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 the rest of 2021.
After the disruption in the retail real estate market in 2020, consumer sentiment is beginning to improve which, in turn, has helped investment activity ramp back up. In addition, net absorption experienced its first quarterly gain since the end of 2019. Investors who had to sit on the sidelines most of 2020 because of the lack of inventory on the market, are looking to buy and have capital to spend. Overall, the market has experienced an evolution as consumer habits have shifted. Establishments that have a sufficient model to weather the pandemic have benefited. Tenants unable to adjust to the new norm have led owners and investors to contemplate redeveloping the property or re-evaluate the use of the space. However, as the pandemic regulations wind down, we are expecting a shift back towards normalcy.
2020 Market Takeaways
Investment Activity: Investment activity is still on a gradual decline since 2015 highs, but saw an increase in activity for the Midwest in the last quarter of 2020. Nationwide investment activity continues a downward slope, but based on anchored retail’s recovery there could be a comeback in 2021 as cash-heavy investors look for opportunities to deploy capital
Current Inventory: Active listings were still down during the second half of 2020, but there was a substantial uptick in the final months of the year which we believe will continue into 2021
Pricing Uncertainty: Investors experience volatile jumps and dips in pricing for different retail property classes. Anchored cap rates saw a significant drop in the Midwest while unanchored cap rates increased in Q4
Essential Businesses: Essential business tenants are highly desirable for risk-averse investors because of their ability to pay rent, not fall into a debt spiral, and often are more profitable during these times. The biggest winners are grocers, home improvement stores, auto stores, discount stores, and fast food restaurants
Hardest Hit: Lockdowns, fear of contagion, and lack of mobility has significantly hurt establishments that depend on social interaction. Additionally, working from home and limited entertainment options have hurt venues that rely on people dressing up. The hardest hit includes apparel and department stores, restaurants, and entertainment establishments such as movie theaters and theme parks
Click here to view the full report. Reach out to Grant at 614-437-4569.