2023 Summary
2023 was another tumultuous year as inflation, high-interest rates, and general economic headwinds continued to affect both the national and local economies. The Branson market’s performance remained steady, however, after several years of record-breaking visitation. Although final numbers were not available at this time, it appears that visitation was flat to minimally down from the 10.2 million visitors when compared to the record years of 2021 and 2022. Tax collections for the Tourism Enhancement District recorded an 11% increase year over year and set another record for collections of over $12 million.
All commercial property sectors remained strong as occupancies improved in all sectors, even above last year’s high occupancy rates. All commercial property sectors and classes are at or near full occupancy. Rents for the warehouse/ industrial sector showed the largest rate increases while retail and office remained relatively flat compared to last year. It appears that landlords were concerned about the projected recession and chose to not increase rents or increase them only minimally last year. Knowledgeable owners did increase common area maintenance charges when possible due to higher insurance rates and general operating expenses.
Few commercial properties are currently available for lease and even fewer are available for sale. Owners who have acceptable financing in place have no reason to sell as there is such a limited amount of inventory available to replace their investment, New, usually higher-cost financing makes available properties unattractive for 1031 exchanges. In addition, current property owners who have financing in the 3% range are facing up to 7%+ to refinance and in some cases, if rents won’t justify the higher debt service additional equity will be required, and or increased net operating income will be necessary. Retail sales tax collections did set another record, however, only a 3% increase was recorded, probably barely keeping up with inflation.
Land sales remain challenged as lenders are stingy with acquisition and development loans. Higher interest rates made it difficult to finance many planned development projects. Commercial construction remained active with several public projects that either started or continued during the year. Little to no new inventory was added to the office and retail market segments. Only the industrial/warehouse segment saw new production with new inventory focused primarily on the office/warehouse segment.
Lodging properties continued their strong performance although slightly less than the prior year. Occupancies were the only performance segment that increased, reaching just over 50%. Both Average Daily Rates and Revenue Per Available Room we down slightly. Tourism tax collections for the lodging segments declined 2.2% over the previous year with a solid 8.6% increase in collections for the nightly rental segment. This fact is more proof that the market is demanding newer lodging properties with more amenities than the current motel/ hotel inventory. No new hotel inventory has been added in over 17 years. The strongest, highest revenue and occupancy is being generated by the higher quality hotel properties further reflecting a need for these types of rooms.
Based on the total number of multifamily units available in the market for rent, the number of units vacant in the county we estimate to be in the 8% vacancy rate range. This rate generally reflects vacancies in the January and February months when many seasonal workers and residents might not be living in the area. Typically, vacancy rates drop beginning in March/April. Traditional apartments (3+ units) rent for between $520 to $800+ a month while two- to three-bedroom units rent for $850 to $1,100+, which we believe is well below the rent needed to support new construction for these types of units.
Residential demand typically follows commercial development, and the Tri-Lakes area continues to suffer from a shortage of housing inventory. We’ve asked Brad Gore, a long-time area REALTOR to provide us with some details about the residential housing market later in this report. Conversion of older motel properties will continue to slow as several hundred new apartment and dormitory units are being built by The City of Branson, Silver Dollar City and Big Cedar Properties. These new units will help support the temporary summer workforce and relieve some of the inventory shortage for year-round workforce housing.
After a start to such an uncertain year, it appears Branson continues to perform well as compared to other tourist destination markets.
Now in our 19th year, Commercial One Brokers are happy to support this area and provide this market report for all our clients, lenders, and friends. We thank everyone for their continued support and another great year as we are looking forward to 2024.
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4 2023 Summary
6 Retail Market
8 Office Market
9 Lodging Market
10 Industrial Properties Market
12 Residential Market
14 Miscellaneous Market Thoughts