Market Snapshot: Woods Hole, MA

Nestled in the extreme southwest portion of Barnstable County, MA within the Town of Falmouth, the village of Woods Hole is argueably the most diverse, enduring and unique of all the many business districts located on Cape Cod. Just ask anyone with a connection to Woods Hole and they will proudly tell you that’s just the way it is and how they have liked it for decades.

In such a small, densely improved and hard to access village the level of local, regional and international economic activity transpiring behind the scenes here is literally astonishing. 

In Woods Hole, the dominant economic driver for over a century has been the two world renowned educational and research centers, Marine Biological Laboratory (MBL; established in 1888) and Woods Hole Oceanographic Institution (WHOI, established in 1930). Over the years complimentary organizations such a The Sea Education Association and the highly recognized Woods Hole Research Center have been major enhancements to the Woods Hole community.

Business sectors such as tourism, year round and seasonal residency, eating and drinking establishments, creative arts, fishing, marine trades, and retail trade all meld together and add to the flavor and economic vitality of this small business cluster. The highly active Steamship Authority Terminal, WHOI Exhibit Center, U.S. Coast Guard base, and the popular National Marine Fisheries aquarium all add to the seasonal bustle. It is important to note too that all of this activity is happening in the presence of ongoing freight, auto and passenger ferry traffic and a small drawbridge separating the Woods Hole business district at its center! It’s no wonder these factors make bicycles and walking the preferred modes of transportation in Woods Hole.

Among residents, business owners and those working here, community pride and a clear sense of place  is prevalent. In any given day, it is not uncommon to stroll the streets of Woods Hole and hear visiting scientists, researchers, and interns conversing in a range of foreign languages. Organizations such as the The Woods Hole Community Association (organized in 1919) and Woods Hole Business Association go a long way in strengthening and nurturing the fabric of the community.

Over the years, transition in the business community and commercial real estate sector has been low in Woods Hole. Since many commercial properties are owner-occupied, the rental market is extremely tight. Recently, however, certain developments worth noting have surfaced.

In October 2009,  Martha’s Vineyard Saving Bank made it known it intends to establish a branch at the former Bank of America branch bank at 2 Water Street. The branch was one of four Cape Cod locations the large national bank announced in June 2009 that it would close in following months.

This summer, The Penikese Island School acquired the office building at 565 Woods Hole Road for $850,000. Founded in 1973, The Penikese Island School is a small therapeutic boarding school for teenage boys on Penikese Island located 12 miles southwest of Woods Hole, MA. The two story 2,600 square foot c. 1806 building overlooks Little Harbor and has on-site parking. The school previously occupied the building as a tenant for many years and will continue to house their administrative offices at this location. The acquisition was financed by Eastern Bank with a loan guarantee from MassDevelopment.

In November 2008, the Cape Cod Commission approved as a Limited DRI, Wise Living at Woods Hole, 43-unit independent senior living facility at the Nautilus Motor Inn located at 533 Woods Hole Road. The project proposes the demolition of the existing 54-unit Nautilus Motor Inn and removal of the existing pool and tennis courts. The design of the proposed two- and three-story buildings will be in a “shingle” style with gambrel roofs and extensive porches and balconies. As part of the redevelopment project, the geodesic dome in the southeastern portion of the 5.41 acre site will be rehabilitated. The dome structure building was designed by R. Buckminster Fuller and built in 1953-1954. For many years the dome structure comprised a 170-seat restaurant (Dome Restaurant), a use which ceased in about 2002.

Sales Figures Reflect Softening Cape Cod Commercial Real Estate Sector

A total of 145 qualified commercial real estate sales transpired on Cape Cod from January – September 2008. The latest figures amount to a 23.3% decline from the level achieved in the same nine month period in 2007. The 2008 drop is also about 42% below the 12-year average of 250 sales and the lowest period to period total since 1997.

Quarterly figures reveal the deceleration in the number of sales was evenly spread out among each quarter. The quarterly data also shows in both in 2007 and 2008, first quarter activity once again fell below Quarter II sales volume. This is significant in that, except for 2006, at no time since 1997 has the number of sales in Quarter II been lower than the prior Quarter I total.

Excluding the Outer Cape sub region (Provincetown, Truro and Wellefleet) which achieved a small gain, the remaining three Cape Cod sub regions posted moderate decreases in the number of commercial property transactions. The greatest fall off, however, was in the Upper Cape sub region which experienced a sharp 49% decrease in year over year transaction volume, nearly double the countywide percentage decline.

