Why Small Shop Space Is Driving Opportunity

MIAMI—The real estate market is healthy in Miami. In other parts of the nation, not so much. Kimco Realty plays in various major metros. So we asked Glenn Cohen, CFO of Kimco, for his take on the markets.

In part one of this series, we asked Cohen what he sees as the biggest challenges retail real estate owners face this year and his view of the economy through the commercial real estate lens. In part two, we're diving into his certainty—and what he sees as the biggest opportunities in the market.

GlobeSt.com: Are you more certain than we were last year? Still uncertain?  

Cohen: While there will probably be some bumps in the road as we go along, I would say that we're cautiously optimistic about what 2013 brings. The capital markets are continuing to be in better shape. Housing prices are starting to recover and increase. The rate of foreclosures has slowed down, which is going to help.

Bank balance sheets are also in much better shape. There is a significant build up in deposits at the major banks and a thirst for yield. The real estate sector provides pretty good yield, especially when you look at it relative to where a 10-year Treasury is at 2%. If you're buying high-quality assets at 6%, that spread is pretty favorable.

GlobeSt.com: What are the biggest opportunities you see in 2013? What factors are fueling those opportunities?

Cohen: In the retail sector, one of the biggest opportunities this year is the continued lease up of small shop space. Within the Kimco portfolio, 97% of big-box space is leased, but there is still a great opportunity to increase absorption in the small to mid-sized spaces.

GlobeSt.com: In what areas is your firm focusing its energies and why?

Cohen: There are a lot of people who are taking advantage of the very low interest rate environment and will continue to refinance debt at lower rates. That's certainly part of our plan for this year, and is another avenue of opportunity for the long haul.