TAMPA, FL-Tampa’s retail market is still on the rebound from recessionary lows. And single-tenant, net-leased product is getting the lion’s share of the attention. So says the most recent Marcus & Millichap retail market report.
Scaled-down construction of new stores by CVS and Walgreens has compressed drugstore cap rates into the low-7% range. Interest in dollar stores, which performed well during the recession, also remains intense, with cap rates averaging the mid- to high-8% range, depending on brand affiliation and location.
“Financing is certainly getting easier,” Bryn D. Merrey, vice president and regional manager of the firm’s Tampa office, tells GlobeSt.com. “I’ve been surprised by some of the things that we’ve been getting financing quotes on. And the average deals are actually getting bigger. There’s a trend toward REITs and institutions coming back into the market in a big way.”
In the multi-tenant segment, Publix-anchored properties are the primary target of institutions and large investors. Cap rates for strong locations start in the low- to mid-6% range, according to M&M. The firm reports that investors seeking greater yields will also consider properties anchored by Winn-Dixie stores and Sweetbay Supermarkets. These assets are typically offered at cap rates beginning around 9%. Interest in shopping centers with highly rated in-line tenants has also picked up as financing has improved, and these properties will likely sell at cap rates starting close to 9%.
Merrey has been tracking how many offers his team gets on deals. On a rolling 12-month basis, he reports an average of seven offers for every listing. With the demand picking up, he says, a lack of inventory is becoming the issue.
“I have wondered if multi-tenant retail will see a slow down in transactions since we are hearing negative news about unemployment and a stagnation in retail sales,” Merrey says. “We haven’t seen it yet. There’s less and less distress out there. The level of distress in Tampa is down from last year to the first half of this year. But there is still plenty of distressed property to wash out.”