WHAT'S HAPPENING IN RETAIL INVESTMENT?
Written by: Grant Chaney, CCIM
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 throughout the rest of 2021.
As the world continues to evolve toward the end of the pandemic, there are many factors that show continued optimism in the retail real estate market as we enter the second half of 2021. As optimism increased throughout the year, so did investment activity which bottomed out early in Q1 2021. Since then, there has been significantly more buyer activity, inventory on the market, and closed deals. With interest rates near all-time lows and investor cash supply near all-time highs, the investment market is nearing pre-pandemic levels. Overall, publicly traded REITs have been the busiest, as they look to make up for lost time during the pandemic. From a tenant perspective, around the country pandemic restrictions have been lifted allowing for a return to the new normal. Consumer sentiment continues to grow signaling less vacancy and lower cap rates around the corner.
2021 1st Half Takeaways
Investment Activity: Retail investment activity has begun its climb up the mountain after hitting rock bottom in Q1 2021. Both National and Midwest markets have followed a similar trajectory, almost mimicking one another in recent quarters. As anchored cap rates continue to drop, the expectation is for investment activity to continue on an upward trend.
Current Inventory: We have yet to hit pre- pandemic levels regarding active listings, but there continues to be a significant uptick from the beginning of 2021, and we see that continuing throughout the remainder of 2021.
Cap Rate Compression: Overall, pricing for all centers cap rates have gone down in the last
2 quarters, but that is in large part due to the drastic decline in rate of anchored centers as investors look to well-known and high performing tenants to trust. Unanchored centers cap rates have been higher, but steady since the Q1 2021.
Cautious Optimism: With the sudden appearance of the Delta variant, consumers and investors remain cautiously optimistic in the health of the market. While retail real estate investment remains on the forefront in minds of buyers, some sellers are holding out waiting for the market to fully come around as many are predicting.
Tenants: Certain tenants have definitively made their mark through the pandemic as safe investments - grocers, auto part stores, discount stores. Conversely entertainment, big box department stores, and movie theaters have seen hardship and are only now beginning to rebound
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