Northmarq investment sales broker Isaiah Harf completed the sale of a 4,403-square-foot retail condo on the ground floor of the Metropole Condominiums located at 1515 15th Street Northwest in Washington, D.C. The property is fully leased to TD Bank, one of the largest banks in the United States. Harf represented the seller, a private investor based in Maryland. The California-based 1031 exchange buyer acquired the asset for approximately $7.6 million.   “This was a very challenging environment to close this transaction in with rising interest rates daily,” said Harf. “In the end, the purchaser pushed through, and we closed in a timely manner.”  The property was built in 2008 and is situated in one of the fastest growing neighborhoods in downtown Washington, D.C., Logan Circle. The property boasts outstanding demographics with over 416,000 residents with an average household income of over $157,000 within a three-mile radius. Neighboring national retailers include Whole Foods Market, Chipotle, Wawa, CVS Pharmacy and more.

Northmarq investment sales broker Isaiah Harf completed the sale of a Whole Foods Market located at 6020 North Cicero Avenue in Chicago, Illinois. The 41,148-square-foot grocery store is situated on the first floor of a vertical condominium development. Harf represented the seller, a private investor based in Maryland. A family trust located in Denair, California acquired the asset for approximately $18.1 million.   “Despite the challenging headwinds of interest rates rising nearly 300 basis points during the transaction, this premier asset received multiple offers and went under contract quickly,” said Harf. “The purchaser is excited about their future long-term ownership of this property and its uniqueness in the immediate marketplace, offering full underground parking and being located directly off the expressway. Not only were the sales at this location above average, but Amazon/Whole Foods had already renewed once prior.”  The property was originally built in 2007 and is situated on a 1.85-acre lot. Located in the Sauganash neighborhood of Chicago’s northside, the high-end grocer benefits from 284,237 residents with an average household income of $99,533 within a three-mile radius. The retailer is less than 12 miles from downtown Chicago and sits at the signalized hard corner of West Peterson Avenue and Cicero Avenue, immediately east of the on and off ramps to Interstate 94.

For investors evaluating a shopping center purchase, the anchor tenant can make or break the deal. Although grocery stores and big-box retailers have traditionally topped the list of ideal anchors to help draw customers to retail centers, another worthy option deserves investor attention: fitness centers.   When we think of traditional anchors in multi-tenant retail, names like Walmart, Target, Hobby Lobby, T.J. Maxx, most grocery stores, and other big box retailers come to mind. While gyms may not check all the same boxes as traditional anchors, over the last several decades they have emerged as resilient tenants that bring steady traffic to neighboring retailers and a great investment.  Resiliency  When retailers shut down at the beginning of the pandemic, fitness centers were among the first places to empty—and many of the small, local gyms stayed that way. However, the large fitness chains like Planet Fitness demonstrated that even a global crisis would not stop them. Almost as soon as they opened their doors again, Planet Fitness operators began repaying rent deferments, often ahead of schedule, putting themselves right back on their pre-pandemic trajectory.  Fitness buffs made do with home equipment, outdoor runs and streaming workouts during the pandemic, but many missed the community of their local gym. By second quarter 2022, gym patrons returned in force, leading to a 15.9 percent increase in fitness visits compared to second quarter 2019 according to retail traffic data firm, Placer.ai.  Health and Wellness is Here to Stay  In recent years, scientific data has continued to demonstrate the physical, mental and emotional benefits of exercise—and Americans are paying attention. According to IBISWorld, over the last five years the number of gym, health and fitness clubs in the U.S. has grown an overage of 2.7 percent annually, reaching more than 112,000 locations in 2022.  While attaining a beach body may have been the ultimate goal of exercise a decade ago, the top two reasons that Americans work out today are to reduce stress and feel better mentally. Big fitness brands are adapting with more wellness services, stress-busting workouts and community events. Some are even adding new services like hydro massages and cryotherapy, creating even more incentives for members to make regular visits.   Additionally, a heightened focus on mental health has opened eyes to the social benefits of exercise. Gymgoers appreciate the opportunity to mingle with like-minded people multiple days a week.   Steady Foot Traffic  Unlike grocery and big-box retail patrons, fitness center members typically make several visits in one week—sometimes even daily. Moreover, they tend to linger. After a long workout, a member may stop by the café next door to pick up an iced coffee or smoothie or grab a quick dinner at a nearby restaurant. In family-friendly shopping centers, parents might bring their children to a neighboring trampoline park after they’ve been cooped up in the gym’s kids club for an hour or two.   