Inflation, Downsizing Good for Core Markets

IRVINE, CA-Core retail assets can benefit from rising interest rates in the long run, as long as they’re well capitalized, Reza Etedali, head of REZA Investment Group tells GlobeSt.com. “There seems to be a lot of uncertainty among investors about the potential for rising interest rates and rising cap rates, but our feeling is that well-located assets in core markets that have good long-term capital behind them will weather any kind of macro market challenges that come.”

Another factor impacting retailers is box downsizing. Etedali says that space downsizing in well-located properties in core markets creates an opportunity to reduce a credit tenant’s space and charge higher rent for the reduced square footage, combined with putting a good tenant with higher rent in the space next door. “The net effect has been good in stronger markets, although it could be a challenge in inferior locations.”