Part 2 of 2

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LOS ANGELES—As we wrote in part one of this two-part series inpreparation for the upcoming ICSC Western States conference, dealsin the retail space are very much still happening. According toShauna Mattis, a SVP at JLL, the company gets calls every day fromprospective retailers looking to open new stores.

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“Retail is evolving, not declining, to meet the demands oftoday's consumers,” says Mattis. “As a result, some stores willclose when they are no longer relevant but others will come in totake their place. It's a healthy part of our industry, even ifit is sometimes painful along the way, and keeps the retail horizonexciting in the future.”

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Joseph Williams, SVP of the Woodmont Co., tells GlobeSt.com thatwith consumer metrics strong and the continuation of store closuresand right-sizing, there is tremendous opportunity for bothlandlord's and tenant's in the West Coast retail landscape. “TheInternet will continue to erode brick and mortar sales, but itsimpact is over-hyped in the news.”

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Williams explains that the larger issue is that the US isover-stored at 24 square feet of retail per capita, highest in theworld; and the department store model, and thus the regional mallmodel, has become antiquated. “While this will continue to resultin closures, it also presents opportunity throughout the West Coastas dominant top tier retail venues will become even more dominantas lesser performing venues fail and need to change.”

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The retail closures, he adds, may also yield opportunities foremerging retailers and restaurants to penetrate legacy assets inhigh barrier to entry markets. “To get it right and survive,today's retail must focus on experience and convenienceincorporating food and entertainment with a diverse merchandisingmix.”

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When we spoke with Patrick S. Donahue, chairman and CEO ofDonahue Schriber, he said that “While the narrative in the presscontinues to herald the problems of retail, our fundamentals havenever been better. We are 97% occupied with average base rents atrecord highs.”

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He also pointed out that there is a complete lack of new supplywhich translates to competition. “We believe this lack of newsupply of space will continue as a positive driver to the overallfundamentals in our portfolio for at least the next two to threeyears. We continue to have strong interest from restaurants,beauty, fitness, and service tenants. I would certainly ratherhave a poor narrative with great fundamentals versus the other wayaround.”

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Stan Johnson Co. regional managing director, Myles Helm, tellsGlobeSt.com that in the single tenant net lease retail category,overall sales volumes have trended upward each quarter since Q22016 except during Q2 2017.

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“Retail cap rates, on average, have remained somewhat stableholding at approximately 6.1% during the past year,” he explains.“Headwinds created by the possibility of rising interest rates,coupled with retail tenants closing stores or reducing their newopenings in response to increasing internet sales, has resulted ina temporary pause by some retail single tenant net lease investors,particularly by domestic private buyers, which make up 63% of theretail single tenant net lease buyer pool.”

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Check back with GlobeSt.com as the ICSC Western Statesconference gets closer for all things retail.

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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.

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