September 05, 2023

Adapting Casual Dining to Evolving Consumer Dining Habits

Casual dining has long been a staple of the foodservice industry, offering a relaxed yet enjoyable dining experience. However, as consumer dining habits evolve, so must the casual dining landscape. This article explores the dynamic changes and adaptations within casual dining restaurants, highlighting how brands are successfully catering to the shifting preferences of modern diners.

Consumer Dining Habits: The Driving Force of Change

The world of casual dining is undergoing a significant transformation, driven by shifting consumer behavior and evolving societal trends. In an era of rapid technological advancement, changing preferences and heightened awareness of health and sustainability, restaurants are being forced to adapt in order to remain relevant and appeal to a new generation of diners.

Adapting Casual Dining: Healthier Menus and Sustainable Practices

Casual Dining - Evolving Consumer Dining Habits

Health-consciousness and environmental awareness are driving changes in consumer behavior. Casual dining restaurants are responding by incorporating healthier ingredients and cooking methods into their menus. Locally-sourced, organic, and sustainably-produced ingredients are gaining prominence, as consumers seek out options that align with their values.

Moreover, restaurants are making efforts to reduce food waste by implementing sustainable practices such as composting, using biodegradable packaging, and minimizing portion sizes. These initiatives not only resonate with environmentally-conscious consumers but also contribute to cost savings for the restaurant

Industry Leaders Setting the Bar: Noteworthy Initiatives in Casual Dining

For example, Chipotle Mexican Grill is known for its commitment to using locally sourced ingredients. The company has been praised for its sustainable practices and its focus on healthy eating.

Another example is The Cheesecake Factory, which is known for its wide variety of menu items. The company has over 200 items on its menu, including appetizers, salads, pasta dishes, seafood, steak, and desserts. This allows diners to find something to their liking, regardless of their dietary restrictions or preferences.

Casual Dining Restaurants: Embracing Innovative Concepts

To meet evolving demands, casual dining restaurants are embracing innovative concepts. From pop-up collaborations with local chefs to immersive dining experiences, these establishments are finding creative ways to engage their patrons beyond the standard dine-in model.

For instance, some restaurants are offering virtual cooking classes or hosting live music events. Others are creating interactive dining experiences, such as allowing diners to build their own pizzas or salads. These innovative concepts help to create a more memorable and engaging dining experience for customers.

Food Service Industry Trends: Technology Integration

Technology is playing a pivotal role in reshaping the casual dining landscape. From online ordering platforms to digital menus and contactless payment options, brands are leveraging technology to enhance the dining experience and provide a seamless process for customers.

Foodservice Industry Trends: Technology Integration

Many casual dining restaurants now offer online ordering and delivery services. This allows customers to order food from the comfort of their own homes, without having to wait in line or worry about parking. Additionally, many restaurants are using digital menus to provide customers with more information about the food they are ordering. This can help customers make informed decisions about what to eat.

Real Estate in Casual Dining

The success of casual dining also intertwines with the commercial real estate landscape. Net Lease (NNN) properties have emerged as a preferred choice for many casual dining brands. These leases, involving the tenant’s responsibility for property expenses, align with the financial stability sought by real estate investors and free up capital for brands to invest in areas other than real estate.

The evolution of casual dining is a testament to the industry’s resilience and adaptability. From menu diversification to technological integration and strategic real estate choices, the transformation is driven by the desire to cater to changing consumer dining habits. As casual dining brands navigate these changes, they pave the way for a new era that promises delightful experiences for diners and viable investments for the commercial real estate sector.

August 22, 2023

Is the Micro Coffee Trend Here to Stay or is it a Fad?

In recent years, the coffee industry has witnessed the rise of micro coffee shops, also known as micro-roasted coffee, catering to a niche market seeking artisanal and unique coffee experiences. With popular brands like Dutch Bros. Coffee, Caribou Coffee Cabins, Scooter Coffee, and 7 Brew leading the charge, it is evident that the trend has captured the attention of coffee enthusiasts.

However, the question remains: is the micro coffee trend here to stay, or is it just another passing fad? In this article, we will delve into the world of micro coffee shops and their impact on the specialty coffee market.

