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SAN DIEGO—Retail is back and the market is ready. Corporate tenants are expanding, franchise tenants are active, andthere is strong demand from both investors and tenants for qualityretail space. As the Western Division ICSC conference approaches,commercial real estate professionals in the West from VoitReal Estate Services, are optimistic about the future ofretail. And as this optimism grows, questions continue to ariseamong retail owners, developers, and tenants. The firm's SVPMark Caston; Kit Graski, SVP;George Okinaka, senior associate; andSpencer Kerrigan, an associate, recentlycollaborated to exclusively provide their insights to GlobeSt.comon these pressing questions.

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GlobeSt.com: How will cap rates change over the next12 months?

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Voit Retail Brokers:As the markettightens over the next year, cap rates will certainly compressfurther.

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Because historically low cost of capital has already compressedrates, vacancy rates throughout the Western US continue to go down,and lease rates are rising, buyers are hurrying to acquire retailas quickly as possible.

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This trend will change, however, when interest ratesincrease. At that time, cap rate compression will cease.

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In the meantime, sellers in the current market can command a lowcap rate and high price, but are having difficulty identifyingup-leg exchange opportunities. The best solution to this challengeis working with a broker who can help to identify off-marketacquisition opportunities, as prices for these deals may beslightly lower due to less competitive bidding.

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Currently, single tenant net lease deals backed by strong creditcontinue to be the preferred investment for those willing to pay apremium price for lower risk.

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What retail sectors will grow fastest in the nearfuture?

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Voit Retail Brokers:Wellness, fitnessand healthcare are particularly active areas for retail, and arepoised for additional growth in the immediate future.

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From specialty fitness, farm-to-table food, and healthy quickservice restaurants, to medical uses in retail space, the marketwill continue to support health and wellness retailers. This trendwill continue for the foreseeable future due to the depth of theaging population in the US.

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GlobeSt.com: What's next forretail?

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Voit Retail Brokers:Vacancies willcontinue to decline, retail development will recommence, andfurther retailer expansions are projected.

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Quick-service restaurants are demonstrating an early lead inthese expansions, and there will likely be a further influx of QSRsthroughout the Western US in the coming years.

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In addition, the trend of retailers with larger store footprintsintroducing smaller prototypes for infill locations, urban andmixed-use areas will continue.

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Consolidation of retailers, such as Family Dollar and DollarTree, will continue, resulting in excess or duplicate locationssimilar to what has happened with Office Depot and Office Max. Thiswill be an area of opportunity for owners to diversify their retailmix with newer concepts.

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The Las Vegas strip is a specifically hot growth area. There arealready several retail-focused developments in the works on thestrip, and many retailers are now considering this location as aprimary target. For example, Voit represented Famous Footwearas they opened a location on the strip last year, and the retaileris performing above expectations. As other retailers take notice ofretail success on the strip, retail openings on the strip arelikely to increase.

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The retail market is heating up, and those who are poised totake advantage of the opportunities as they come will reap thebenefits.

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.