Trillions of dollars of commercial real estate will transfer ownership over the next decade.
The Baby Boomer generation is exiting real estate. The top of the generation would be highly influenced by The Vietnam War ending 48 years ago. From race riots, civil rights movements, assassinations of JFK, MLK, and RFK, man on the Moon, Boomers experienced a U.S. economy that was both financially prosperous and socially turned on its head. Boomers make up 28 percent of the population and control 80 percent of personal financial assets. This real estate typically is part of a generational trust passed down from their parents (The Traditionalists) who built the buildings in the 1980s to 2000 time period.
NAI Fennelly, in conjunction with NAI Global’s CEO, Jay Olshonsky, are selling a family portfolio that is 131,000 square feet of medical buildings in the Greater Princeton office market. Jerry Fennelly states, “It was important to bring in a larger sales platform (NAI Capital Markets) to deliver the highest value and to create the most activity for this $15 million investment transaction.”
Fennelly states, “As Boomers hit 74, the thought of less becomes more important. If they have children the expertise required to succeed may not be there, or the millennial (receiver) may not want the asset class and hence the exit. The greatest transfer of commercial real estate is underway and creates significant opportunities for new Buyers coming in from higher priced (low return) areas. The Buyers are utilizing tax free 1031 strategies, selling commercial real estate at high values in low return (3 percent) areas and buying in high return (7.5 percent) areas which are moderately valued, deferring taxes and increasing cash flow. According to Green Street Advisors, office medical buildings in the northeast have increased 2 percent over the last 12 months. So the perfect combination of 1031 tax deferment, historically lowest interest rates, strong growth in neighboring cities/states, and motivated sellers in commercial real estate, are increasing investment sales volume in the Greater Princeton area’s medical office building categories. The increase of these sales will satisfy the long-term high need for medical facilities conveniently located for the aging Baby Boomer patients.
For information on medical investment buildings in the Greater Princeton area call Jerry Fennelly at NAIFennelly: 609-529-0061. www.fennelly.com