Southeast Retail Buyers Increasingly Upbeat

ATLANTA—In the last few years, as consumer confidence has returned, investors' interest in the nation's retail sector has grown considerably, and this outlook was apparent at the recent ICSC conference in Atlanta.

“I found the conference very bullish and upbeat,” Kris Cooper, a managing director in the JLL Capital Markets Group, tells GlobeSt.com. The conference was held from October 28 to the 30^th. “There is still plenty of capital available, both debt and equity, and a lot of people were very optimistic.”

“We keep filling up vacancies and rental rates also keep going up,” he says. But like many other experts, Cooper points out that all of this visible strength has yet to translate into a significant amount of new development. Some builders have taken advantage of the pent-up demand for new product by constructing a limited number of grocery-anchored centers, as well as some big-box retail, but primarily in top markets where both they and lenders feel especially confident. “A lot of those developers got burned during the recession,” Cooper says.

And it's uncertain when the sector will see a meaningful uptick in new development. “You won't see the kind of development that went on between 2002 and 2008 and everybody knows it,” Cooper says. “We need growth, but it has to be done with right-sized tenants and long-term leases. At the conference, I didn't hear anybody say anything differently.”

And with so little money going toward new development, many mall owners have taken the opportunity to spend money on expanding or improving existing facilities. 

However, the lack of new product hitting the market gives sellers tremendous opportunities. “If you put quality product on the market, you're going to get very low cap rates and a lot of interest,” he says. And if there was anything surprising going on in the market, it is the popularity among investors of retail centers in the second-tier cities in the southeast. In the past, investors may have concentrated on buying up properties in Atlanta, Charlotte and Miami. These days, investors are just as likely to make purchases in Nashville, Raleigh or Tampa.

For example, Cooper says JLL has handled the sale of Coursey Commons S.C., a 67,755-square-foot Walmart-anchored center in Baton Rouge, LA, and now has a buyer under contract. Although he can't disclose details about pricing, the firm “was pleased to see that an asset like this in Louisiana, and in a second-tier city,” attracted a lot of interest from a set of potential buyers with the ability to close a deal.

The increased interest from prospective buyers was clear at the ICSC conference. Cooper and others were fielding many more requests for meetings than at previous gatherings. “I view that as a sign of significant improvement in buyer interest,” he says.