High-Street Retail Prices Headed Up

LOS ANGELES—Demand for high-street retail product has exploded. To keep up with demand, CBRE has tapped high-street retail experts Orbell Ovaness, as first VP, and Brad Baskin, as VP, to focus on the Southern California high street retail investment properties. The niche has become popular with a broad range of investor classes and for all-cash buyers

“Investment demand for high-street retail is nothing short of fierce.  Although, we have seen an uptick in interest rates, this area of retail investment is not as reliant on the debt market in most instances,” Ovaness, tells GlobeSt.com. “There is still tremendous liquidity in the marketplace, and nine out of 10 deals are being purchased on an all-cash basis. Furthermore, there are a limited amount of players for super core deals. The most active buyers in this arena tend to be ultra-high net worth individuals and family offices, both national and international, public/private funds and endowments.”

Baskin adds that they expect demand to continue to soar this year, with the expectation that pricing will climb as a result f the heightened demand. “We expect prices to continue to climb in this niche through 2017.  The demand for this type of real estate knows no end,” Baskin tells GlobeSt.com. “Individuals and funds from around the world have interest in high-street retail. The appeal of these assets is not current cash flow, but long-term appreciation, and pride of ownership. Markets fluctuate. That's a reality, but main and main will always be main and main.”

Grocery-anchored and service-driven retail has dominated the market recently, especially with the rise of ecommerce; however, as retailers create experiences and retail destination areas, high-street retail is returning to vogue. “While online retail is affecting retail numbers, a physical presence in core locations is necessary for retailers to remain relevant, especially at the high-end realm,” says Ovaness. “Footprints will change, but the need to be seen will not. The concept of physical versus digital is misleading in this category because it is more of a complimentary relationship. The experience of shopping on Rodeo Drive, Michigan Avenue or the 3rd Street Promenade, for instance, cannot be replaced by a computer. Rents will continue to climb as inflationary markets kick in and more importantly because of limited supply of high-street block.”

In Southern California, investors are focused on high-street retail that is near public transit or in markets with strong job centers, like Silicon Beach. “Geographically, the metro rail expansion has had a significant effect on Los Angeles and surrounding retail,” explains Ovaness. “The explosion of Silicon Beach and the tech growth in Venice are also examples of geographic trends in retail.  Abbot Kinney, Venice, and Playa Vista weren't on any retailer's radar 10 years ago.  With increased foot-traffic comes increased rent and demand, which obviously drives pricing and volume of transactions.”

LOS ANGELES—Demand for high-street retail product has exploded. To keep up with demand, CBRE has tapped high-street retail experts Orbell Ovaness, as first VP, and Brad Baskin, as VP, to focus on the Southern California high street retail investment properties. The niche has become popular with a broad range of investor classes and for all-cash buyers

“Investment demand for high-street retail is nothing short of fierce.  Although, we have seen an uptick in interest rates, this area of retail investment is not as reliant on the debt market in most instances,” Ovaness, tells GlobeSt.com. “There is still tremendous liquidity in the marketplace, and nine out of 10 deals are being purchased on an all-cash basis. Furthermore, there are a limited amount of players for super core deals. The most active buyers in this arena tend to be ultra-high net worth individuals and family offices, both national and international, public/private funds and endowments.”

Baskin adds that they expect demand to continue to soar this year, with the expectation that pricing will climb as a result f the heightened demand. “We expect prices to continue to climb in this niche through 2017.  The demand for this type of real estate knows no end,” Baskin tells GlobeSt.com. “Individuals and funds from around the world have interest in high-street retail. The appeal of these assets is not current cash flow, but long-term appreciation, and pride of ownership. Markets fluctuate. That's a reality, but main and main will always be main and main.”

Grocery-anchored and service-driven retail has dominated the market recently, especially with the rise of ecommerce; however, as retailers create experiences and retail destination areas, high-street retail is returning to vogue. “While online retail is affecting retail numbers, a physical presence in core locations is necessary for retailers to remain relevant, especially at the high-end realm,” says Ovaness. “Footprints will change, but the need to be seen will not. The concept of physical versus digital is misleading in this category because it is more of a complimentary relationship. The experience of shopping on Rodeo Drive, Michigan Avenue or the 3rd Street Promenade, for instance, cannot be replaced by a computer. Rents will continue to climb as inflationary markets kick in and more importantly because of limited supply of high-street block.”

In Southern California, investors are focused on high-street retail that is near public transit or in markets with strong job centers, like Silicon Beach. “Geographically, the metro rail expansion has had a significant effect on Los Angeles and surrounding retail,” explains Ovaness. “The explosion of Silicon Beach and the tech growth in Venice are also examples of geographic trends in retail.  Abbot Kinney, Venice, and Playa Vista weren't on any retailer's radar 10 years ago.  With increased foot-traffic comes increased rent and demand, which obviously drives pricing and volume of transactions.”