Retail Sector Posting Healthy Improvements as Investors Return
Retail Traffic reports: Last year, retail sales activity was largely constricted to high-quality properties in top markets. This year, the story has changed significantly, with Retail Traffic citing data aggregated by Real Capital Analytics (RCA) to state that, “The investment sales market for retail properties is heating up as buyers feel more confidence in the economy and financing has become easier to obtain.” In April alone, $1.6 billion in retail properties valued over $2.5 million traded, or nearly a 40% increase from last year. Year-to-date, $7.9 billion in retail deals have closed, while another $16.0 billion are currently in contract.
Further supporting Retail Traffic’s bullish outlook on its sector of focus, offerings over the first four months of 2011 reached $4.5 billion, which was up by 63% from one year ago, and, according to RCA’s historical data, the highest level of offering since the fall of 2008.
Retail Traffic identified two main reasons retail buyers are getting back into acquisition-mode: improving retail sales and record-low interest rates on loans used to acquire retail properties. The former has encouraged retailers to go from “…shutting down new opening plans in 2008 to mulling expansion in 2010 to actually signing leases this year” while the latter has “…given urgency to investors’ desire to get deals done before the Federal Reserve raises the benchmark.”
Finally, investors may be leaping back into retail acquisition before initial yields fall back to pre-recession lows. RCA has tracked a 20 basis point decline in retail cap rates since the start of 2011.
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Posted by: Nina Turner