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NEW YORK CITY-With interest rates high and the stock market shaky, investors have been turning to real estate in recent years, particularly impacting the retail segment. According to Cushman & Wakefield managing director of retail valuation Richard W. Latella, retail property investment in 2002 totaled $24.5 billion, a 123% increase over the previous year, and 2003 is already moving in the same positive direction.

“Investment in retail real estate has been rising and we expect it to continue throughout 2003,” says Latella, adding that the drop in cap rates for the retail segment over the past 12 months demonstrates its ability to attract new capital and buyers looking to diversify their portfolios.

In addition, Real Capital Analytics reported that sales activity involving regional malls jumped tenfold last year to $11.5 billion. Seventy percent of those mall transactions were completed by REITs, which are expected to continue as frontrunners in these retail acquisitions.

While demand in the mall sector continues to outstrip supply, Latella adds that, “I don’t expect we’ll come close to a tenfold increase like we had last year.”

Tenant bankruptcies are also becoming an increasing problem, he says, noting the recent filings by Spiegel, closing 560 Eddie Bauer stores; Warehouse Entertainment, closing 190 locations; Casual Male, shutting down 55 outlets for its Levi’s and Docker’s chains; and Best Buy, closing 110 Sam Goody and SunCoast video shops.

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