Real Improvement for Commercial Real Estate
Interview by David Zaslawsky
Photography by Robert Fouts
John Stanley is the founder and president/broker of John Stanley & Associates. He was recently interviewed by Montgomery Business Journal’s David Zaslawsky.
Montgomery Business Journal: How long have you operated your own firm, John Stanley & Associates? • Stanley: We started John Stanley & Associates in June of 2000.
How long have you been involved in commercial real estate? • Since 1971.
Now that we have established your credentials, what is your 2015 outlook for commercial real estate in the River Region? • I have a very positive outlook about the future here and a lot of that was reflected in a meeting that I (recently) attended with the Montgomery commercial real estate group, which is a local group consisting of 35 commercial Realtors in the River Region. We talk about recent activity and talk about things in the future.
How would you characterize the meeting? • That meeting we had was very upbeat; a positive mood – that I haven’t seen in a while.
You’re saying the positive sentiment is widespread. • Widespread. There was a reporting in that meeting of (recently) more sales and leasing activity than has been in the past. I had a feel for a more upbeat mood and optimism as we moved into 2015. On a personal note, we had a very good 2014 overall in leasing and sales activity and we moved into 2015 with a lot of sales and leasing activity on the books to be closed in 2015.
What was your percentage increase from the previous year? • Our activity in commercial real estate consists of real estate sales, whereby we are representing sellers and buyers; and commercial leasing, which consists of office leasing and some retail leasing, but primarily office leasing. Our activity last year and going into this year is probably up 15 to 20 percent from the past. We probably saw more increase in activity on the office leasing side than the sales side.
Are your numbers matching the previous highs or returning to pre-recession levels? • They are getting back to what I consider my best year and my best year was 2010. We’ve had steady and positive growth over the past five or six years. We never really had a dip because so much of our sales and leasing activity has involved the selling and leasing of bank-owned property. Fortunately we were on the receiving end of that … and able to assist banks with the sale of foreclosed assets.
Going back some years, there was a glut of office space. How do you characterize the market for office space? • We have an overabundance of certain types of office space.
Which types are those? • In my opinion, we have an overabundance of Class B office space.
What is Class B office space? • We consider three levels of office space. Class A is your top-of-the-line office space like Halcyon Pointe, Capitol Commerce Center, RSA (Retirement Systems of Alabama) buildings, Lakeview Center. Your Class B buildings consist of middle-grade buildings, which are many of the one-story and two-story office buildings on Carmichael Road. A good example of Class B product is Interstate Park and some of the older office buildings in downtown Montgomery. There are Class C office buildings that are dated.
Has that overabundance of Class B office space been declining? • It’s been increasing the available inventory. There is more product on the market and it’s driving rates down. Ultimately, it affects the overall market – it even affects the Class A market.
Is that causing Class A office space rates to decline as well? • Yes, it can. Rates in Montgomery with some exceptions are flat or slightly less than what they were three years ago.
Will it take three, four or five years to reduce the supply of Class B office space? • I’ll say it will take two to three years for that to even out.
Then will all the office rates start moving up? • They will start to return to normal.
Are people still constructing office buildings? • There has been so much existing product on the market that buyers have tended to purchase those properties and remodel or rehab those properties. I am beginning to see an increase in the purchase of land for new development.
Isn’t that a recent development? • Yes. It might be spec or might be owner-occupied. I’ve seen more dentists and doctors considering building new because their office buildings are typically very specific, so they choose to buy new rather than buy something (existing). We are also beginning to see a lot of new retail activity and continued retail activity. There has been a great resurgence of new activity along East Boulevard with Gander Mountain, Party City relocation; new furniture store; relocation of Starbucks. You have new car dealership activity on East Boulevard: Toyota-Lexus, BMW, Capitol Chevrolet, Jack Ingram Motors, Best Auto Sales. All of that has greatly enhanced East Boulevard. You have improvements that Stivers (Ford/Lincoln/Mazda) has done on his site and what’s going to happen to (the old) Montgomery Mall.
What is the message from those retailers and developers? • It’s extremely positive. You’re not going to get a company like Gander Mountain to make the investment that they have made without feeling very good about the market. I think it’s coming from the optimism of our city planners, our city officials and local developers.
