User Sales Are Back En Vogue
By Aaron Jodka | June 2017
So far in 2017, user sales are far more common than in the previous few years. Coming out of the downturn, user sales—where a buyer plans to occupy the space themselves—drove 22% of all office and industrial property sales volume outside of Boston. But as the market came back to life and volume increased, user sales decreased (as seen in the chart below).
In 2014, user sales made up just 7% of volume. However, this trend began to reverse in 2015 and has been on an upturn since. This year through mid-June, 20% of sales volume has been driven by end users. Colliers has recently worked with schools as well as religious organizations (among others) on finding new homes in the suburbs.
Why is this taking place? Several reasons. The decision on leasing versus buying is not straightforward, varying based on the user. But businesses or organizations with vision into their long-term space needs can frequently find value in buying property. For schools, charities, and religious groups, owning has tax implications and benefits that leasing does not. In addition, interest rates are low today, making buying attractive, in order to lock in long-term debt (for non-cash buyers).
A wider range of buyers than tax-exempt entities also participate in user sales. DN Van Lines recently purchased 42,000 SF at 2 Beeman Road in Northborough to accommodate its expanding business. On the opposite side of that coin are some users selling their properties, such as Murata Power Solutions, which sold its headquarters in Mansfield to Hilco Real Estate, which will reposition it for future tenants.
The Greater Boston market has seen phenomenal liquidity of late, and many assets have sold in this real estate cycle, some multiple times. The buyers and sellers are diverse, but the trend of user-driven sales is something to watch for in 2017.