Hello and welcome to The Flex Focus. The Flex Focus is a monthly newsletter where I will share our story and opinions on the news that will affect the path of Flex Real Estate along the way to building the best industrial and flex investing platform possible; we are constantly taking in information about the micro and macro markets that allow us to make informed investment decisions. The Flex Focus will primarily focus on our daily focus, information that will affect small-suite industrial properties.
To introduce myself to those I have not met, my name is Andrew Hannah. I am Flex Real Estate's President and The Flex Focus's author. I started in real estate ten years ago, helping gather tax documents at a shopping center-focused real estate investment trust. For the next ten years, I focused primarily on identifying real estate opportunities and creating a business plan to maximize the value of those opportunities. Along the way, I loved learning about the history of real estate and the economy. This led me to read books on how textiles shaped the world economy and the ancient history of interest rates (I swear I am fun at parties).
I hope I can distill my love of reading, market connections, and real-time data intake into helpful, quick hits about the real estate market.
Andrew Hannah
February Focus
2025 Commercial Real Estate Deal Velocity
2021 and Early 2022 appear to have been once-in-a-decade runs on real estate investments; since that historic run, the sales volume has been muted, declining below the pre-COVID average sales volume; this decrease is mainly due to the Fed’s increased rates to combat inflation.
There is optimism heading into 2025:
The Fed cut rates gradually towards the end of 2025.
The election is decided.
Matthews Real Estate showed a 50% year-over-year increase in closings in January.
I still believe it will be a mixed year; while the Fed cut rates, the most recent consumer price index report showed a 3% annual increase 50 bps higher than anticipated. This may put future cuts from the Fed on pause, and additionally, the 10-year treasury, a key indicator for real estate debt, has risen 50 BPS since the election on inflation fears, increasing the debt cost for fixed-rate borrowers.
While I focus mainly on the debt market's effect on deal velocity, many additional factors shift deal velocity. Flex Real Estate is still focused on finding off-market opportunities through our real estate and manufacturing network to methodically grow the portfolio.
Ohio and The Drones
On January 16th, Anduril and Ohio announced Arsenal-1, a five-million-square-foot weaponized drone-making factory south of Columbus, Ohio, to scale US weapons production rapidly. This is exciting news for Ohio and another excellent example of Ohio attracting large companies to put their manufacturing base in Ohio. Recent examples are the Honda battery plant in Washington Courthouse and the Intel chip factory in New Albany.
Pictured: Anduril Founder
Palmer Luckey
We believe these projects will increase demand for the spaces in the current flex portfolio and future acquisitions. These large projects do not happen in isolation; introducing a manufacturing plant consuming materials and skills brings in tier one and two suppliers who will also benefit from increased revenue, increasing their demand for industrial space, which will, in turn, increase rents and decrease vacancy. Flex Real Estate’s focus on industrial with small suites will allow us to capture these rental increases.
What is Flex Focusing On
Investor Software
We are committed to creating a seamless experience for our partners in our real estate opportunities, so we are reviewing several different real estate software platforms to determine which will best fit our needs.
HVAC
As temperatures hit zero across the Midwest a few weeks ago, heating systems in our warehouses became survival of the fittest. Our property management was working hard to coordinate the repair and maintenance of several units across the portfolio. Luckily for our units, spring is coming soon.
Where I Am Getting More Information
Last week, I attended the Dayton Development Coalition (DDC)’s 28th annual meeting and 2024 economic review showcase. Governor DeWine reviewed his plans for the $218 Billion state budget for Ohio, which included childcare tax credits, sports stadiums funded by taxes on gambling, driver's education in High School, and a guaranteed acceptance into any state university for any student in the top 5% of their class.
Dayton Development Coalition celebrated adding 2,559 Jobs and the announcement that Sierra Nevada Corporation was awarded a $13 billion contract from the Air Force, resulting in the addition of two new hangers at the Dayton Airport.
Pictured: Ohio Governor Mike DeWine
What I Am Reading
Industrial Real Estate Investing and Management – Obie Silverman
Obie Silverman shares his experiences owning and operating industrial real estate over a 46-year career.
The Flex Real Estate team is all armed with a copy of this book to compare our processes to an industry veteran.
Flex Real Estate is on its way to a successful 2025 and we appreciate your support! Stay tuned for the March Focus and don't hesitate to reach out.
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