By IRR January 2014

The retail property sector continued its recovery in 2013

shopping center
Investor interest in retail properties surging

Investor interest in retail properties surging, with many markets reporting that development activity has resumed. This comes as vacancy rates continued to decline throughout the year, while capitalization rates continued to compress and approach 2007’s historic lows. Retail transaction volumes weren’t as impressive as some other property sectors in 2013, but still exceeded 10-year average norms.

Out of IRR’s 63 reporting markets, only Atlanta and Greensboro observed that the local retail markets remained mired in recession. Meanwhile, 18 markets representing a wide geographic and population density spectrum reported that development activity has increased materially and the retail sector has again entered the expansion phase of the market cycle.

Retail transaction volumes, especially for “one off” or small portfolios of assets, weren’t as robust in the retail sector as experienced in the industrial or –most particularly-apartments sectors in 2013. Several large-scale ownership level transactions did occur in 2013, however, pushing up volume metrics in 2013.

By Real Estate Forum, January 2014

Mixing it Up in the Suburbs

Nina Gruen:   Ms. Real Estate

I cannot provide you with a one-size-fits-all recommendation. In order to identify the most financially rewarding product mix, you will have to undertake a market study that probes for the demographic characteristics and shopping, entertainment and lifestyle priorities of the households in the mid-rises. You cannot get the demand model you need just from the comparables.

In order to identify the appropriate product mix, you need to obtain answers to the following questions for those residents living within your market area.

  • Over the past ten years, what has been the growth rate of the primary demographic groups- pre-Baby boomers, Baby Boomers, X’ers and the Echo Boomers?
  • What percent of the above demographic groups have sufficient income to rent or purchase in a new building?
  • When #1 and #2 have been identified, you can make use of recent comparable to see which products have been most successful in renting or selling their product. It would be advantageous to employ a real estate marketing firm or have members of your staff speak with the management of these buildings to ascertain what the primary attractions are, as well as mistakes they wish had not been made.
  • Lastly, you will need to ascertain the amount of current and anticipated competition for the most desired product types, through your planning department or economic development departments.
  • Once you have identified the most appropriate market niche, you will have a leg up on the type of retail and service tenancies that can best serve your future renters or buyers, as well as those residing and/or working within a reasonable trade area.

I hope the above helps. I would have like to have provided you with a clear and direct answer as to the most appropriate product type. But Ms. Real Estate just isn’t that smart.

By Shopping Center Business, Monday, March 10, 2014

Improving Retail Sales and Leasing Activity

shopping center
Investor interest in retail properties surging.

Retail investment sales and leasing experienced an uptick in activity in 2013, a sign the slowly improving economy is finally trickling down to one of the sectors hit the hardest by the recession.

Retail investment sales in 2013 totaled approximately $60 billion, up seven percent year over year, according to Dan Fasulo, managing director of Real Capital Analytics. “Retail is not the best performing asset class, but certain segments of the market like strip centers outperformed in 2013,” he says.

A real sign of a healthy market is the diversity of participants acquiring properties, Fasulo says. “The retail market is seeing action from institutional investors, but also public and private REITs. Private buyers are back in a big way, partly fueled by CMBS resurgence.”

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