The data backs up these anecdotes. Analysis of cellular tracking data shows that one popular fitness location had 572,000 visits in a single month from people who made at least 10 visits that month—compared to 191,000 visits to a traditional AAA credit retail anchor. The fitness market outlook is bright as consumers increasingly prioritize self-care, wellness and community engagement. As consumers once again fit gym visits into their schedules, it’s time to consider whether fitness-anchored retail fits into your portfolio. While every investment is unique, a highly trafficked, loyalty-based tenant can have a significant influence on a shopping center’s overall synergy and long-term success. As you begin to evaluate fitness-anchored centers, consider the following general tips: To download a copy of this report, please provide the following information: hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "4e6713d2-ff33-454c-94f7-b3a2c5036179" });  

The U.S. economy reported gross domestic product (GDP) annualized growth of 2.6 percent in the third quarter, thereby avoiding a third consecutive quarter of negative growth.  This positive news can be easily tempered by the fact that the growth was greatly affected by trade and inventory numbers, which were skewed as a result of world events like the war in Ukraine. But the news of growth was welcomed in an economy that has been starved for something positive for most of the year.  Compounding the economic caution in the absence of sustained economic growth, of course, is the strain that inflation has inflicted on all Americans. In response to 40-year inflationary highs, the Federal Reserve has been forced to react with its primary inflation-countering tool: increasing interest rates. In early November, the Fed raised short-term rates to the highest level since January 2008. Additional rate hikes are anticipated in December, although signals suggest we’ll see increases in smaller increments going forward.  Still, amid all the turmoil and uncertainty, several quick service restaurant (QSR) operators continue to roll-out expansion plans and report better-than-expected sales and earnings.  Restaurant Brands International (NYSE: QSR) recently reported third quarter revenue numbers that exceeded expectations. With same store sales growth from their Burger King, Popeyes, Tim Hortons and Firehouse Subs brands, the company’s profitability also came in higher than expected.  At the same time, Yum Brands (NYSE: YUM) also reported same store sales for its Taco Bell and KFC stores that were higher than anticipated, citing popularity for its “premium” menu items with consumers. McDonald’s (NYSE: MCD) also recently reported an increase in same store sales, pointing to a strong consumer appetite for budget fast food versus more expensive dining options.  As a result of the sustained strength of the brands like the ones mentioned here, as well as others, QSRs continue to be a very popular option for many net lease investors looking for conservative and predictable investments in the $1 to $4 million price range.  As an illustration of this current level of investment demand and pricing, we recently represented a client in the acquisition of a newly constructed Burger King that had relocated to a Philadelphia suburb of New Jersey. With a guarantee from a 29-unit franchisee, the triple net lease had nearly 20 years of initial term remaining with rental increases every five years. The all-cash buyer used the acquisition as a 1031 exchange replacement property and at approximately $3 million, the acquisition cap rate was in the mid 5-percent range.  A different 1031 exchange client, that required a conservative level of financing, is now under contract with another Pennsylvania Burger King that has over 20 years of initial term remaining. The lease is guaranteed by Carrols Restaurant Group – Burger King’s largest franchisee with over 1,000 locations – and also has regular rental increases.  "Amid all the turmoil and uncertainty, several quick service restaurant operators continue to roll-out expansion plans and report better-than-expected sales and earnings." Across the Northeast region, real estate investors seeking QSR assets will see supply continue to rise as more and more brands target the region for expansion and growth. Bojangles, for example, has announced long-term plans to open nearly 50 locations over the next seven years and will enter the New Jersey market for the first time. Panda Express and Krystal have also identified New Jersey as a target growth market, while Rhode Island is on the map for Checkers and Rally’s. Dunkin’ has opened new stores in Pennsylvania in recent months, while Sonic has grown in Connecticut.  Investors pursuing stable cash flow investments should consider opportunities across the region. Those moving equity through 1031 exchanges toward single-tenant net lease assets realize these are reliable investments that hold value with little to no management involvement. For these reasons, growth across the QSR sector will provide a variety of attractive investments for buyers to consider.  To download a copy of this report, please provide the following information: hbspt.forms.create({ region: "na1", portalId: "7279330", formId: "58a01bd1-def8-4a08-8b75-43f2c726ccb5" });

