio of 19 urban industrial buildings totaling nearly 1.1 million square feet in Northern Virginia. Given the strong demographics and high barriers to entry associated with this portfolio’s last mile location, it is expected to be aggressively pursued by both institutional buyers as well as operators.
The portfolio comprises 15 buildings totaling 813,955 square feet in Northern Virginia Industrial Park at Lockport Place and Telegraph Road in Newington, Virginia, and four buildings totaling 241,994 square feet in Fullerton Industrial Park at 7401, 7664, 7666, 7668 Fullerton Road in Springfield, Virginia, which historically has had a 4 percent vacancy rate. The buildings are in a coveted last mile zone, just south of the interchange of Interstates 95 and 495, also known as the Capital Beltway. According to Transwestern research, industrial land prices at last mile sites saw a 93 percent jump since 2013, compared to 10 percent for sites outside the last mile zone.
“Last-mile industrial and light industrial product have outperformed the bulk industrial market for the past four years,” said Gerry Trainor, Executive Managing Director of Transwestern’s Mid-Atlantic Capital Markets Group. “The performance gap between these industrial product types will continue to widen as a result of the high barriers to entry associated with the last mile locations and the explosion of online retail. Not only are we seeing a dwindling supply of industrial product in the last mile zones due to residential conversions, but the demand continues to increase because of the population growth and change in shopping patterns associated with e-commerce.”
Coupled with limited new construction, much of the existing last mile product has been demolished and converted to a more profitable use, according to Transwestern. In the Washington/Baltimore region, roughly 20.1 million square feet of flex/industrial product was demolished from 2005 to 2017, with another 4.6 million square feet slated for removal through 2020. Nearly 70 percent of this demolished product was located within last mile sites. Only 10 percent of the demolished space is being replaced with new flex/industrial buildings, compared to 63 percent with multifamily. Specifically in the Interstate 395/95 submarket where the portfolio is located, rents are anticipated to continue to increase as virtually no new construction has occurred in the past 10 years, and 2.4 million square feet of industrial product has been or is planned to be razed for alternative uses.
Since purchasing the portfolio in 2015, current ownership has repositioned the properties, which average 34 years old, through capital improvements and the enhancement of the tenant base credit. With vacancy rates falling, the ownership has had significant leasing success, completing more than 485,000 square feet of leasing in the past two years, which includes the replacement of over 140,000 square feet of tenants with weak credit. With a current occupancy rate of 79 percent, this core-plus portfolio provides a new buyer with the ability to increase net operating income by over 56 percent by taking occupancy to a stabilized 95 percent and rolling below-market in-place leases to market.
The parks, located within 3 miles of each other, cater to the surrounding residential communities that rely heavily on home improvement suppliers and e-commerce. The submarket, with an average income of $115,000 per year, has seen a population increase of 18 percent in the past seven years and is projected to do the same in the next seven years.
Transwestern’s Mid-Atlantic Capital Markets Group focuses on investment services throughout the Washington, D.C., region, providing clients with exceptional service and market knowledge. During the past 24 months, the group’s transactions have exceeded $1.8 billion in aggregate value. The team’s success is a direct result of detailed underwriting and keen understanding of the local, national and international investment communities. For more information on the team and subject listing, call Gerry Trainor at 202-775-7091.
Transwestern is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service – the Transwestern Experience. Specializing in Agency Leasing, Tenant Advisory, Capital Markets, Asset Services and Research, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Based in Houston, Transwestern has 35 U.S. offices and assists clients through more than 180 offices in 37 countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com and @Transwestern. For updates from the Mid-Atlantic region, follow @TranswesternDC.
About MRP Realty
Founded in 2005, MRP Realty is a real estate operating company focused on opportunistic and value-add investment in the northeastern United States, with offices in Washington, D.C., Maryland, Virginia, Pennsylvania, and New York City. MRP provides to its institutional capital partners a full array of real estate services including: acquisition/disposition, development/construction management, property management, asset management and financial reporting services. Since the company’s inception, MRP has deployed $4.1 billion in total capitalization, an average of over $300 million per year. MRP’s combined development assets total more than 20 million square feet, with an additional 9+ million square feet under management. For more information, please visit www.mrprealty.com.
About J.P. Morgan Global Alternatives
J.P. Morgan Global Alternatives is the alternative investment arm of J.P. Morgan Asset Management. With more than $130 billion in assets under management and over 800 professionals (as of December 31, 2017), we offer strategies across the alternative investment spectrum including real estate, private equity and credit, infrastructure, transportation, liquid alternatives, and hedge funds. Operating from 23 offices throughout the Americas, Europe and Asia Pacific, our independent alternative investment engines combine specialist knowledge and singular focus with the global reach, vast resources and powerful infrastructure of J.P. Morgan to help meet each client’s specific objectives. For more information: www.jpmorganassetmanagement.com.