Micro Coffee Shops: The New Kid on the Block

Micro coffee shops are defined by their unwavering focus on quality, craftsmanship, and delivering a personalized coffee experience. These establishments stand out by sourcing their coffee beans from specific regions, often emphasizing fair trade and sustainable practices. What truly sets them apart is the art of micro-roasting. By roasting in small batches, micro coffee shops can meticulously attend to every detail, resulting in a flavor profile that distinctly differs from mass-produced coffee.

The benefits of the physical size of micro coffee shops also play a significant role. As highlighted in articles like Change Is Brewing: The Future of the Physical Coffee Shop, smaller, more intimate spaces allow for personalized interactions between baristas and customers, enhancing the overall coffee experience. This emphasis on a cozy and intimate environment fosters a sense of community, setting micro coffee shops apart from the larger, impersonal chains.

For example, by intentionally reducing their physical space in the real estate and streamlining their products, brands, like Blank Street Coffee, are able to provide a small selection of high-quality options at an affordable price. Blank Street Coffee has established over 40 mini-cafes, with none exceeding 350 square feet in size.

The Paradigm Shift in the Specialty Coffee Market

The surge of micro coffee shops has ignited a significant shift within the specialty coffee market. Modern coffee enthusiasts are no longer satisfied with mere caffeine fixes; they crave an authentic coffee journey enriched with unique flavor notes and innovative brewing techniques. In response, traditional coffee giants have begun integrating micro-roasted blends and artisanal offerings into their menus, acknowledging the evolving demands of consumers.

Embracing the Convenience: Micro Coffee on the Move

One of the driving forces behind the popularity of micro coffee shops is their exceptional convenience. Many micro coffee brands, like Scooter Coffee, have embraced a mobile approach, strategically setting up shop in unexpected locations to cater to coffee lovers on the go. This shift towards convenient coffee aligns perfectly with the fast-paced lifestyles of modern consumers, making micro coffee an accessible and appealing choice.

Drive Thru Micro Coffee

The convenience factor is underscored in the Coffee & Convenience article, revealing that drive-thru coffee shops make a significant difference among today’s consumers. The speed and ease of drive-thru service caters to the demands of busy individuals, enabling them to savor high-quality coffee without disrupting their schedules.

Brands like PJ’s Coffee saw their drive-thru locations average 53.4% more revenue than locations without a drive-thru, and drive-thru purchases made up 65% of their total sales overall at drive-thru enabled locations in 2020. That’s some solid proof there!

Dutch Bros. Coffee: Leading the Expansion

Dutch Bros. Coffee, a pioneering figure in the micro coffee movement, has rapidly expanded its footprint with drive-thru coffee stands emerging across the nation. Their remarkable success has inspired other micro coffee brands to explore expansion opportunities, underscoring the growing demand for handcrafted, high-quality coffee experiences.

Real Estate Dynamics: NNN Leases and Micro Coffee

The escalating popularity of micro coffee shops has even sparked interest in the commercial real estate (CRE) market. Triple net leases (NNN) have become an enticing option for both micro coffee shop owners and investors. These leases transfer numerous expenses, including property taxes and maintenance costs, to tenants, making them an attractive prospect for those seeking investment opportunities within the specialty coffee realm.

The Verdict: A Lasting Impact

Considering the surge of micro coffee shops, their impact on the specialty coffee market, and their synergy with the commercial real estate sector, it becomes evident that the micro coffee trend transcends a fleeting fad. As more coffee enthusiasts yearn for distinctive experiences and flavors, micro coffee shops are poised to remain and continue shaping the coffee industry in the foreseeable future.

Embracing the Future: The Enduring Legacy

The micro coffee trend, characterized by micro-roasted coffee and convenient coffee shops, has etched a unique space within the specialty coffee market. Renowned brands like Dutch Bros. Coffee, Caribou Coffee Cabins, Scooter Coffee, and 7 Brew have not only introduced new flavor dimensions but have also revolutionized the coffee experience itself.

