The retail investment sector is ready to burst, and investment sales brokers agree that there has been a clear rise in requests for suitable retail investment properties. One major driving force behind retail acquisition is the re-born availability to finance large acquisitions of not only single properties but large portfolios of retail-heavy assets. Banks are now once again lending on retail, most likely due to the more optimistic outlook on leasing activity in and around the N.Y. Metro area.
As trend-setting leases are inked, many institutional investors are seeing their opportunity to gain enormous exposure and secure their stance within the retail market. In 2012 alone, the number of closed transactions for retail properties sky-rocketed 20%, and total volume rose 7%. At the beginning of 2013, this number is still over ten percent lower than retail was being sold for at its peak. The vast majority of investors are still expressing very strong interest in retail, and the steady decline in CAP rates has not thwarted potential suitors, although research suggests that retail properties in default will soon be brought to the market by lending institutions and will help stabilize the market and make retail investment more attractive and accessible to a multitude of investors. In addition to delinquent loans on a variety of retail assets, class B and class C assets in Manhattan and the boroughs have come to the market, at higher CAP Rates, and have quietly convinced a handful of institutions to invest outside of Manhattan.
Investment sales and advisory firm Berko & Associates president, Joe Berko, confirms that New York brokers have seen a sharp rise in activity recently, and adds that due to potential upcoming economic and political concerns, investors are aggressively looking to allocate funds into top-quality retail assets. Most recently, notes a senior associate at Berko, he had received bids upwards of $6,000 per s/f for a mixed-use property with a long term retail lease on the Upper East Side, exhibiting the willingness of institutional investors to appropriate exorbitant portions of their funds towards stable retail properties in paramount locations.
Retail is very cyclical, and seems to be on its way up. The influx of investment into the sector is a reassuring signal of the market’s recovery and bodes well for investors looking for a safe haven for their funds in a high-growth locale with tremendous opportunity and the ability to create a highly visible footprint on the New York City market.
Lee Silpe is the senior analyst at Berko & Associates, New York, N.Y.