After having the pleasure of moderating the ACRE SoCal 2016 Retail Forecast for the second year in a row, I was happy to hear a similar upbeat and optimistic tone for 2016. The panel consisting of John Chun of HFF, Matt Hammond of Coreland Companies, Kostas Kavayiotidis of PSRS, Carlos Lopez of Hanley Investment Group and Dave O’Connell of CBM shared their insights with the audience for the year ahead.
On the leasing side of the business, tenants have shown great activity for well-located spaces. Both Matt Hammond and Dave O’Connell shared their recent experiences of having multiple offers on available spaces. Additionally, landlords’ concerns for having highly leveraged tenants leasing space have been assuaged since the tenants are entering these deals with strong financials and good equity positioning. The theme of offering experiential shopping continues to permeate the retail sector. Added amenities such as bike racks and nicely finished gathering areas are becoming commonly expected by shoppers and retailers alike.
For the investment sales sector, Carlos Lopez shared that the investment community is still robust and seeking well-located, credit-tenant occupied centers. Supermarket anchored centers with food and service-oriented shop space continue to attract investors. While these may be widely sought after investment targets, the best news was the high volume of offers on these types of assets. Foreign investors and 1031 Exchange buyers continue to play a large role in this investment arena.
Also, from our team’s experience at SDA, the net leased sector has shown a steady flow of interest with 1031 Exchange and high-net worth investors continuing to lead the charge on acquiring long-term single tenant and multi-tenant net leased assets with credit tenants in-place. Cap rates for these assets have remained low and lack of supply continues to keep this the status quo for the foreseeable future.
John Chun and Kostas Kavayiotidis opined on the debt markets and both echoed that the available debt is well-priced and allowing for long-term placement of very attractive rates. Owners have the ability to refinance and allocate funds to reinvest in their existing inventory or continue acquiring new properties. Investors can acquire new assets with this advantageous financing and enjoy the margins as the rents increase over the hold period.
Overall, the outlook for 2016 is positive and all the panelists agreed that the year should have a high volume of transactions. The debt markets are continuing to allow for favorable financing, tenants are still expanding and showing interest in well-located spaces while investors are actively seeking new assets to acquire for long-term holds or repositioning opportunities. All good signs for the year ahead!
Now to find some more deals…
Real Tales 