Moving forward, it is undeniable that the micro coffee trend is far more than a passing fad. Its robust presence in the specialty coffee market and its allure for commercial real estate investors signify that micro coffee shops are destined for continuous growth and triumph. If you haven’t yet embraced the micro coffee movement, now is the time to embark on this aromatic journey and uncover the plethora of flavors that await you.

August 08, 2023

Ground Lease vs. Fee Simple: Understanding Commercial Real Estate Leasing Options

Unraveling the Choices in Commercial Real Estate Leasing

When it comes to commercial real estate leasing, landlords and tenants have several options to consider. Two common types of leases are ground leases and fee simple leases. Each holds unique advantages and considerations for both parties involved. In this article, we will explore the key differences between these leasing options and their implications for landlords and tenants, with a focus on triple net leases and commercial real estate investment.

Ground Lease: Unlocking the Potential of Land Ownership

A ground lease is a long-term lease in which the tenant rents land from the landlord, gaining the right to develop and utilize the property during the lease term. The tenant is responsible for constructing and maintaining any improvements to the property, while the landowner retains ownership of the land. Because the landlord only owns the land, they have zero responsibility to the building and cannot take depreciation. After the lease term ends, the landlord assumes all improvements the tenant made to the property.

Fee Simple Lease: Absolute Ownership and Control

A fee simple lease, also known as an absolute triple net lease, is a traditional lease where the landlord retains absolute ownership of both the land and any improvements to it, leasing both to the tenant. The tenant has no ownership of the building or land, but assumes full responsibility for property management and all associated costs.

Evaluating NNN Leases within Ground Leases and Fee Simple Leases

Triple Net Lease | Image of Storefronts under construction Triple Net Lease in Ground Lease

In a ground lease with a triple net lease arrangement, the tenant bears the responsibility for all property-related expenses, including taxes, insurance, and maintenance costs. The landlord enjoys a steady income stream without the need to manage property management tasks. The landlord only has ownership of the land until the lease term ends or the tenant vacates the property, after which the building ownership goes back to the landlord who may re-tenant the property.

Triple Net Lease in Fee Simple Lease

Within a fee simple lease with a triple net lease structure, the landlord retains absolute ownership, while the tenant assumes all property management and maintenance obligations. This lease type offers investors the potential for long-term passive income without direct involvement in property upkeep. Absolute NNN leases are typically offered to creditworthy or investment grade tenants with a credit rating of BBB- or higher.

Choosing the Right Lease Option: Factors to Consider

Risk and Control

Ground leases offer landlords the advantage of retaining ownership and control over the land, while giving the tenant the autonomy to make decisions regarding the property.

Investment Horizon

Both lease options are generally long term and are well-suited for long-term investors. That said, Ground leases are generally longer and are a good choice for those who wish to generate passive income from land assets, whereas fee simple leases appeal to investors seeking complete ownership and more active involvement in property management.

Property Development

Ground leases allow tenants to develop the property according to their business needs, while fee simple leases retain some landlord control over property improvements and renovations.

Additional Points to Consider

The length of the lease term is a key factor to consider, as it will affect the tenant’s investment horizon.
The rent payments in a ground lease are typically lower than those in a fee simple lease, as the tenant is not responsible for the cost of the land. The lower rent generally means they can be purchased for a lower price.
The tenant in a ground lease may be required to make periodic payments to the landlord for the cost of property taxes and insurance, but generally they are structured as net leases with the tenant paying for those expenses directly.
Both lease types offer consistent monthly income with little to no involvement from the landlord. The creditworthiness of the tenants as well as corporately backed leases can provide some additional investment stability.

Making the Best Decision for Your Commercial Real Estate

Fee Simple | Land Being Developed

Choosing between a ground lease and a fee simple lease involves various considerations, including investment goals, risk tolerance, and desired levels of involvement in property management. Both leasing options offer unique benefits for landlords and tenants, with NNN leases providing an additional layer of stability and income potential for investors in commercial real estate.

July 18, 2023

QSR Success: Chick-fil-A – A Strong NNN Lease Tenant

Chick-fil-A is one of the most successful quick-service restaurant QSR franchises in the world, with over 2,800 locations in the United States and Canada. The company’s net worth is estimated to be over $14 billion, and its stock value has steadily increased in recent years. Chick-fil-A‘s success is due in part to its commitment to exceptional customer service, high-quality food, and a strong brand reputation.

