Q3 RETAIL INVESTMENT UPDATE
Written by: Grant 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. Keep reading for Grant’s take on the current state of the Midwest retail investment market and what we can expect in coming months.
Heading into the final quarter of 2021, we are seeing the resilience of retail sales as volume returns and cap rates return to pre-pandemic levels. With markets across the Midwest returning to normal earlier this year, and the absence shutdowns caused by the delta variant, optimism in the retail market continues across the sector. Now more than ever, cheap rates and massive cash stockpiles are searching for yield as cap rates continue to plummet. As rates start to increase, we anticipate it will only increase the urgency in which investors look to close deals and place capital quickly.
Third Quarter Takeaways
Investment Activity: Retail investment activity is gradually increasing with shopping centers starting to trade more frequently. Quarterly sales volume for National and Midwest markets have nearly tripled since 2021 Q1.
Current Inventory: Active listings remain lower than pre-pandemic levels, but we’ve seen a big increase from the last 2-3 quarters. With buyers getting more aggressive and less COVID discounts, sellers are now more willing to list properties.
Cap Rate Compression: With less inventory on the market, but money to be spent by investors, cap rates are continuing to compress. Although, according to the data, cap rates for Midwest anchored centers are an outlier and have jumped significantly since Q1 2021. Over the next 2 quarters, we expect those cap rates to return to pre-pandemic levels as well.
Tenants: Unanchored tenants, such as services and nonessentials, were hit hard during the pandemic. However, they have started to recover and are receiving more positive interest from the investment community.
Click here to view the full report. Reach out to Grant at 614-437-4569 for more information on retail investment.