Isn’t there a whole different mindset right now? • I agree. I think there is a totally different mindset. There seems to be a mindset of everybody pulling together and working through all the issues as it relates to our day-to-day activities. I think the mayor, City Council, County Commission do a great job to enhance growth – development opportunities.
The local developers and investors are seeing something very positive. • Just in (January) we’ve entered into contracts for the purchase of land to do developments along Taylor Road – medical office buildings – and even looking along EastChase Parkway and a couple of new restaurants. Not to mention and not to exclude what Aronov is doing at the intersection of Taylor Road and I-85.
You’re talking about Chase Corner, which will have Whole Foods. • Buffalo (Wild Wings) is going there.
There are also restaurants coming to EastChase Station. • That’s correct. There’s a new hotel coming – Hilton Garden Inn. I’m working with another hotel group in that vicinity.
Hoteliers are always looking to hit that magic 70 percent occupancy before adding a facility. • Hotel occupancy rates are up all over town. I have often said what I consider extremely beneficial to the City of Montgomery is that six or seven years ago Montgomery was growing extremely fast in the east. It was moving like a freight train and then all of a sudden you had the development of Walmart on Ann Street. Then we had all that development downtown, which has been excellent for the City of Montgomery because it has helped to balance the city as far as commercial real estate activity. Now I see the city as (more) level-balanced than it was.
That activity has spread out across the city. • There has been activity on Fairview Avenue and then the Southern Bypass. The city is much more balanced with retail, office and commercial than it was five or six years ago. Now, you have the north side on Federal Drive with a Walmart grocery store.
From what you’re saying, this certainly looks like a very promising year for commercial real estate. • There is a definite optimism, momentum and confidence in what I think Montgomery is perceived as being the place to invest.
Isn’t that the bottom line – the confidence to invest? • You have all those people willing to invest. You’ve got strong leadership with the city and county that are doing everything they can to facilitate growth and increase retail sales. Guess what (happens) when you increase retail sales? It increases tax revenue.
What are you seeing in the industrial commercial real estate sector? • A vast majority of the large industrial boxes are leased now. We need more large warehouse boxes for future Hyundai-related tier 1, 2 and 3 suppliers or whatever. Options are limited now.
In a way that is a good problem because before there were a lot of vacant industrial buildings. • That’s right.
We’ve only talked about Montgomery. • I don’t want to leave Prattville out of the mix here because we do a lot in Prattville. We’ve represented several companies that own land in Prattville.
There is work going on next to Prattville Carpet. • I represented the owner of that tract of land and I sold it to Brewbaker Motors and they are doing a new car dealership there. We have other properties in Prattville. Going back to the Eastern Bypass, I think the fact that all the car dealerships have greatly improved their facilities is an indication of optimism.
Do you see 2016 and 2016-2020 extending gains this year unless there are some major blimps? • Provided interest rates stay down to a manageable level and that we have the available and trained workforce to actually work new developments – I am very optimistic for at least the next four or five years under current conditions.
Let’s talk about Loveless Academic Magnet Program high school and the school district’s technical education center moving to the old Montgomery Mall. What does that mean to that area as far as commercial real estate? • I think it makes a tremendous impact. It increases retail activity. Those people have got to have a place to eat and shop close by. It creates more synergy for that intersection. I think it will improve business activity for existing owners in that area and encourage others to locate there. The improvement of Montgomery Mall removes a stigma from that area that should not exist. There is too much potential there at that intersection.
If some existing businesses relocate near the old mall, that opens up opportunities for other retailers as well to backfill those sites. • That’s right. There are just so many people who can afford to pay East Montgomery prices. When the less expensive (sites) become available inside the bypass, that’s a good backfill. One of the most positive things Montgomery has got going from a residential standpoint is Hampstead. With the Lowder family’s willingness to make that investment out Taylor Road to do what they’re doing … Hampstead is going to be a major residential and commercial development for the future. I’ll tell you what dictates growth and that’s the availability of sewer and you’ve got sewer there; you’ve got sewer at New Park; you’ve got sewer down Park Crossing. I’m working on a major deal out Taylor Road right now that I cannot identify. I see a lot of potential development out Taylor Road.
Following the rooftops. • Yes, follow the rooftops.