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Retail investment declines by 18.7% as retail investors adopt a more focused, strategic approach to deals
The current retail climate has investors shying away from risk and, in turn, retail transaction activity decreased by 18.7 percent at midyear, with $27.0 billion in transaction volume. Portfolio activity in particular has declined by 14.2 percent year-over-year from 2016, though liquidity exists for strategic, large-scale partnerships and portfolio deals where quality opportunities arise.
Given the undeniable uncertainty of retail now, investors will remain selective in their purchases but will likely make bold moves for the right large transactions when they present themselves. Though transacting less frequently, retail will continue to see large, strategic deals executed in the coming quarters, as opposed to smaller, lower-return deals.
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Private investors are driving liquidity in struggling retail markets
With mall and power center product flooding the market, long term institutional and REIT investors are looking to rightsize their retail holdings, focusing on core assets and aggressively acquiring other well-performing, strategically aligned assets.
Institutional and REIT investors stray from mall and power center product in H1 2017
Institutional mall investment drops 94.9% at midyear, while REIT specialized purpose volume drops 96.3%
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Risk aversion remains the norm in retail, even in grocery-anchored assets
There is currently a broad opposition to risk across all retail product types, and to some surprise, this includes grocery-anchored shopping centers, which are generally thought to be one of the more stable retail investments in the current climate.
With this shift in grocery perception, reputable grocery owners like Brixmor and Kimco are continuing to shed lower-performing assets. Brixmor, for example, disposed of a number of grocery-anchored centers in the first half of the year including Eustis Village Shopping Center, located in Southeast Florida. The Publix-anchored property sold to Slate Retail for $23.5 million, or $150 per square foot in May. Following suit, investors are likely to remain hesitant on retail in the short-term, streamlining portfolios through the remainder of the year. In the mid-to long term, disruption fears will wane as the true impact becomes a reality, and the appetite for risk will begin to normalize toward the end of the year into early 2018.
Despite grocery’s stable reputation, grocery volume declined by 31.1 percent at midyear
Grocery-anchored transaction volume (billions of $US)
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