To Sell or Not to Sell Retail?
There's certainly compelling reasons to sell retail assets these days—there are fewer than 60 shopping centers of 100k SF or larger in development across the US, there's not a lot on the sales block, and investors are wagging their tongues (and wallets), says Fuqua Development's Jeff Fuqua. (If you need more reasons than that then you've got trust issues.)
We chatted with Jeff about the spurt of recent development his firm is undertaking—some eight projects either underway or in the pipeline in Atlanta—and selling projects once they're completed is on his mind (no reason to get too attached, you can't legally marry the projects): “We're weighing each of those options,” he says. We'll hear more about who's out in the market at our fourth annual Bisnow Atlanta Real Estate Summit next week.
Jeff says he will make that call on a project-by-project basis. So far, he's officially announced that organic grocer Sprouts will anchor his Peachtree Corners Market project, with PNC Bank, Verizon Wireless, and Zoe's Kitchen also part of the retailer lineup. (It also has that great circular landing pad for flying saucers.) And Jeff says Fuqua has begun construction on its Morningside project, which includes 35k SF of retail slated for an unnamed organic grocer and a 300-unit multifamily project developed by Mill Creek. Fuqua's also going before city planners for zoning approval next week for a mixed-use retail project at Scott Boulevard and North Decatur Road that will also include 250 apartment units, he says.
Cassidy Turley's Mark Joines tells us that in regards to retail investment, “the year started off in a slow fashion, but it's picking up steam quickly,” with more grocery-anchored portfolios hitting the market than we've seen in the past. (With all this money going into grocery stores, none of the carts should have faulty wheels anymore.) That's partly because the fundamentals of grocery-anchored centers have improved, with vacancies dropping. And this year should be active for REITs as well, he says. Mark and his partner Drew Fleming currently marketing Wesley Chapel Crossing in Decatur for Equity One and Freeway Junction, a 175k SF center in Stockbridge for Phillips Edison.
JLL's Kris Cooper (with his partner Margaret Caldwell) sees 2014 being “another record year” for retail investment sales activity, even if interest rates tick up further. “There's so much pent-up demand.” For investors, Kris says grocery-anchored and trophy malls still rule the roost. But as cap rates compress in those product types, some investors begin to dip into the Class-B and C categories. “Even some of those A investors are matriculating down to the Bs.”
Colliers International just released a roundup of its top retail sales in 2013, and as Collier's Scott Amoson points out, the trophy property is still gold with investors. (And not just participation trophies, this isn't youth soccer.) Where there are good Class-A plays, investors are going to snap them up, he says. But Colliers is also seeing investors—particularly those who don't have deep enough pockets to chase the huge portfolio deals—eye more selective Class-B strip centers in some areas. (Learn more about this hot sector by registering for next week's retail event.)