Investors Moving Back Into Retail

At PGP, we have been talking about the "rotation" out of multi-family assets - at least those Class-A properties that have seen cap-rates compress to the 5% levels - and into better priced retail and office assets (see this blog post here from back in June).

There is a story out from CoStar talking again about the flow of investor money into retail, and this seems to be underscored by the improving economy and retail demand that we are starting to see.

Granted, most of the appetite has been in the higher-end mall category and is being dominated by the larger institutional buyers, but we are willing to be patient as we accumulate a portfolio of solid neighborhood centers at excellent values.

From the article:

A variety of factors, including rising rental rates, stronger tenant sales and a dwindling supply of quality well-located shopping center space, are causing U.S. and offshore investors to move back into the retail real estate sector, the last of the four major commercial property types to enter full recovery.

Just as U.S. retailers appear to be once again entering expansion mode, large mall operators are enjoying higher rents as leases expire in low-vacancy centers, giving landlords the leverage to negotiate rent bumps at renewal or reletting. Macerich reported leasing spreads of 17.5% at midyear. Taubman reported a 29% average increase at rent rollover, while Simon and General Growth Properties logged spreads of 18.4% and 10.4%, respectively, according to CoStar Portfolio Strategy. Seeing those kinds of income streams, investors have flocked back into retail -- focusing especially on higher quality malls. Based on preliminary third-quarter CoStar data, 2015 will likely end as a record year for retail investment volume, with strong gains in pricing over the course of 2015, according to the CoStar Commercial Repeat Sale Index (CCRSI).

Entire Article Here:


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Prudent Growth Partners, LLC  (2020)    1829 E. Franklin St, Suite 800-F, Chapel Hill, NC 27514  (919) 590-4119