Part 2 of 2
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ATLANTA-In terms of who is buying retail, the answer is that REITs will continue to dominate the ownership of class A malls and fortress centers, only seeking to sell the bottom 20% of their inventory. Private equity and institutional investors will continue to eye grocery-anchored strip centers in core markets and single tenant properties. Private equity will also continue to see out class B malls as well.
Foreign investors are also priming the pump, bidding on opportunistic mall investments that are perceived to be less risky than investment opportunities in their home markets.
In terms of financing availability, lenders continue to underwrite all property types with far more due diligence than the heydays leading up to 2007, however, debt is becoming increasingly available, with lenders even exiting their comfort zones for core, well located products.
What's Coming?
Retail development is expected to pick up for strip- and grocery-anchored malls, but we expect very few new malls to be delivered in the next decade as the gap between supply and demand equalizes. However, the face of what's leasing those malls is definitely changing. More and more non-traditional mall tenants are entering the market and the big boxes once occupied by Sears, JCPenney and others in secondary and tertiary markets will likely be transformed into new and creative uses. At the high end, luxury retailers continue to perform quite well.
Interest rates may eventually be a concern, but right now, retail property sales volumes look to be a winning hand, and we expect 2013 market sales volumes to comfortably top 2012.
Greg Maloney is president and CEO of JLL Retail. The views expressed in this column are the author's own.
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