Necessity-Driven Tenants Dominate Neighborhood Centers, Boost Traffic
Creekside Center produces attractive levered cash returns and during the past six months, an influx of capital has been chasing yield with a target of good quality assets in secondary markets.
VACAVILLE, CA—Neighborhood centers, especially grocery-anchored ones, continue to outperform other retail centers due to the inherent Internet-resistant nature of that type of asset. In a recent example, an institutional investor making its first retail acquisition in Northern California has purchased Creekside Center, a 112,092-square-foot neighborhood shopping center. The institutionally managed center is anchored by a strong performing Raley’s supermarket and complemented by a mix of necessity-driven tenants that provide the surrounding community with a complete shopping experience.
Newmark Knight Frank vice chairman Nicholas Bicardo and managing director Brandon Rogoff represented the seller, Weingarten Realty Investors. The price was undisclosed.
“Unlike other sub-retail assets like power centers, neighborhood centers offer goods and services that are not easily replaced by online shopping,” Rogoff tells GlobeSt.com. “Additionally, neighborhood centers are typically very convenient easy to access, which is another reason why they are not as susceptible to online shopping. Given these two dynamics, investors continue to pursue assets like Creekside Center in Vacaville.”
Currently 100% leased, Creekside Center serves as a blossoming trade area for the 84,000 residents within a 3-mile radius earning an average household income of $95,140 per year. The center is positioned at the hard corner of Nut Tree Road and Alamo Drive, providing maximum visibility and frontage along the two primary north-south and east-west arterial roads with more than 33,000 cars passing by the site per day. The site is configured in a rectangular shape, which provides a functional site plan with a center parking field and retail storefronts that are convenient and easily accessible.
“Given the current debt markets and stable nature of the cash flow, Creekside produces extremely attractive levered cash returns,” said Bicardo. “Over the past six months, we have seen an influx of capital targeting good quality assets in secondary markets chasing yield.”
Cap rates remained flat at 5.6% in the second quarter of 2019 across all major property types and have been relatively unaffected by interest rate fluctuations, bolstered by strong investor demand for real estate and favorable market fundamentals. The 10-year Treasury rate ended the second quarter at 2%, widening the spread even as most major property types have undergone sizable cap rate compression in the current cycle, according to a report by Newmark Knight Frank.