LAS VEGAS—During a general session at the recent ICSC Las Vegas titled "Deal or No Deal," a panel of experts discussed market dynamics, consumer demands, and strategic investment planning. Karly Iacono, Senior Vice President of the Investment Properties Group at CBRE's Capital Markets, emphasized the current centrality of interest rates in real estate.
"At present, everything hinges on interest rates," she said. "Most investors enter the real estate arena seeking profitability and stable cash flow. When debt terms fail to align with the purchase value, securing deals becomes challenging, especially if they don't promise positive cash flow."
Iacono highlighted the dual impact of inflation: while it can drive up rents, the escalating cost of capital often outpaces this growth. Despite robust fundamentals, she cautioned about limitations posed by capital markets. Notably, she observed sustained activity in single-tenant properties, particularly among discount retailers like Dollar General, Dollar Tree, and Aldi, which continue to thrive in the current market landscape.
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Bryant "Bo" Okoroji, Founder and Managing Partner of Steerpoint Capital, directed attention to high-yield assets, noting a shift in lender interest towards formerly niche markets. "Our challenge lies in projecting future exits and assessing cap rates over a five-year horizon," he explained. Despite these complexities, Okoroji highlighted an expanding pool of investors once averse to mall investments, signaling growing deal flow.
However, Okoroji cautioned about the impact of inflation on consumer spending. "Inflation directly affects our shoppers' wallets," he stated. "We prioritize tenant viability, scrutinizing their sectors and susceptibility to inflationary pressures."
Vince Tibone, Managing Director and Head of US Industrial & Mall Research at Green Street, highlighted volatility in the financing market. "Credit spreads have narrowed across most property types recently, though asset-specific variations persist, especially in the mall sector," he noted. Taking a broader view, Tibone stressed the significance of the prevailing interest rate landscape, which heavily influences consumer behavior. While luxury retail continues to thrive, there's evidence of reduced spending among middle to lower-income demographics. Tibone underscored the mixed impact of inflation, noting winners like off-price retailers alongside its strain on tenants' financial health.
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