08-13-2018 - Laserfiche WebLink

Home Browse Search

Page 40 Nagell Appraisal Incorporated | 952.544.8966 Highest and Best Use – continued Physically Possible Uses: The subject does have some orientation issues that a buyer might consider. Specifically, that the access to the site is via Edgewood Drive. This means that if commercial is located on Mounds View Boulevard traffic must drive past the site and then loop around, it is more circuitous. This can also lead to higher development costs, including more paved area as well as utility lines running from the street to the buildings. If the commercial is placed closer to Edgewood Drive, the visibility of the commercial building or buildings could be blocked from Mounds View Boulevard if an apartment building is constructed in the eastern portion of the site. Any development on the site should be careful to consider the exposure of commercial to the road, as well as the potential for higher development costs. Financially Feasible Uses: Typically, surrounding uses, market demand, and availability of financing drive financially feasible uses. Surrounding Uses: Uses in the immediate area are a mixture of commercial, residential (apartments), and senior living. A commercial, office, or apartment use would be supported by the surrounding uses. Financing: Over the past 3+ years, financing has loosened up since the “Great Recession”. However, borrowers typically must be well qualified with 20% to 30% down. For new projects, lenders commonly require significant pre-leasing activity for multi-tenant commercial properties. Interest rates for new construction range from 4.75% to 5.75%, depending on tenant quality. Amortization periods are generally 20 to 25 years with 5-year balloons. Financing for apartment properties is similarly 4.75% to 5.75%, commonly with amortization periods of 25 to 30 years (5-year balloons). Lenders will not necessarily look for significant pre- leasing before extending financing, however, they will strongly consider market demand, preferably from a feasibility study. Market Demand: Market demand for commercial land in the subject area is soft to average. The commercial retail market has been experiencing significant changes in the past few years, primarily due to online shopping (Amazon). Most new commercial is either service based or food related. That said, many grocery stores have been expanding in the metro, including HyVee and Aldi. CoStar indicates that current asking commercial rates within a 5-mile radius are around $11.38 per SF, net with vacancy of about 3.8%. Any new construction of a commercial building would likely require rent of $18+ per SF net with a 10-year guaranteed lease.