Chik-fil-A's QSR Success | Image of very busy fast food restaurant

One of the factors that has contributed to Chick-fil-A’s success in commercial real estate is its use of triple net leases. NNN leases transfer all property expenses, such as property taxes, insurance, and maintenance, from the property owner to the tenant. This frees up the property owner’s time and resources, allowing them to focus on other aspects of their business.

The Key to Commercial Real Estate Investing Success

The Key to QSR Success | Two women shaking hands over busines deal NNN leases are a type of lease agreement in which the tenant is responsible for all property expenses, including real estate taxes, insurance, and maintenance.

This provides a steady stream of income for property owners, because, even if the property is vacant, the tenant is still accountable for the property expenses. This can be a valuable asset for property owners, especially during economic downturns.

Another benefit of NNN leases is that they can help to increase the value of the property. This is because NNN leases are seen as a more stable investment than other types of leases. As a result, investors are more likely to pay a premium for properties that are leased under NNN agreements.

Additional NNN Lease Benefits for Investors

NNN leases are relatively illiquid, meaning that they are not easily sold or transferred. This can make them a more attractive investment for long-term investors who are looking to avoid volatility.

Also, NNN leases are often backed by a corporate guarantee, which provides investors with additional protection in the event of default. This can help to mitigate risk and ensure that investors receive their full investment, even if the tenant goes bankrupt.

Chick-fil-A as an NNN Lease Tenant

NNN Lease Success | Chik-Fil-A Sign

Chick-fil-A is a highly desirable NNN lease tenant. The company has a strong track record of financial success, and it is known for its commitment to quality and customer service. This makes Chick-fil-A a safe investment for property owners, and it can help to increase the value of the property.

In addition, Chick-fil-A typically signs long-term NNN leases, which can provide investors with even more stability. The company’s current average lease term is 20 years, with some leases lasting as long as 30 years.

By partnering with a proven brand like Chick-fil-A, investors can achieve long-term financial growth and stability. NNN leases can provide a steady stream of income, help to increase the value of the property, and offer additional protection in the event of default.

If you are looking for a safe and reliable investment, consider investing in a property that is leased to a strong tenant such as Chick-fil-A. You can be confident that your investment will be protected by the company’s strong financial performance and commitment to quality.

July 03, 2023

Taking Stock of Retail: The Evolution of the Physical Store

As the dynamics of retail continuously evolve, the brick-and-mortar segment is undergoing a revolution of its own. Despite the swift ascendancy of e-commerce, the physical store persists as a dominant player, affirming their position as an integral part of the consumer’s shopping journey.

The Undying Importance of Physical Retail

According to a PwC survey, brick-and-mortar stores remain consumers’ most popular shopping channel. Echoing this sentiment, the National Retail Federation (NRF) reported that a commanding 80% of shopping transactions still occur in physical stores. Physical stores offer an immersive shopping experience that online platforms can’t replicate, engaging customers with tangible products, tactile sensations, and immediate gratification.

Rising from the Ashes: Store Closures and Openings

However, brick-and-mortar retail has not been without its challenges. News of store closures from prominent brands like Bed Bath & Beyond and Tuesday Morning signifies a shift in the commercial real estate (CRE) landscape. Despite this, in 2023, store opening announcements outnumbered closures, attesting to the resilience and adaptation of the sector. Major retailers like Five Below and Dollar Tree are planning to open hundreds of new stores, reaffirming their faith in physical retail.

The Evolution of Retail Store Formats and Malls

Evolution of Malls | People walking in nearly empty mall The changing face of brick-and-mortar retail is reflected in the evolution of retail store formats and shopping mall trends. Traditional storefronts are being transformed, with renovations to accommodate changing consumer preferences and industry shifts. For instance, Dollar General is remodeling stores to accommodate demand for inexpensive groceries, while Walgreens is adding primary care clinics to its locations. These renovations have been spurred by retailers regaining budgets post-COVID, as stated by Bill Barton, Executive Vice President of Sales at Quality Equipment Management (QEM).

