Q1 2022 RETAIL INVESTMENT UPDATE
Written by: Grant Chaney, CCIM and Brent Chaney
Grant Chaney’s primary role at Colliers is assisting and consulting commercial real estate owners with the valuation of properties, performing in-depth analysis on investment scenarios, and representation in the sale of commercial investment properties. Prior to his current position, Grant was the analyst for Colliers Columbus. Having a background in research and analysis enables him to bring a unique skill set to his team and clients’ portfolio. Brent’s primary role at Colliers is assisting and consulting commercial real estate owners with the valuation of properties, performing in-depth analysis on investment scenarios, and representation in the sale of commercial investment properties. Brent’s primary focus is helping clients achieve their investment goals with less stress, effort and wasted time, while providing them the highest possible return on investment. Prior to his current position, Brent was an investment representative at Fifth Third Securities. Keep reading for Grant and Brent’s take on the current state of the Midwest retail investment market and what we can expect throughout the rest of the year.
Retail sales volume fell more in line with pre-pandemic levels in Q1 following one of the largest quarters in the last 5 years (Q4 2021). Interest rate increases were, and remain, the predominant topic in retail sales with many wondering how the swift increases in rates will affect cap rates and sales volumes moving forward.
First Quarter Takeaways
Investment Activity: Retail investment activity for the Midwest pulled back slightly in Q1 but is the second highest since 2018 after setting a high in Q4 2021. National investment activity had a more significant pullback in Q1, registering the fifth highest quarter since 2018. This is on trend as Q1 has seen a pullback every year since Q1 2018. The Midwest and National sales volume was still three times and two times Q1 2021, respectively.
Current Inventory: Inventory has seen a slight increase quarter to quarter. Much of this is attributed to increasing interest rates throughout Q1 with expectations of continued increases throughout 2022. Many owners are getting their properties listed to try and take advantage of low cap rates while interest rates remain low.
Cap Rate Compression: Net lease cap rates have remained steady with some additional compression, but we expect them to increase with the rapid rise in interest rates at the end of Q1 and continuing throughout 2022.
Pricing Growth: Grocery-anchored centers continue to be a very desirable segment of retail with the price per square foot being the highest since Q4 2017 for Midwest markets and Q2 2018 for National markets. Unanchored centers continued to increase as well in Q1 to $225.88 psf Nationally, which is the highest we’ve seen since before 2015.
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