CHICAGO-According to the Jones Lang LaSalle 2010 Retail Outlook, retail transactions and sales volumes are expected to increase as customer demand begins to gradually pick up. Additionally, investors looking to make a purchase when acquisition prices are at their lowest are likely to find value in class A trophy shopping malls in 2010.
An increase in sales volumes will be a welcome sign of recovery after the severe decline experienced in 2008 and the first three quarters of 2009. The JLL report states “retail property transaction volume fell 66% from total year-end volumes of $56.3 billion in 2007, to a mere $19.2 billion for total year 2008.” Additionally, so far in 2009, not taking into account the November and early December numbers, transaction volume declined 71% from 2008, to $5.6 billion.
“The continued lack of liquidity in the debt markets has contributed to pent-up demand, and we expect opportunistic investors to cautiously re-enter the market in early 2010,” says Kris Cooper, managing director in the retail investment sales practice. “We’re just now seeing lenders’ willingness to lend to strong sponsors open up, but those lending offers are at far more conservative levels than we’ve seen in the past.”
Still, this does not mean retail properties will begin trading at rapid rates. Highly-leverages institutional investors are likely to hold on to properties unless forced to dispose of them because of pending debt maturities or of the need for capital.
“Some buyers are coming around as many believe the bottom of the market has finally been reached,” Cooper says. “Buyers will probably stick around for the next six to nine months before seeking better opportunities. We are also seeing significant interest from international buyers who feel now is the time to re-enter the US market.”
As a sign of better things to come, JLL cites its recent retail asset sales over the past three months. The retail investment sales team has completed roughly $50 million in sales, including the $17.8 million sale of the Arsenal Plaza in Watertown NY, a $16.5 million sale in Southington, CT and a $22.5 million sale in Lowell, MA.
“Contrary to current conventional wisdom, we are experiencing growing demand for a wide range of retail properties. Supermarket-anchored properties continue to garner the most interest, along with other risk-averse single-tenant assets,” says Jim Koury, managing director of the retail investment sales practice. “However, we are also seeing demand for non-supermarket anchored properties with credit tenants trade in a respectable mid to high to 8 percent cap ranges in select major metro markets. Developable land is also starting to garner interest as tenants, seeing an end to the downturn, start making 2010 to 2011 commitments for the choicest locations.”