Originally published by Wealth Management Retail brokers and consultants expect strong interest when Sears spinoff Seritage Growth Properties starts to liquidate the remainder of its assets, as recommended by its board of trustees. But these industry insiders expect discounts will be necessary in order to consummate transactions.  Shareholders recently approved a plan that will bring additional Seritage properties to the market during a time of rising interest rates and a slowdown in commercial real estate deals.  Despite that added challenge, Seritage assets are bound to garner a lot of investor interest, says Margaret Caldwell, investment sales broker at Northmarq, which provides capital markets services to commercial real estate investors. Many of these properties are located in prime markets, with strong population and income levels, she notes.  Typically, a Sears box attached to a regional mall includes the parking field surrounding it, which can add a significant number of acres to the property, making it all the more attractive to potential investors, according to Caldwell.  “There are lots of investors and developers that continue to look for opportunistic investments where they can create value,” Caldwell says. “Many of the Seritage properties provide exactly these types of opportunities—repositioning an asset, for example, through redeveloping these boxes into other uses, such as multifamily or exterior-loaded retail.”  Industrial and self-storage could also be among potential uses for those sites, according to other industry insiders.  The investor demand will be there as long as the pricing on the assets is in line with the market expectations for absorbing risk, backfilling vacancies and undertaking redevelopment, says Matt LoPiccolo, first vice president specializing in retail with Matthews Real Estate Investment Services. He expects that to be the case because Seritage has a loan payment due to Berkshire Hathaway.  “The demand is there, and it’s just a function of their expectation on the price and that’s why some of their deals have sat on the market for a while or fell out of contract,” LoPiccolo says. “[There’s interest] because you’re going to be well below replacement costs and land value. The opportunity creates value in terms of backfilling with better quality tenants or in-demand tenants. All of that just boils down to the time and cost to reposition or redevelop the site.”  The main challenge to completing sales of remaining Seritage assets will likely be what’s going on in the debt markets, says Daniel Taub, senior vice president and national director of retail with real estate services firm Marcus & Millichap. Some of the deals where there will be opportunity to create higher value are also going to be capital-intensive, and matching up those investment opportunities with the right capital—including both debt and equity—is likely to be more challenging due to the current instability in the capital markets, he says.  Neil Saunders, managing director at research firm GlobalData Retail, is a little more pessimistic. While there will be some demand for the assets, it won’t be as strong as it would have been a year ago, he notes. The market has turned downward, and people are more concerned about taking on debt to finance new transactions. Real estate values under more pressure as well, he adds.  “I think some of the yields people see coming from it are much weaker than they were last year and before the pandemic hit,” Saunders says. “There’s definitely something they can do in terms of a sale, but I don’t think they will get the maximum value out of these things. There are certain properties they will have to sell at a discount if they want to unload them.”  In the end, Saunders says, he sees the liquidation sales going through because Seritage must realize it could be more difficult to close deals in 2023 if rising interest rates and lower consumer sentiment further damages the economy.  “Maybe the thought process is to get rid of them now because they might get less in a year’s time,” he adds. “It’s not a great time to be selling, but the risk is if you leave it, it might be even worse.”  Pricing  Seritage properties will most likely be priced based on land values per acre in the local market or price-per-sq.-ft. for existing older buildings, according to Caldwell. Pricing would be maximized, however, if investors are provided the option to purchase these assets separately or in mini portfolios, she adds.  Caldwell doubts that the remaining assets can be easily sold as a portfolio other than at a discount, given the significant number of remaining properties and the diversity of locations included.  According to Taub, it’s hard to feel confident about prices and their impact on private and institutional investors at this time.  “Pricing seems to be the most difficult to get your hands around because of what it was 30, 60 or 90 days ago and what it is today, being materially impacted by what’s going on in the capital markets,” he says. “The market to varying degrees is impacting all asset classes in retail.”  Some of the assets, if there were stabilized and depending on their location, could have sold at cap rates in the high 5 or 6 percent over the summer. The ones offering more of a value-add approach or more of a redevelopment opportunity, could see cap rates reach the 7.5 to 8.5 percent range, Taub notes.  Potential buyers  The mix of interested buyers for Seritage properties could range from retailers to developers looking at the best possible uses, including multifamily, says LoPiccolo. Most former Sears and Kmart properties hold strategic locations and could also offer an opportunity to develop mixed-use projects, he notes.  