Retail Property Cap Rates & Opportunities

[Music] welcome to America's commercial real estate show America your source for Intel forecasts and success strategies I'm Michael Ball thanks for being with us we also like to thank you for seven years opinion on air we've done a show every week that's three hundred and sixty-four shows that we've done we hope we helped the industry we hope we've helped you in some way we certainly appreciate your likes your shares your comments and and your subscribe so thanks for being with us well today we're going to talk about a retail real estate think retail has been a very interesting sector in commercial real estate maybe a lot of opportunities maybe a lot of turmoil well let's see what's happening have an expert on the phone with us today Jim Costello he's senior VP with real capital analytics Jim thanks for joining us thanks for having me so Jim I think the one of the biggest questions mountains may have right now is you do you guys do a great job of tracking investment property sales when you look at retail sector what are you seeing for cap rate trends today right now the funny thing with all the negative news around retail you know you might think that investors are running away and cap rates would be going up but really they've been flat over the last year now they're their record lows you know what we saw for August we just published our August figures this morning they averaged around 6.5 percent nationally that's about 80 basis points lower than the long-run average for the sector so it's at a record low but so far you know there's not pressure to push them up I see and if these cap rate trends now they're kind of flat have they been flat for a while what's what's the past look like yeah they have been flat for some time the min flat over the last year there was a little bit of movement for a very temporary basis right after the election in 2016 and with the increase in interest rates that happen for a short period of time but the interest rate increase quickly corrected itself and so cap rates really fell back to where they work over the last year except for that there's just not been much movement okay and gems with real capital analytics and they track investment property sells and real immersive real estate sales and you pretty much concentrate on properties that sell over 2.5 million so Jim is there something about maybe the properties that are selling today are not selling today in that over 2 and a half million dollar price range that are impacting cap rates is it may be the better properties that are still moving you know it's a funny thing on that market in some sense the better properties the best properties don't sell period you know there's there's a lot of talk around the retail sector and a lot of negative headlines surrounding it but there's still great retail properties with cash flowing tenants and key locations that are going to survive whatever comes with internet retailing becoming showrooms a mix of the bricks and mortar and clicks those assets that you've got that and you've got that fortress location you're not so disposed to selling it and then you know there's other retail that is just not going to be susceptible to the predation from the internet think of all the local service kind of focused retail and especially food and entertainment you know that kind of stuff is just you know you can't you can't get yourself a pizza email to so you know even if Domino's is delivering it even if you send an email for them and they deliver it they still need a place to do all that so that kind of retail is still it you know still has a reason in the economy to be there and it's a challenge even stuff like that gets painted with a broad brush it's tied to retail and from the board level on down people are aware that there's some broad challenges at retail faces and they've just been a little too skittish I think there's opportunities in retail and pertick and that that are more fortress like that and now when a asset that and Jim I want to ask you about the opportunities before we go they I want to touch it back and what you're talking about on the sentiment because you guys are in touch with a lot of the investors that are buying these properties you're tracking these sales every day so you mentioned the sentiment is a hey maybe there's some issues with retail so if I've got a great performing asset and maybe I don't sell it but also you have investors who like to say hey there's a little bit of terminal maybe there's opportunities there but a lot of these investors have to get loans on these properties so what you've seen with lender cinnamon yeah the interesting thing about lender sentiment is that in this year for commercial property broadly we've seen a resurgence and CMBS lending CMBS London is backed because they finally figured out risk retention rules you know so they're able to you know effectively provide capital to to the industry and they're growing as a share of all lending for for every other property sector except for retail retail where CNMs is probably a natural fit for a lot of these kind of diverse portfolios and smaller assets and multiple markets you know that should be a fit for lending but just didn't grow this year there's still some hesitancy for from the folks who might buy those bonds eventually to get into anything tied to retail because of the broad negativity in retail so the folks who have been stepping up up and who have gained market share on lending are the local and regional banks and to me that kind of makes sense if you can't get a group of folks in New York to package a security that includes a couple retail buildings in your market well the talk to Martha down at the savings and loan and she can arrange a loan for you because she's more intimately familiar with what happens at the corner of a main and main yeah that makes a lot of sense and I was like you said they're there they're shopping there they know how popular the property is and have a better comfort level they're not sitting in a boardroom or have investors they're saying and retail and in trouble right now well we're talk with Jim Costello and he is with real capital analytics and Jim you mentioned opportunity and it seems like retail properties when you when you look at them they are great real estate in other words they're they're usually pretty cleared they're pretty level they've got utilities their own good streets where are their opportunities in retail today you know the opportunity I think in retail is in the fear to extent that too many people are walking away from it and walking away from the opportunities in those locations that come with may with how companies reach consumers they're still going to need key locations like that I think that's the kid that's that's the opportunity to find those who others are just a little too fearful at the moment okay so properties that maybe somebody does want to sell maybe there's less buyers so maybe some opportunities there you know I think that that is the case at the same time it hasn't shown up in price trends you know cap rates are flat and our index of commercial property prices it's not growing as quickly as it has it's only about a 1 percent year-over-year growth at this point versus commercial properties broadly growing around 7 percent year-over-year but you know it's just not showing up yet in terms of discounts and pricing yeah well that's interesting well I want to Jim onna ask you about where you think we are in the cycle I want to ask you about interest rates impact moving forward and then something that's big on the minds of people today is the changes in the tax code may be the potential repeal of the 1031 we're gonna take a short break we'll be right back with Jim Costello with Archie Analytics I'm Michael bull this is America's commercial real estate yet you [Music]

Channel: America's Commercial Real Estate Show

Views: 168

Rating: 5 out of 5

Keywords: agent, akb media, america's commercial real estate show, broker, bull realty, commercial real estate, commercial real estate agent, commercial real estate show, commercial real estate training, cre show, forecast, guide, industrial, industry, investing, landlord, leasing, marketing, michael bull, multifamily, office, real estate, strategies, success, tenant, tips, training, video, youtube, youtube video, zoning, Retail, Cap Rates, Cap Rate Trends, Lender Sentiment, Opportunities, Money, Growth

Id: Z309so9ljCQ

Length: 9min 3sec (543 seconds)

Published: Mon Oct 02 2017