The retail asset class hasexperienced its own odd polarity. On one hand, retail is strugglingto survive in a world dominated by ecommerce, and on the other, itis thriving in well-located markets with high-quality product. Lastyear, 1031 exchange buyers in particular leaned into retail as alow-management investment class, and many of these buyers exchangedout of multifamily. Newmark Knight Frank recently sold afour-property retail portfolio for $35 million, focusingspecifically on exchange buyers for the deal.

“We definitely saw an uptick of trade buyers in 2018 pursuingretail opportunities. There's always a steady stream of tradebuyers in retail but with the choppiness of the market and tenantbankruptcies, we definitely saw demand fluctuate, pricing soften abit, and buyers easily spooked during due diligence,” KyleR. Miller, executive managing director at NKFCapital Markets West, tells GlobeSt.com. “In 2018 we sawincreased activity coming from the multifamily market sector intoretail.”

The retail portfolio included a Petco in Northridge and a Petco,Office Depot, and multi-tenant property all located in the SouthBay. Miller and his team, which included vice chairman BillBauman and senior managing director DanSamulski, advised the seller to sell the propertiesindividually to achieve the highest value. Miller says that theytargeted exchange buyers specifically because of the “deal size,passive nature of the opportunities, and location are allcharacteristics that exchange buyers have been gravitating towardsin this market.” The portfolio included three single-tenantbuildings and a multi-tenant building.