The Mid Cape sub region once again posted the highest number of transactions (63) for the nine month period. According to the data, the Mid Cape sub region has held the top ranking in each consecutive three quarter period since 1997, until being closely edged out by the Upper Cape sub region in 2007 with 72 qualified sales.

Joseph P. Egan is a MA Certified General Real Estate Appraiser with over 25 years of professional valuation experience. Through a specialization in commercial real estate and closely-held businesses, since 1991 he has completed over 600 appraisal, brokerage and consulting assignments concerning all types of commercial real estate assets and going concerns located on Cape Cod, Nantucket, and Plymouth County, MA. Clients served generally include attorneys, banks, corporations, developers, investors, and owners of closely-held and family businesses. Prior to relocating to Cape Cod, Joe worked in the New York Metro Area and throughout CT with leading regional and national appraisal firms such as Cushman & Wakefield. Please contact Joe here.

Note: Qualified sales generally include arms length commercial real estate sales and exclude transactions such as those involving governmental agencies, conveyances among related or affiliated parties, partition or other court ordered sales, and at least for the time being foreclosure sales in most cases (although they are separated tracked). Excluded property types generally include small multi-family dwellings, agricultural properties, multi-unit residential developments, nursing homes, and lodging properties with fewer than four guest units.

Will Breaker Trip on Hyannis Circuit City Store?

HYANNIS, MA – The Wall Street Journal reported today Circuit City Stores, Inc. is considering a plan which will shutter at least 150 stores and result in the loss of thousands of jobs. Reportedly, the nation’s No. 2 electronic retailer has engaged various legal and industry experts as the firm explores alternatives to filing for bankruptcy protection. (WSJ)

NAR: Commercial Real Estate Pinched by Wall Street Woes

WASHINGTON. DC - According to the latest Commercial Real Estate Outlook released by the National Association of Realtors (R), activity is slowing in leading commercial real estate sectors all in response to tightening credit and slow economic growth.

Lawrence Yun, NAR chief economist, acknowledges problems on Wall Street are affecting commercial real estate. “Although capital remains available for residential loans, the credit crunch is pronounced in commercial lending,” he said. “Combined with a slowing economy, the lack of credit is curtailing activity in the commercial real estate sectors. As a result, there’s been a slowdown in the net absorption of space, which is leading to higher vacancies and more modest rent growth.”

Patricia Nooney, chair of the Realtors(R) Commercial Alliance Committee, chracterized market conditions as complex. “We’re in an unusual situation where transactions are being curtailed not for lack of demand, but for serious challenges in obtaining financing,” she said.

Locally, the Cape Cod MA commercial real estate market has also experienced a clear drop off in sales transactions, a subject to be covered in my up coming Quarter III 2008 Market Report. Commercial leasing activity on the other hand appears to be the bright spot in the Cape Cod market. 

The NAR forecast analyzes quarterly data in the office, industrial, retail and multifamily markets. The COMMERCIAL REAL ESTATE OUTLOOK is published by the NAR Research Division for the Realtors(R) Commercial Alliance. The RCA includes affiliate organizations such as the CCIM Institute, Institute of Real Estate Management, Realtors(R) Land Institute, Society of Industrial and Office Realtors(R), and Counselors of Real Estate.

Barnstable, MA MSA Ranks 101 in Best Performing Small Cities Index

LOS ANGELES, CA – The Barnstable MA, MSA achieved a rank of 101 among 124 Small-Cities according to the Milken Institute / Greenstreet Real Estate Partners 2008 Best-Performing Cities Index released this month.

The index ranks U.S. metros based on their ability to create and sustain jobs. It includes measurements of both long-term (five years) and short-term (one year) employment and salary growth. Four measurements of technology output growth are also included because of the crucial role technology often has in regional economic growth.

The 2008 list of small cities contains 124 cities, compared to 174 last year following funding cuts permitting The Bureau of Labor and Statistics to collect data on fewer small metro areas. The decrease in the number of cities ranked resulted in a significant gains in year-over-year ranking for some metros. In 2007, the Barnstable, MA MSA for example ranked 137.

The technology sector advanced several newcomers to the top 10 in the annual ranking of where America’s jobs are being created and sustained, and metros that are highly dependent on export-intensive industries also showed success.

“This year’s rankings demonstrate that entrepreneurs continue to be the economic engine of choice for job growth, even in the face of national and global economic challenges,” said Ross DeVol, author of the report and director of Regional Economics at the Milken Institute. “We’ve seen energy, housing and even catastrophic events such as Hurricane Katrina impact a specific year, but consistently, those metros dedicated to growing their technology base and human capital beat the short-term shifts in the economy.”

