Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/122387
director for retail services at CBRE. "Multifamily is in front of the pack, followed by industrial. Retail now sits between industrial and office. There is strong heat for certain kinds of retail." Badly planned retail developments that went bust during the recession, the closings of big-box retailers and the strength of Internet shopping scared away many retail property buyers. Two realities helped turn things around, however: First, institutional investors continued to have a hankering for core properties — generally in gateway cities where there would be little new competition; and second, everything else hit bottom, which meant some good deals for prime retail in secondary markets or for value-added properties. For core properties — either leading big-city malls, or stores on important streets such as Rodeo Drive, in Los Angeles, or Fifth Avenue, in New York City — the market has been so heated that yields got pushed way down, which to institutional buyers is no impediment. "Yields on core properties are not very relevant, because a lot of these buyers are legacy owners," said Buono. "We have seen some transactions at 4 percent and below. This is still higher than the riskfree rate on the 10-year Treasury, but not much." Last year's top retail markets in sales-volume terms were New York City's borough of Manhattan, Chicago, Los Angeles, Dallas and the other four boroughs of New York City. There is but so much of this type of core property available, of course. "Due to a lack of true trophy product, investors are looking at secondary markets where they are now buying the top assets in other towns that are strategically located," said Caldwell. Looking at where investors were buying last year, after the top five, one finds Denver, Phoenix, San Diego, Southern California's Orange County, Northern California's East Bay, Se- 198 SCT / M a y 2 0 1 3 KKR Real estate holdings bought the 1.1 million-squaRe-foot legends outlets Kansas city (Kan.) at auction foR $131.5 million. attle, Florida's Broward County, and Miami — all of which saw significant year-on-year change. "In the peak years before the recession, grocery-anchored centers in certain locations, with long-term leases on the anchor and good sales, were trading down to the low sixes and Cap rates on core real estate in suburban open-air groceryanchored centers in such places as Southern California have dropped below 6 percent. high fives cap rate," said Kris Cooper, a managing director at Jones Lang LaSalle. "We are getting near that kind of pricing again." Cap rates on core real estate in suburban open-air grocery-anchored centers in such places as Southern California have dropped below 6 percent, says Buono. "That would be absolute core," he said. "For pretty good, but not perfect, stuff in San Diego or North Miami, you are getting up into the 6 percent or 7 percent range." While institutional buyers and the very active REITs are chasing individual prime and big-portfolio sales, a host of other investors are gobbling up everything else out there — except for the very distressed properties — and this comprises the majority of the retail market. Recent Jones Lang LaSalle deals have been all over the map — from a $10 million purchase of a Publix-anchored shopping center in Greenville, S.C., by Kite Realty Group, of Indianapolis, to a $90 million acquisition in Miami on the part of Chicago-based Heitman. In a sort of value-add deal, Jones Lang LaSalle helped sell the Westdale Mall, in Cedar Rapids, Iowa, to a local investor working with a developer from Denver and an investor from Florida. Much of the mall will be demolished and redeveloped, to the tune of $90 million, press reports say. An example of how divergent the retail market is now can be seen in the vastly different directions that two Los Angeles–based developer-managers are taking. Primestor Development, with a