Where Is Retail Pricing Heading In OC?

Phil Voorhees, EVP, CBRE National Retail Partners – West

It may sound off-trend, if you follow the narrative around retail, but CBRE recently brokered the deal of Edinger Plaza, a 155,000-square-foot power center in Huntington Beach, for a record price in the market. According to industry sources, as the pricing was not disclosed, the property traded hands for $65.5 million. However, and again, if you follow the narrative around retail, the deal may have been an anomaly. Retail pricing is already off the 2015 peak, and with interest rates rising, they will likely continue to trend downward.

“Over time, cap rates track interest rates, specifically the U.S. 10-year treasury yield The 10-year-treasury yield is moving upward considerably, more than 1% since early September in 2017,” Phillip D. Voorhees, an EVP at CBRE, tells GlobeSt.com. “We’re seeing cap rates up slightly year-over-year on core retail assets, perhaps 20 to 40 basis points, producing lesser pricing as price moves inversely to the cap rate. For off-core assets, particularly larger projects of $35-plus million in size in secondary and tertiary markets, pricing is considerably off the cycle peak during the second half of 2015. As a primary, coastal market with inherent supply constraints, a nearly perfect climate, and with an enviably diverse economy, pricing will hold up better in Orange County than in most other markets if cap rates continue expanding.”