IMC Deal Could Perk Up High Point Real Estate Sales
Heath E Combs -- Furniture Today, June 2, 2011
HIGH POINT - The sale of three of High Point's biggest market properties could be a boon to demand for showroom real estate in a market that has struggled since the Las Vegas Market opened in 2005, the housing bubble burst a couple years later and the recession set in.
The decline hit just a few years after a boom decade for the furniture industry, in which the High Point Market added about 3 million square feet of showrooms.
While the real estate market picked up a bit this year even before the big International Market Centers deal - as David Michael Inc. purchased a 16,680-square-foot building at 521 N. Hamilton St. and New Classic Home Furnishings bought about 40,000 square feet at 135 S. Hamilton St. - local property owners say it's been a difficult few years.
High Point currently has about 10.5 million square feet of active showrooms, according to the city, which collects a showroom tax on the space. That number doesn't include showrooms outside city limits, like that of Lexington Home Brands in nearby Thomasville, N.C.
The market is down from its peak a few years ago, when estimates ranged as high as 13 million available square feet in High Point.
The recent International Market Centers showroom deal should add stability the city's market-related real estate, said Ed Price, president of Ed Price and Associates, a High Point commercial and residential realty firm. The IMC has acquired the International Home Furnishings Center and the former Merchandise Mart Properties Inc. holdings and intends to buy the Showplace properties as well. When the deal for Showplace is done, IMC will own about 60% of High Point's active showroom space.
One problem in the past few years has been that banks have been reluctant to finance purchases, said Price, whose firm currently is listing about 13 showroom buildings for sale.
"I go to bankers now, to try to sell showrooms and get a loan on it, and it's like, ‘Hey these are nice people and they make nice furniture. And here's the back door.' They just don't want to make loans. They've been questioning the furniture market the last three or four years," he said.
In part, that is because there's been uncertainty regarding what would happen as High Point faced competition from Las Vegas, he said.
That competitive picture is changing, since the International Market Centers also is acquiring the World Market Center buildings, uniting much of High Point and Las Vegas under common ownership.
Calvin Reynolds of Calvin Reynolds and Associates, a real estate developer who has worked on showroom projects in High Point, said he's hopeful the IMC purchase will bring stability to the real estate market.
Reynolds said the demand for showroom space has been weak, with few buyers and "tremendous vacancies." But he said the big deal won't necessarily make all market-related real estate more saleable.
"Everyone pretty much knows it's a deal-by-deal basis," Reynolds said.
He said, however, that he hopes that the IMC sale results in less aggressive practices between buildings to steal tenants from each other - a sentiment shared by others involved in local real estate, like industry veteran Ivan Garry, a broker with Price Commercial Properties who also operates High Point Furniture Market Services.
"We certainly won't have the fierce competition you had between these major showroom freestanding entities where they were battling each other back and forth and lease rates were going down. I don't think they'll go down any more," Garry said.
He said consolidation will likely be a good thing for High Point, as the new buyers aim to pay down debt and provide a return for investors. It'll likely help some properties sell in the city - although other space will likely remain unsold because it's undesirable, he said.
"We've still got a bunch of that stuff around and that's where you're seeing the vacant signs, either for lease or for sale," Garry said.
In contrast, the market for better showrooms should improve, he said, especially for space that is "well located and within the magic three square block radius from the intersection of Commerce and Main."