Saunders expects potential buyers to include real estate developers, mall owners and private equity investors. That buyer pool is going to be a lot smaller than it would have been before the current economic environment set in, he notes.  “There would have been a whole suite of people interested, but now the prospective field is a bit thinner,” Saunders says. “I think you’re more likely to get some of those investment firms if they can see these as a long-term win for them. I don’t think you will get much interest from the retail community, quite honestly. There are buyers, but they are a bit more discerning, and you have to work hard to find them.”  Some buyers, however, will be attracted by the risk-adjusted returns and property locations, according to Taub.  “The real estate in many instances is fundamentally good real estate, including those in non-primary markets,” Taub says.  If the asset is attached to an enclosed mall, the mall owner may be the one to buy it because they could see it as a way to control their destiny and create additional value for their mall, Taub says.  In addition, the liquidation could open opportunities for investors who can complete all-cash transactions and wait out the current economic cycle, he says.  Where the assets are  During an initial offering, Seritage brought about 38 assets to market, and Taub says he’s awaiting an announcement for the next batch.  Seritage owns properties across the country, but primarily east of the Mississippi River, he notes. They are located along the East Coast from New Hampshire, New York, Delaware to Virginia, the Carolinas and Florida. There will also be opportunities in Ohio, Illinois and Wisconsin in the Midwest, Texas and Arizona in the Southwest, and California on the West Coast.  The properties vary tremendously, but the majority of the Seritage sites are in traditional suburban locations  “With some of them, [Seritage] had successfully executed on the majority, if not the entire business plan, on repurposing those spaces,” Taub says.   

Northmarq’s Jason Maier, previously of Stan Johnson Company, has completed the sale of a single-tenant triple net lease Walgreens located at 509 Collins Avenue in Miami Beach, Florida. The 22,857-square-foot freestanding property sold for $35.3 million reflecting a 4.59 percent cap rate. Maier represented the buyer, a New York-based private investor. The seller was an individual based in New York.  “We are pleased to have been able to acquire this trophy Miami Beach property on behalf of our client, given the long-term lease to Walgreens and the inherent quality, size and intrinsic value of the real estate,” said Maier. “We were very excited to complete this transaction for our client, a generational real estate family that is taking a long-term view and holding period.”  Located in the heart of South Beach, this two-story property is strategically positioned on the hard-signalized intersection of Collins Avenue and 5th Street. The single-tenant retail store was built in 1995 and is situated on a 0.35-acre corner lot. The unique property is just one block away from Ocean Drive and a world class beach and minutes from the newly renovated Miami Beach Convention Center, 4,000 high-luxury condos, and some of South Beach’s iconic resorts and hotels.  

Originally published by Pittsburgh Business Times SomeraRoad has sold off the real estate of one of the SouthSide Work's key hospitality anchors as it continues to reposition the next complex with its new "micro neighborhood" approach.  A new owner based in New York called Regal Ventures bought the Cheesecake Factory restaurant property at the heart of the SouthSide Works, paying $7.1 million for the property. The restaurant, known to draw more than one million diners a year, will continue to operate as normal, as it renewed to a new 15-year lease last year.  Ian Ross, founder and principal of SomeraRoad, announced the sale on his LinkedIn account, describing it as part of an ongoing component of executing its business plan.  The sale for a restaurant building that totals more than 12,500 square feet in size translates to a price of $565 a square foot, SomeraRoad announced.  The sale comes after SomeraRoad had bought the SouthSide Works as a distressed asset in the year before the pandemic, acquiring the nonperforming debt of the asset and then taking ownership with some significant redevelopment plans.  Now, the company is touting it was able to find at interested buyer for the property amid a challenging business environment as it works to invest elsewhere at SouthSide Works, with its $85 million apartment development The Park now under construction.  The New York-based investment sales broker who helped to bring the deal together, Asher Wenig, of New York-based Northmarq, noted a "major rejuvenation" of the SouthSide Works in a prepared statement and expects "this strong performing Cheesecake Factory will benefit from major growth in the area given the healthy term, rent and percentage rent outlined in the lease."  SomeraRoad has invested to redevelop the town square in front of the Cheesecake Factory, establishing three new food vendors there, as part of its bid to achieve a renewal with the restaurant, now selling off the restaurant asset as it works to improve the larger complex.  The sale of the Cheesecake Factory property is the second sale of a portion of the SouthSide Works by SomeraRoad, which also sold The Flats at SouthSide Works, anchored by a new Rite-Aid store at the corner of 27th Street and East Carson, in July.   