In the CRE space, the introduction of new retail formats, such as the market fulfillment centers rolled out by Walmart, indicate a clear shift towards a more customer-centric model. These centers, powered by their proprietary Alphabot system, are designed to increase the number of daily orders a store can fulfill, thereby enhancing customer experience through quicker, more accurate online order fulfillment.

Anchor Tenants: The Pillars of Retail Spaces

Anchor tenants play a pivotal role in driving foot traffic to retail strips and shopping malls. They serve as a magnet, attracting customers and helping smaller retailers thrive. In the realm of investment real estate, these tenants are crucial as they contribute significantly to the returns for investors in Real Estate Investment Trusts (REITs) or those holding single-tenant net leases or triple net leases.

Consumer Preferences: Shifting Towards Sustainability

Modern consumers are becoming increasingly conscious of their shopping habits. The rising popularity of secondhand retail reflects a shift towards more sustainable consumption. As revealed by a WD Partners report, a staggering 92% of U.S. consumers participate in the secondhand market at least once annually, indicating a vast opportunity for retailers to tap into.

Embracing Retail Technology: The Omnichannel Experience

JCREW's Omnichannel Experience | Image of JCREW Storefront Technology has become an indispensable tool in the evolution of brick-and-mortar retail. Retailers are leveraging technology to create a seamless omnichannel shopping experience, integrating digital and physical shopping experiences. Take J. Crew, for example, which recently launched a virtual store in collaboration with Obsess, an experiential e-commerce company. This digital touchpoint allows the brand to connect with new audiences and drive sales in an innovative digital format.

Evolution = Adapting and Thriving

The narrative of the retail landscape’s evolution is one of adaptation and resilience. While the advent of digitalization has brought its challenges, it has also unlocked new frontiers for growth and innovation. For stakeholders in commercial real estate, especially those with net lease investments or REITs, a keen understanding of these shifts will provide valuable insights into investment real estate opportunities. After all, the future of brick-and-mortar retail is not a tale of decline but rather of dynamic adaptation and endless possibilities.

June 20, 2023

NNN Leases and REITS: A Match Made in Heaven?

Investing in real estate has always been a popular choice for individuals seeking long-term wealth accumulation and diversification of investments. Two strategies that have gained significant attention in recent years are triple net leases (NNN) and Real Estate Investment Trusts (REITs). We will explore how these two investment options can work together seamlessly, offering a match made in heaven for savvy investors.

Understanding Triple Net Leases

Triple Net Leases, commonly known as NNN leases, are a type of lease agreement where tenants assume responsibility for property management expenses in addition to rent. These expenses typically include property taxes, insurance, and maintenance costs. By shifting these responsibilities to the tenant, property owners enjoy a steady income stream with reduced management obligations.

Exploring Real Estate Investment Trusts

Real Estate Investment Trusts (REITs) are investment vehicles that pool funds from multiple investors to invest in income-generating real estate properties. REITs offer individual investors an opportunity to participate in large-scale real estate portfolios without the need for substantial upfront capital. They provide access to various property types, including commercial, residential, and industrial, allowing investors to diversify their real estate holdings easily.

The Synergy Between Triple Net Leases and REITs:

Stable Income Stream: Triple Net Leases offer a reliable and predictable income stream for investors. By including triple net lease properties within a REIT portfolio, investors can benefit from a steady flow of rental income generated by single tenant net lease properties.
Diversification of Investments: REITs provide investors with the opportunity to diversify their real estate holdings across different sectors, locations, and property types. By incorporating triple net lease properties into a REIT portfolio, investors can further diversify their investment and mitigate risk.
Professional Property Management: REITs have a dedicated team of professionals who manage property management tasks, including leasing, maintenance, and rent collection. This alleviates the burden of managing individual triple net lease properties for investors, freeing up their time and resources.
Increased Access to Investment Opportunities: Investing in triple net lease properties individually may require significant capital and specialized knowledge. By investing in REITs, investors gain access to a wider range of investment opportunities, including high-quality triple net lease properties that may have been otherwise inaccessible.

