LOS ANGELES—Earlier this month, Ten-X released a report that named Los Angeles as a top buy city for retail investors, thanks to strong economic fundamentals, climbing rents and declining vacancies. While this was great news, we wanted to see how investors are responding and if activity is perking up as a result of the designation. We sat down with Ken McLeod, first VP at CBRE and a retail expert, to give us his boots-on-the-ground perspective of the retail market. Here, he tells us about the new activity, the players in the game, and where this momentum is headed in this exclusive interview.
GlobeSt.com: Ten-X has listed LA as a top buy market. Have you experienced an uptick in investment sales in your business?
Ken McLeod: The investment sales activity has picked up as the year has progressed. We now see as much activity on our listings as any other time over the last 3 to 4 years. This is in great part due to rising demand from Millennials. This age group lives and works in highly populated urban areas of Los Angeles whereas previous generations have moved to the suburbs. Millennials want to live, work, and shop within a relatively close radius to avoid commuting. Retail is benefitting from the urban renewal and gentrification happening throughout Los Angeles. Investors recognize this growth in this region and want to be a part of it. Also, urban infill retail in Los Angeles is still affordable as compared with other cities like San Francisco, New York, and London.
GlobeSt.com: Where are these investors from, and how is this different from the typical buyer pool for retail in LA?
McLeod: In the Greater Los Angeles retail market, we are seeing both national and foreign investors. The overseas money primarily comes from Asia, especially China, but we see the majority of urban retail buyers from places such as New York, Chicago, and Florida. Los Angeles-focused retail investors are selling properties in small California markets and out-of-state markets that are generally less safe and redeploy the capital into densely populated urban areas of Los Angeles.
GlobeSt.com: What types of products have become the most popular among investors?
McLeod: Safe assets or long-term investment properties and buildings that are in excellent locations and/or assets with credit tenants are the most desired. Downtown Los Angeles, Santa Monica, Beverly Hills, and Venice are examples of retail areas that are seeing lots of demand. Flourishing retail markets provide more than just shopping. They offer an overall experience with a mix of restaurants, movie theatres, and lifestyle and fitness tenants.
GlobeSt.com: How much competition are you seeing on individual transactions? How is this competition affecting pricing?
McLeod: There is a lack of inventory and safe assets are generating a lot of investor interest. We are seeing as many as 20 to 30 bidders on our well-located, urban Los Angeles retail assets. These properties rarely become available for sale. This can push pricing beyond some buyers' comfort zone.
GlobeSt.com: What is your outlook for LA retail investment? Is this just a trend or can we expect activity to pick up in the market?
McLeod: Well located, infill, and “safe” assets will continue to garner premium pricing. This trend will continue through 2017 due to the fact that urban infill Los Angeles retail still has room to grow. Retail in densely populated and high-traffic areas is considered safe. Economic uncertainty is one additional factor helping to drive this sector.
LOS ANGELES—Earlier this month, Ten-X released a report that named Los Angeles as a top buy city for retail investors, thanks to strong economic fundamentals, climbing rents and declining vacancies. While this was great news, we wanted to see how investors are responding and if activity is perking up as a result of the designation. We sat down with Ken McLeod, first VP at CBRE and a retail expert, to give us his boots-on-the-ground perspective of the retail market. Here, he tells us about the new activity, the players in the game, and where this momentum is headed in this exclusive interview.
GlobeSt.com: Ten-X has listed LA as a top buy market. Have you experienced an uptick in investment sales in your business?
Ken McLeod: The investment sales activity has picked up as the year has progressed. We now see as much activity on our listings as any other time over the last 3 to 4 years. This is in great part due to rising demand from Millennials. This age group lives and works in highly populated urban areas of Los Angeles whereas previous generations have moved to the suburbs. Millennials want to live, work, and shop within a relatively close radius to avoid commuting. Retail is benefitting from the urban renewal and gentrification happening throughout Los Angeles. Investors recognize this growth in this region and want to be a part of it. Also, urban infill retail in Los Angeles is still affordable as compared with other cities like San Francisco,
GlobeSt.com: Where are these investors from, and how is this different from the typical buyer pool for retail in LA?
McLeod: In the Greater Los Angeles retail market, we are seeing both national and foreign investors. The overseas money primarily comes from Asia, especially China, but we see the majority of urban retail buyers from places such as
GlobeSt.com: What types of products have become the most popular among investors?
McLeod: Safe assets or long-term investment properties and buildings that are in excellent locations and/or assets with credit tenants are the most desired. Downtown Los Angeles, Santa Monica, Beverly Hills, and Venice are examples of retail areas that are seeing lots of demand. Flourishing retail markets provide more than just shopping. They offer an overall experience with a mix of restaurants, movie theatres, and lifestyle and fitness tenants.
GlobeSt.com: How much competition are you seeing on individual transactions? How is this competition affecting pricing?
McLeod: There is a lack of inventory and safe assets are generating a lot of investor interest. We are seeing as many as 20 to 30 bidders on our well-located, urban Los Angeles retail assets. These properties rarely become available for sale. This can push pricing beyond some buyers' comfort zone.
GlobeSt.com: What is your outlook for LA retail investment? Is this just a trend or can we expect activity to pick up in the market?
McLeod: Well located, infill, and “safe” assets will continue to garner premium pricing. This trend will continue through 2017 due to the fact that urban infill Los Angeles retail still has room to grow. Retail in densely populated and high-traffic areas is considered safe. Economic uncertainty is one additional factor helping to drive this sector.
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