Northmarq investment sales broker Jason Maier completed the sale of a freestanding grocery store located at 105 Northwest Highway in Crystal Lake, Illinois. The 74,800 sq. ft. high-end supermarket is leased to Mariano’s, a wholly owned subsidiary of The Kroger Company. Maier represented the seller, a New York-based private investor. The property was acquired for approximately $34.7 million by a 1031 exchange buyer based in New York.  “We were very pleased to have represented both parties in this transaction. It was the perfect timing and the ideal property for a 1031 buyer that our team was exclusively representing,” said Maier. “One of the major benefits of our platform is the access we have to some of the best trophy triple net leased properties in the country.”   The property was built in 2018 as the most recent Mariano’s prototype format and is situated on an 8-acre lot at the signalized intersection of Northwest Highway and South Virginia Road. Just 45 minutes northwest of Chicago, Crystal Lake boasts strong demographics, and is home to approximately 131,187 residents within a 5-mile radius. The average household income is approximately $111,903 within a 3-mile radius.   The upscale grocery store offers a Starbucks, sushi bar, pizza oven, oyster bar and sweets shop. Neighboring businesses in the surrounding retail corridor include Target, Walgreens, Aldi’s, Sam’s Club and numerous quick service restaurants.   “It just worked out that we represented the current owner when he purchased the property as part of his 1031 in 2018,” Maier added. “It made perfect sense for the owner to sell, and it was the ideal trophy NNN leased asset our buyer was looking for. It checked all the boxes. It is always a great feeling to walk away knowing your clients are happy, and you were able to add real value.” 

Northmarq investment sales broker Billy Benedict completed the sale of the Villages at Hamilton Mill, a 10,631-square-foot shopping center located at 2085 Hamilton Creek Parkway in Dacula, Georgia. Anchored by Starbucks, the center was fully leased to eight tenants at the time of contract signing. Northmarq’s Billy Benedict represented the seller, a private investor based in Buford, Georgia. A Lawrenceville, Georgia-based 1031 exchange buyer acquired the asset for approximately $4.5 million reflecting a 5.56 percent cap rate.  “With a predominantly stone exterior, the Villages at Hamilton Mill is a unique, high-quality center, the likes of which would not be built today,” said Benedict. “The Starbucks-anchored center generated significant interest as it checks most all the boxes for convenience multi-tenant retail investors.”  The center is situated at the pin-corner of the main intersection for the retail hub, which includes Home Depot, Regal Cinemas and Kohl’s. Additional neighboring tenants include Publix, Raising Cane’s, Petco, Arby’s and more. The property benefits from a prominent location, positioned within half a mile of Interstate 85 and the Hamilton Mill Parkway interchange. The Villages at Hamilton Mill caters to an affluent residential population with an average household income of $133,000 within a one-mile radius.   “Additionally, there were several short-term tenants that provided future upside,” added Benedict. “The buyer was able to envision this upside via our soliciting of strong national and regional tenant interest. Despite one of these short-term tenants vacating during due diligence, the buyer was unphased on account of their belief in the property and its location.” 

Originally published by ConnectCRE For the net lease sector as well as in commercial real estate at large, the economic picture remains murky, with inflation and rising interest rates at the forefront of consumers’ and investors’ minds, Northmarq (formerly Stan Johnson Company) says in a new report. Fears of a recession still loom, and there has been a noticeable decrease in consumer confidence this year.    Additionally, the industry continues to question the future of 1031 exchanges, and the upcoming mid-term elections could impact economic conditions and investor sentiment as well. Balancing out these trends are strong job growth, low unemployment, robust consumer spending and insatiable investor demand for quality assets, according to Northmarq’s Lanie Beck.   “In the single-tenant net lease market, we’ve seen investment sales volume decline over the past three quarters and compared to the record-setting end to last year, current activity levels may feel somewhat lackluster,” Beck reported. “Put in perspective, though, the market is on pace to have a very solid year, perhaps topping the $70-billion-mark and solidifying 2022 as a top three year in history.”   However, Beck said the fourth-quarter sales total will be telling. “The final three months of the year will not only dictate how 2022 gets logged in the history books, but it will also set the tone for 2023.” 