Maximizing Real Estate Investment with Triple Net Leases and REITs

Triple Net Leases and Real Estate Investment Trusts are complementary investment options that can create a harmonious and profitable investment strategy. By combining the stable income streams and reduced management obligations of triple net leases with the diversification, professional management, and increased access to investment opportunities provided by REITs, investors can enjoy the best of both worlds.

Whether you are an individual investor or a seasoned institution, considering the marriage of NNN leases and REITs can offer an attractive investment opportunity within the realm of commercial real estate.

April 11, 2023

Brisky Net Lease Continues Growth, Expands to North Carolina

MINNEAPOLIS, Minn. (April 11, 2023) – Today, commercial real estate firm Brisky Net Lease (Brisky) announced plans to expand by adding a regional office in Charlotte, North Carolina, effective April 1st. The firm specializes in triple net lease (NNN) transactions and other forms of investment real estate across the United States.

Additional markets are planned with Brisky’s targeted growth strategy. While doing a nationwide search, Charlotte stood out as an excellent fit for Brisky because of its booming economy, diverse talent pool, and appealing quality of life.

“Having a full team of smart, savvy, and client-driven professionals here in Charlotte will allow us to bring our vision and custom-tailored experience to the southeast,” said Brian Brisky, founder and president. Brian added, “The firm has had a great deal of success in the Carolinas already, so coming here made perfect sense.”

Founded in 2010 by Brian Brisky, Brisky is known for excellent client service, transparent communication, and determined results for large institutions, private groups, and individual investors. With more than 90 percent of their 2022 transactions coming from repeat clients, Brisky achieved tremendous results in 2022 and made some excellent strides to continue that trend into 2023.

About Brisky Net Lease

Brisky Net Lease is a commercial real estate brokerage that provides full-scale buyer and seller representation on real estate and triple-net lease properties nationwide. Brisky Net Lease is based in Minneapolis. In 2023, Brisky Net Lease announced plans to open their first regional office in Charlotte, North Carolina. For more information, please contact us at info@brisky.wordkeeper.net or 612-413-4200.

March 09, 2023

Everything to Know About Commercial Appraisals

Commercial appraisals are necessary because, in most cases, the buyer and seller are working towards different outcomes. The buyer wants to pay less, while the seller is looking for the opposite effect – to have the price be as high as possible. This is where a commercial appraisal comes in as the third party that determines the “fair market value” for the commercial property being sold.

The appraiser is called upon to perform market research and come back with an independent value. This fair market value is then used by both the buyer and seller in the transaction for negotiation purposes, as it is considered the generally agreed-upon current value of the property. This makes the fair market value an important part of any commercial appraisal.

In this Brisky blog, we describe what commercial appraisals are, when they are needed, and how they can help. Keep reading to learn more!

What Are Commercial Appraisals?

“Commercial appraisals are the independent assessment of the value of a commercial property. This property could be anything from land to garages to warehouses, multifamily homes, or office buildings.”

Commercial appraisals are performed by the ‘appraiser’ who goes through significant training to learn the rules and practices required to complete an appraisal report accurately and correctly. This type of appraisal is used in many real estate transactions, such as when a property is being sold, refinanced, or insured.

When Are Commercial Appraisals Necessary?

When Buying or Selling a Commercial Property:

If you are buying or selling a commercial property, a commercial appraisal can help you determine the fair market value of the property, which can in turn help you negotiate a fair price and avoid overpaying or underpricing the property.

When Financing a Commercial Property:

If you are looking for financing, like a mortgage or a loan, potential lenders will likely require a commercial appraisal to determine the value of the property. This helps the lender assess the risk of the loan as well as determine the correct loan amount.

For Tax Assessment Purposes:

If you are a property owner, a commercial appraisal can help you assess the value of your own property for tax purposes. This can help you check that you are paying the correct amount of property taxes, so you aren’t hit with a big bill during tax season.

For Insurance Purposes:

If you are insuring a commercial property, an appraisal will help you have a more concrete idea of the replacement value of the property. Knowing the accurate value of the property will ensure that your insurance coverage is enough, in case of damage or loss.

Overall, getting a commercial appraisal can provide you with valuable information about the value of your property, which can help you make informed decisions about buying, selling, financing, insuring, or planning your estate.

