Underwriting Retail MLAs in ARGUS
Does anyone have a good process/methodology to do this? I feel like I have a good grasp of underwriting office (Usually easy to find comps per floor, etc) but I lack good methodology set market rents for retail. I try to split the site up between smaller SFs <2500, between 2500 and 5000, mid box, big box, etc. Anyone have any insight?
I'm currently underwriting a new project, approximately 100k SF with good credit, fully occupied, and high rents. Would it be wrong to put market rents slightly above in-place since we're fully occupied? Retail is very strong in my market with extremely tight vacancy rates and increasing rents.
I would also consider what generation each space is. If space condition varies, create MLA profiles for 1st gen, 2nd gen spaces etc.
No point in jacking up TIs on spaces that have recently undergone heavy reno. On the contrary, late generation spaces might need more TIs.
Call up the right leasing agent and ask them, if you're not familiar with the market/asset class/neighborhood. At 100K SF fully occupied, the good leasing agents in that market will be familiar with the asset, if they haven't already done a deal there in the past. Not sure how much property level information you have access to, might be able to find on costar or through some googling if not, but you can find which agent did the latest deals there, and they'll tell you. Obviously want to be careful with information they give if you've never worked with them before, so call a couple of the best market leasing agents you can get a hold of and take the mid point of their assumptions. “Trust but verify”
Not sure if you're coming from a debt or equity shop, but if you're an equity guy, tell them you are sizing the property up, and the good ones will intuitively know they have a shot at a landlord rep assignment if they cooperate.
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