Originally published by GlobeSt Holiday retail shopping is expected to start earlier, offer with more promotions and see more sales despite the challenges of a tight labor market, lingering supply chain issues, stubborn inflation and soft consumer sentiment.  CBRE is projecting a 6.9% increase in Q4 retail sales year-over-year to $1.48 trillion, despite inflation straining consumer budgets.  “Consumers can expect greater costs this holiday season, evidenced by an 8.2% annual increase in the Consumer Price Index (CPI) in September,” CBRE reported.  CBRE said the most notable rising expense could be the cost of a homemade holiday dinner, which is projected to average $103 this year compared with $84 in 2020, according to data from the American Farm Bureau Federation and the St. Louis Fed.  Families Seek Bargains for Their Budgets  Jim Bieri, principal, Stokas Bieri Real Estate, tells GlobeSt.com that right now, families are struggling to pay the bills and meet their expenses.  “I expect online discounts to start early on overstocked items as customers look to beat rising inflation and a deepening recession by buying early,” Bieri said. “Online sales will continue to play a strong role in holiday shopping, as families look for bargains to stretch their budget.”  Expect Plenty of Markdowns from Nordstrom  CBRE said an “ill-timed slowdown in July retail sales has left some retailers with excess inventory that may prompt discount offers to consumers.”  It reported that Nordstrom, for example, estimates $200 million worth of markdowns over the second half of 2022.  “However, retailers could benefit from excess inventory due to an extended holiday shopping season,” according to CBRE.  Data analytics firm Placer.ai expects a repeat of last year’s early holiday shopping season when weekly sales in October grew by 3.2% compared with 2.5% growth in November.  An Earlier Start to the Holiday Season  Joe Coradino, CEO, PREIT, tells GlobeSt.com that PREIT is gearing up for robust in-person shopping with an earlier start to the holiday season than in years past.  “The traditional holiday season timeframe for comparison is continuing to morph,” Coradino said. “Due to this, mall owners and retailers need to be stocking product sooner.  “Most importantly for our business, while there have been improvements in supply chain, we think customers will seek surety of in-person purchases. Toward this end, we will be offering customers rewards for shopping in our centers this holiday season.  “At the same time, we have seen a healthy shift of consumer dollars toward dining in our portfolio. Naturally, we expect some of these dollars to be reallocated to goods during the holiday season.  Coradino said that he is watching employment and wage levels, which remain “strong” right now, and know there are inflationary challenges impacting many consumers.  “That said, we think this year is the true return to holidays past and customers are looking for celebratory festivities with their loved ones.”  Parking Lots Are Already Busy  Mark Whiting, mall manager at Simon Property Group’s Northshore Mall, tells GlobeSt.com that shopping in stores is still the preferred way to shop.  “People crave connecting in real life and find joy in discovering the new and different,” Whiting said. “It’s too soon to project sales but we’re already seeing lots of shopping bags, busy Santa set reservation activity and busy parking lots – which is always a good sign and indicator of a busy holiday shopping season!”  Season to Be ‘Promotionally Driven’  Chris Butler, CEO of National Tree Company, said this holiday season will be “extremely” promotionally driven and that in general there will be consumer softness.  “We are seeing a ‘return-to-store’ post-COVID after consumers did a lot of their shopping online,” Butler said. “Over the long term, online shopping will continue to grow, but this year there is a softening based on strong comps from last year.  “Last year, holiday spending was pulled forward due to the supply chain and consumers worrying about lack of availability of goods. We believe that consumers will start spending much later this year.  “The most important thing will be the ability to react in real-time, using data to make in-season decisions to either spend more promo dollars or buy back if volume remains soft.  “We have not seen any issues with the labor market today. We have given our hourly workers a temporary ‘inflation increase’ but have not experienced any other issues.”  Compared to Last Year, This Season is ‘Flipped’  Dave Cheatham, president, X Team Retail Advisors and Velocity Retail Group, tells GlobeSt.com that he expects a more “normal” holiday retail season.  “The supply chain is improving, as we are now able to get merchandise out of the ports,” Cheatham said. “We should see more aggressive pricing during the holidays. I am not saying it will be completely back to normal, but it will be closer to what is expected.  He also expects that people will shop earlier online and in-store according to their preferences and will benefit from aggressive promotions and holiday deals.  “Last year, inventory was so low that retailers were not in any position to offer consumers special markdowns. The retail industry saw high demand for merchandise at all levels and low inventory.  “This year is flipped. Retailers will have a better level of inventory versus last year’s supply chain drought. However, the consumer may fill their shopping list with needs and staples for the family, rather than wants and aspirational luxury items.  “I expect value stores and the basics, such as clothes for the kids, to do well. One thing is clear, economic uncertainties will decidedly play a role in this season’s outcome.”  Retail Foot Traffic Picking Up  Avison Young’s Craig Leibowitz tells GlobeSt.com that according to Avison Young’s Vitality Index, when looking at retail foot traffic across the U.S. the week of Oct. 27, relative to the same week in 2019, he is seeing retail foot traffic at 71.5%.  “As a predictive element, when looking at tourism and hospitality foot traffic, we are seeing a recovery rate of 74.2%. which is a great indication of future demand. We expect this to increase into the holiday seasons.”  Retail Rent Collections at Favorable Levels  Mark Sigal, CEO of Datex Property Solutions, tells GlobeSt.com that three factors make him bullish about holiday sales.  “One is that rent collections in terms of timely rent payments by retailers to retail portfolio owners remain strong for both national and non-national retailers, a trend that has only increased in the past couple of months, and which is outpacing 2021’s numbers. This suggests merchants will have favorable footing to market to customers during the holiday season.  “Two, sales per square feet numbers across the 21 merchant categories that we track in Datex Tenant Track has shown a 71% increase in the number of merchant categories showing sales growth vs. the quarter prior, suggesting favorable tailwinds for merchants.”  The Tenant Track is a monthly report of rent collections, retail sales and occupancy cost trends from thousands of shopping centers, and tens of thousands of retailers nationwide  “Three, the job market remains strong, suggesting that consumers will be feeling flush, and will spend favorably during the holiday season,” Sigal said. “With an amelioration of the supply chain issues that impacted merchants’ ability to fulfill orders last holiday season, we believe this bodes well for the holidays.”  Investors Seek Recession-Resilient Retailers  Daniel Herrold, investment sales broker at Northmarq, following the acquisition of Stan Johnson Company, tells GlobeSt.com that, in general, most investors who are investing in single-tenant or multi-tenant retail are looking at both the historical performance of the tenant, as well as future trends and forecasts for the industry.  “Investors generally lean their preference on those retailers who are recession-resilient and have strong e-commerce platforms so they can capitalize on both in-store traffic and online shoppers,” Herrold said.  “If the forecasts point to a strong holiday season for retailers, that only affirms their investment in the sector. Strong holiday projections aren’t likely to increase investor interest or volume in the sector, but it should certainly help to maintain current investment volumes.”  © 2022 ALM Global Properties, LLC. All rights reserved.   

Originally published by GlobeSt The single-tenant net lease market is likely to end the year strong, with sales activity on track to make 2022 the third strongest year in history.  That’s according to a recent analysis from Northmarq, which notes that if current activity levels carry over to Q4, the year will claim $74 billion in annual sales volume. In particular, the industrial market is set to report its second strongest year on record, while the office and retail sectors are more likely to have closer to average years.  Overall average STNL cap rates leveled out during the third quarter as sales activity declined for the third straight quarter. Private buyers have the largest share of the market, according to the report, and while the market is “significantly” off-pace to reach 2021 numbers, strong annual performance is still within reach.  “In the single-tenant net lease market, we’ve seen investment sales volume decline over the past three quarters and compared to the record-setting end to last year, current activity levels may feel somewhat lackluster,” said Lanie Beck at Northmarq. “Put in perspective though, the market is on pace to have a very solid year, perhaps topping the $70-billion-mark and solidifying 2022 as a top three year in history. However, fourth quarter will be telling. The final three months of the year will not only dictate how 2022 gets logged in the history books, but it will also set the tone for 2023.”  Investors are still flocking to the sector, with sales activity for net-leased retail rising between 24% to 27% across the 12-month span ending in June, according to Marcus & Millichap.  “Moving forward, investors seeking long-term cash flow may capitalize on high pricing in other sectors and move equity via 1031 exchanges into less management intensive single-tenant properties,” firm analysts note. “Yield-focused buyers may target Midwest markets with increased frequency, as Detroit, Chicago, Kansas City, Cleveland, Indianapolis, Milwaukee and Minneapolis are home to average returns 30 basis points to 80 basis points above the national mean.”  © 2022 ALM Global Properties, LLC. All rights reserved.