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Private Investors Buy Up Retail Real Estate as Bigger Players Remain Cautious

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Private investors are exploding real estate in shopping centers and other physical stores. This is a bullish sign of the needy retail real estate sector as it is stronger than expected from the Covid-19 pandemic.

While many real estate trusts and other large companies remain cautious, the sale of personal real estate is increasing to family offices, wealthy individuals and small private investment firms. According to real estate services companies, these buyers, who are more agile than large companies, were responsible for nearly three-quarters of the 2021 retail asset acquisitions, up 30% from the 10-year historical average.

JLL..

If current trends continue, brokers expect REITs and major institutions to drive these small investors into the market. Danny Finkle, co-head of JLL’s retail capital markets, said:

New investors’ interest in retail is turning around for sectors that have struggled to adapt to the rise in e-commerce since before the pandemic.

According to MSCI Real Assets, US retail real estate transaction volume surged to about $ 82 billion last year, up 24% from 2019. Enthusiasm continued in the first quarter of this year, with trading volumes reaching $ 25 billion by April 30, an increase of 82% compared to the same period in 2021.

Investors are warming up to retail, partly due to migration favoring suburban shopping. Increasing popularity of open-air shopping centers.. Meanwhile, retailers who have survived the first blockade of the pandemic and the surge in online shopping have found that many customers still want to shop directly.

Since the surge at the start of the pandemic, e-commerce sales have declined as a percentage of total retail sales. According to JLL, online sales accounted for 14.3% of total retail sales in the previous quarter, still higher than before the pandemic, but down from 16.4% in the second quarter of 2020.

Many retailers are paying rent on time, looking to expand, and competing for an increasingly limited square foot. According to JLL, new retail development has been delayed since 2009 and supply shortages are beginning to push up rents.

Time Equities, a private investor, has found that competition has become increasingly fierce, especially with other private investors and hedge funds, since late 2020. New bidders are particularly willing to bid on shopping centers and real estate fixed in grocery stores in more remote areas of the country.

“Not only was things stable, but the situation has improved to some of the best fundamentals I’ve seen since 2007, probably better,” Ziff said.

Commercial real estate is also attractive to investors, especially when compared to popular commercial real estate types such as warehouses and rental apartments, as prices and returns remain attractive. According to data from Bloomberg, Nalight and Green Street, almost all real estate types have declined since the beginning of the year, but retail REITs outperform apartments and industrial stocks.

In Port Charlotte, Florida, a small city on the Gulf Coast, halfway between Sarasota and Fort Myers, earlier this year,

Office depot..

The center attracted 19 bidders, primarily private investors, and was sold for $ 19 million last month, according to Jim Misharac, managing partner of Plaza Advisors. A broker representing a seller, a private equity group based in New York.

The low retail supply in the region, 83% occupancy of shopping centers and plans for the ODP to depart by next year also provided new owners with the opportunity to add high-value tenants. The bid was strong. Miharak said buyers are confident that retailer demand is strong enough to fill the space with attractive rents, and two possible tenants are already considering anchor locations.

“Private investors have moved to the acquisition of shopping centers because of the higher yields compared to other real estate,” said Michalak.

Investing in retail is still a risky business. According to MSCI Real Assets, rising interest rates have stagnated some transactions, and total commercial real estate sales in April increased for the 13th consecutive month compared to the same month in 2021. It decreased by 16%.

However, Finkle and others said they expect retail assets to continue to attract capital.

“I think people are trying to understand if a recession is coming and what the degree of inflation will be,” he said. “But as long as retail fundamentals continue to work, investors will continue to invest in retail assets.”

Write to Kate king [email protected]

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