Most Important Things to Know About Commercial Appraisals

The fair market value is based on several factors, such as the commercial property’s location, condition, size, recent sales, the market, and potential income.
While the process of a commercial appraisal typically involves a physical inspection of the property, it goes much deeper than that, as the research for the local real estate market can drastically change the valuation. In addition, an analysis of comparable properties that have recently sold can also affect the appraised value. The appraiser synthesizes all the above information and more to calculate the property’s value.
Commercial appraisals are governed by industry standards set by organizations such as the Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP). These standards ensure that appraisals are conducted in a consistent and ethical manner. Commercial appraisers must be licensed or certified by their state, and they typically have a degree in real estate, finance, or a related field. They also undergo continuing education to maintain these credentials.

Commercial Appraisal Approaches

The Cost Approach

The cost approach assumes that the price a buyer is willing to pay for a property equals the cost it would take to build an equivalent property. So, to arrive at a value, the appraiser looks at the time and materials used to construct an investment property and estimates the cost (using market knowledge and available data).

The cost approach is often the most used and effective for new properties because the reproduction cost should be similar. However, this is less effective for older properties or that cannot feasibly be replicated in modern times.

The Income Approach

The income approach is the same as above; however, the value of the commercial property is determined by the amount of income it generates. To estimate this, the appraiser reviews cash flow like past financial statements, current rent, leases, operating expenses, and market conditions.

The main benefit of this approach is that it can be used across property types and is relatively simple. The downside is that relying on historical financial accuracy can be challenging, and it may require assumptions about things like rent, expense growth, the future of the market, and vacancy rates.

The Sales Comparison Approach

The sales comparison approach is just as it sounds – that the property’s value is derived from the sales of comparable properties in the same market.

However, it can be difficult to find commercial properties in the same market that are truly comparable or even similar, as location, renters, and slight differences in size, use, or design, can cause drastic changes in value.

Partner With Brisky Net Lease for Your Next Commercial Real Estate Investment

For help finding the perfect NNN investment property, get in touch with the professionals at Brisky Net Lease. Our experienced, professional team can identify the best properties in the best locations — helping you meet your investment goals.

With our extensive commercial real estate track record, you’ll walk into your next lease negotiation confidently and with an experienced team on your side.

February 21, 2023

What Can Commercial Real Estate Investors Learn From Past Recessions?

It isn’t hard to recognize the impact of the last recession on the commercial real estate market. Many developers were left filing for bankruptcy, banks were empty-handed, foreclosed properties were a common sight, and many cities felt the economic impact of empty stores, restaurants, and shopping centers.

However, the last recession is also reshaping the commercial real estate market and its practices in a positive way. With new knowledge, trends, and other banking and business changes, the commercial real estate industry can work to avoid another significant real estate crash by taking what we now know and applying it to future investments and transactions.

Keep reading to learn what we can take from past recessions and how to practice innovative commercial real estate investing.

Lessons Learned – from the Past for the Future

The most significant factors that led to the last real estate crash were overconfidence in the market, a lack of caution in dealmaking, and poor business practices.

Uneducated investors focused too much on growth and not enough on business fundamentals like risk management. High loan-to-value ratios exasperated this further as many people took on more debt in an economic downturn that they could not repay. Many people entered the real estate game late, trying to ride the bubble as the market had boomed in the years before, while others repeatedly refinanced loans to support their spending habits or increased expenses.

Since many lenders, investors, and developers experienced setbacks after the last recession, this new CRE landscape has some difficult aspects. Tighter funding and increasingly cautious lenders have made the market challenging to navigate unless investors have significant assets, ample income, and a successful real estate history.

To truly succeed in the commercial real estate market, investors must be thorough, knowledgeable about the market and practices, and extremely diligent in their property search and acquisition. As always, we recommend working with a broker who can help you determine beneficial investments and walk you through the process.

Lenders & Buyers Exercise More Caution

The last recession led buyers and lenders to exercise more caution when making commercial real estate transactions. Despite more significant profits and less strict loan standards, we saw many lenders fail after the exuberant total costs of loan defaults and foreclosures.

