4 Pressing Retail Market Questions
From ever expanding high street retail to dead suburban malls, the retail market recovery has had its share of dramatic highs and lows. That’s why we’re excited to explore its next act at Bisnow’s 5th Annual Retail Real Estate Summit on Feb. 18 at Trump International Hotel & Tower, starting at 7am. Here are four of the most burning questions answered.
1. If I own retail property, is it a good time to sell?
100%, says Next Realty managing director Eteri Zaslavsky. Demand for retail properties is off the charts, national retailers’ sales are stabilized and there’s so much cheap financing available (even for less attractive deals like no-credit single-tenant retail). The biggest issue for buyers? It’s getting much harder to find value-add, Eteri says. Most opportunistic plays have already been executed, and those 10-year CMBS loans maturing in ’14 to ’17 have almost all been refinanced or are in process. So rather than finding a 70% occupied center and hoping to boost it to 90%, value-add today is most likely new development, Eteri tells us.
2. What if I’m not a developer?
Eteri views deals as either value-add or value-keep (core or core plus), which is where Next, owner of 1M SF across 20 retail properties, is currently focused. That means stable, fully leased properties where you can find attractive financing, decent yield and put it in a drawer, she says. In that vein, the firm just purchased a Heinen’s-anchored shopping center in Barrington (pictured) from developer Hamilton Partners. While the niche grocery trend has been analyzed to the extreme, Next believes in Cleveland-based Heinen’s staying power (full disclosure: Eteri’s from Cleveland) as it works up to four Chicago area locations.
3. What’s the scoop on urban infill?
Revision Group co-founder Scott Goldman (pictured on the left at one of Bisnow's Escape Ascent invite-only cocktail events last summer) is seeing the marketplace providing for a deep pool of tenants paying record rents for Main and Main, top-quality retail locations. Outside of the active fashion world in the high street corridors (Oak, Rush, Michigan), there’s been an uptick in international tenancy and online tenants planting brick-and-mortar roots. Traditional retailers and quick-service food users are attracted to dense urban neighborhoods like Uptown, he says. Revision’s also seeing a lot of interest from healthcare tenants. The firm recently did an urgent care deal at its Gladstone Plaza redevelopment (below) at 5224-8 Northwest Hwy (the balance will be national, service-oriented tenants), and has another project in Edgewater attracting medical users, he says.
4. How is the economy affecting the investment climate?
Scott is concerned that the American and global economies have a very weak foundation (like back in ’07). The market’s supply/demand imbalance is being fueled by access to capital and demand for assets, and there’s a tremendous amount of foreign money coming into US real estate, he says. Coupled with low interest rates, that’s made this a great time to sell, but those temporary flows of capital could easily flow the other way. If and when they do, it’s bad news for real estate unless there’s a broader economic recovery, Scott says. Revision sold an Evanston Starbucks to a private investor Monday, a deal brokered by Baum Realty Group.