SOLD - $4,160,000 (6.13% cap rate) – Fully-leased, multi-tenant industrial building in Chantilly, VA. Built in 1986, the 32,000 SF property is divided into 12 units of approximately 2,600 SF each on 2 levels with a total of 4 docks and 4 drive-ins. The property benefits from a competitive advantage in the market due to its ability to accommodate a niche demand from tenants looking for smaller blocks of space. The property is currently leased to 8 tenants with staggered lease expiration dates over the next 5 years; minimizing potential losses in net operating income through diversification. Many of the contract rents are well below market; presenting huge upside potential to increase the property’s net operating income. In addition, many of the existing tenants have improved their spaces at their own cost and expense; increasing the likelihood that they will choose to renew at the expiration of their existing lease terms at the then market rate. The new owner will thus benefit from a higher net operating income without incurring transaction costs and vacancy losses.
The property is a half mile from Route 50, 1 mile from Route 28, and 4 miles from I-66. Dulles International Airport is less than 15 minutes down with road, and with e-commerce expected to grow by 10% in 2020, the property is ideally positioned as both a distribution center and last-mile facility. Rents in the submarket have increased by nearly 4% over the past 12 months and are currently $1.19/SF higher than the metro average. The 2019 RCM-SIOR Industrial Sentiment Report predicts increased capital investment and continued cap rate compression in 2020; leading to further appreciation and providing a solid, long-term outlook. In fact, the average submarket cap rate dropped by 0.2% from Q3 to Q4 2019 (currently 6.1%) and the average sales price per square foot increased by $32/SF in the same time (currently $147/SF) with the average vacancy at the time of sale being 14.2%. Median sales numbers are even more positive at $156/SF and a 5.4% cap rate with 0% vacancy at the time of sale. With no properties scheduled to deliver in the next 12 months, vacancy rates should continue to decline and rents should continue to grow.