There is a certain degree of risk to any investment, and commercial real estate is no different. After the last recession, many real estate developers lost their wealth after investing in a failed building project, and this was not lost on the average buyer or investor. As a result, many buyers are more cautious when getting involved with large-scale projects — and it’s always good to be cautious. However, we recommend having an expert broker on your team to help navigate any deal you consider.

The Value of Multi-Purpose Real Estate

While multifamily rentals have become more common in recent years, the number of multi-purpose developments has also trended upwards.

Instead of being dependent on the neighborhood and its structure, developers are focusing on building entire communities for their tenants, with a borough-like feel. This results in more demand for housing and businesses in the area, as each property is not an independent asset but part of a growing, revitalized neighborhood. Many of these areas have become highly sought-after, as they are known for their eclectic feel, authentic restaurants, and a wide variety of stores.

Many residential and suburban areas are developing quickly, as developers are creating office buildings, apartment complexes, townhouses, bars and restaurants, shopping centers, gyms, markets, drugstores, parks, and more. Instead of just following real estate trends, developers should focus on adding value to an area for long-term success. In other words, each additional development has the potential to help minimize investor risk by increasing property values in the whole area.

The Investment Services You Need

Our goal at Brisky Net Lease is to be your one-stop shop for all things commercial real estate investment. We know our way around the national CRE environment and can help you find the perfect property for your next investment.

We put a lot of time and effort into underwriting, property evaluation, and education, keeping our clients informed and in tune throughout their investment journey.

To learn more about the various CRE investment services we offer, get in touch with our team!

February 09, 2023

Unique Commercial Real Estate Opportunities in a Rejuvenating Economy

With in-person shopping at a low in 2020, the industry has finally started seeing a comeback. In both 2021 and 2022, brick-and-mortar retail sales saw a huge jump, and many experts believe this will continue into 2023.

Though high interest rates, rising inflation, and labor shortages loom over many industries, increased construction costs and limited building space ensure that retail and other commercial building projects will remain stable in the coming year.

As our economy continues to recover and adjust, we’re looking at unique opportunities investors can take advantage of in the ever-changing commercial real estate market.

Keep reading to learn about our top commercial real estate opportunities that all CRE investors should consider in 2023 and beyond!

An Increase in Redevelopment Projects

Redevelopment projects are ideal investments due to their low carbon footprint, high ESG ratings, existing reputation with consumers, and low building costs.

Because new construction projects are continuing to get more expensive, we’ll see more retail developers and commercial real estate investors focus on redeveloping existing retail spaces. This will help attract new customers and shoppers but is also an excellent opportunity for investors.

Think about a new apartment in an old building — all of the amenities, appliances, and systems are brand new, but the building still has its existing charm. This — and the low cost of renovations compared to a new building project — makes many redevelopment projects so desirable.

As rent levels continue to increase and occupancy levels increase even more, there will be plenty of demand for redevelopment projects, especially in highly populated areas. Many redevelopment projects will see buildings converted for other uses, such as office buildings, apartments, and other industrial projects.

The Evolution of Grocery Stores

Grocery stores will continue to evolve for consumer needs.

The sale of food and beverages on digital platforms like Amazon Grocery, Doordash, and Uber Eats has continued to rise. Still, most of these orders are fulfilled at the grocery store using a delivery service or curbside pickup. To continue evolving with the times, grocery stores must transform to fit our multi-channel world.

This could include extending partnerships to more delivery services or developing their own delivery services to compete with the top food delivery companies. But no matter how much of the grocery shopping process becomes digital, there will always be a need for brick-and-mortar grocery stores due to the nature of the product.

However, as grocery stores become less reliant on employees (see our McDonald’s example below), operating costs will also lower — making them a less intensive CRE investment.

Quick Service Restaurants & Fast Food Chains

Similarly to grocery stores, quick-service restaurants and fast-food chains will also continue to see an evolution in their services which will significantly impact how investors view them.

While these restaurants won’t necessarily need to develop their own delivery services, we’ve already seen how chains like McDonald’s have introduced robots into their operations. These automated employees are leased at a lower monthly price than the average employee, leading to lower operating costs and making them more attractive to investors.

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