Strong national economic downturns in housing and construction brought down last year’s top-ranked cities, with Florida and California metros being some of the hardest hit.

Several past leading cities fell due to the national decline in housing and construction markets, and metros that remain concentrated in manufacturing continue lag in the rankings. Rising energy prices have hindered the performance of cities where industries with high energy use are the key drivers, while benefiting those regions with significant oil and gas production and exploration activities.

The Milken Institute is a nonprofit, independent economic think tank whose mission is to improve the lives and economic conditions of diverse populations around the world by helping business and public policy leaders identify and implement innovative ideas for creating broad-based prosperity. It is based in Santa Monica, CA. (www.milkeninstitute.org)

Cape Cod Commercial Real Estate Transactions Fall to Lowest Level for the Month of May since 1999

The softening demand for commercial real estate on Cape Cod, MA continued in May 2008 as the number of completed transactions fell to its lowest level for the month of May since 1999.

In May 2008 a total of 23 commercial property transactions were recorded at the Barnstable County Registry of Deeds. The recent recordings reflect a modest yet continued decline from the 27 transactions recorded in April 2008. In the past ten years, the highest level in the month of May was achieved in 2004 with 48 transactions. The number of Cape Cod, MA commercial real estate transfers posted in the month of May has steadily declined in each subsequent year.

A total of 76 transactions involving commercial real estate assets located throughout Barnstable County, MA were recorded through May 2008. Year-to-date, commercial property transactions through May 2008 are down 22.45% compared to the same five month period in 2007.

Commercial property dollar volume in May 2008 was just over $19.8 million. This figure included $9.121 million from the sale-leaseback of six Rockland Trust Co. branch banks located on Cape Cod, MA. (See related story.) In May 2007, the total commercial property dollar transaction volume was substantially higher at $118,945,750. This figure, however, includes $106.0 million from three Cape Cod, MA properties sold as part of a $500 million portfolio sale completed by the Flatley Company of Braintree, MA.  Among the ten New England investment properties conveyed, local assets included Southwind Plaza and the Borders Bookstore building in Hyannis, MA and The Falmouth Mall in Falmouth, MA. The joint venture acquisition was completed by the Wilder Cos. of Boston and O’Connor Capital Partners in New York.

In May 2008, transaction activity was favorable in the restaurant and small mixed-use classes. Activity for commercial condominiums of all types, a bell weather sector on Cape Cod, continued to reflect a steady drop off in demand.    

Note: Recorded sales include “arms-length transactions” and generally exclude conveyances among related parties, convenience sales, acquisitions by governmental agencies, and certain foreclosure related transactions.

Cape Cod Commercial Real Estate: Transactions Down, Gross Sales Volume Up

 The maturing Cape Cod commercial real estate marketplace reflected staying power in the first four months of 2008 despite some ups and downs.

Number of Transaction Continues Declining Trend

The number of commercial real estate transactions recorded on Cape Cod, MA through April 2008 was 25.4% lower compared with January-April 2007. This recent downshift follows a 39.3% drop in the first four months of 2007 and was the second largest decrease since 2000. Although notable, the lower YTD 2008 decline suggests the softened demand is moderating. Between 1999 and 2008, the median January – April change in the number of individual transactions was -10.6%.

While most sectors reflected comparable year-to-year demand levels, the recent decline was clearly at the expense of softening in the commercial condominium and vacant land sectors. Total YTD 2008 transactions were evenly distributed in each of the four months with a favorable burst in month end closings experienced in April.

Gross Sales Up Boosted by Investor Acquisitions

Despite the slide in property closings, total YTD 2008 commercial property sale prices reached $85.2 million which was nearly $28.0 million higher than the level achieved in the same period in 2007. The January-April 2008 total commercial property sales volume represented about 9.5% of the total stated value (greater than $50,000) reported by the Barnstable County Registry of Deeds for all property sales in the same period. 

Boosting the total dollar volume was the higher number of investment property acquisitions which included two net leased CVS pharmacies, two shopping centers and a reported sale of Bass River Marina in West Dennis, MA. Collectively, these five sales gave the market a $42.8 million injection. A solid and proportionately higher percentage of $1.0 million plus commercial transactions completed by able funded buyers kept the YTD 2008 dollar volume at a favorable level as well.  

The Take Away

Transaction levels may well continue to erode but less precipitously. Investors and well capitalized cash flow buyers will continue to pattern the national trend toward a flight to quality. Limitations on the available supply of assets of this caliber, including attractive sale-leaseback deals will be an issue for buyers. Owners of quality assets, however, will likely be in a good position to respond to this demand trend.