Done Deals: Rising Interest Rates Reshaping Net-Leased Market, Reports Marcus & Millichap

Thursday, September 12, 2013

Rising Interest Rates Reshaping Net-Leased Market, Reports Marcus & Millichap

WALNUT CREEK, CA --Most stand-alone retailers are focused on driving retail sales within current footprints rather than pursuing rapid expansion, though some major chains continue to evaluate new locations in areas where shuttered competitors have created opportunities.

Drugstores, grocers and Target are at the forefront of pursuing higher same-store sales by attempting to carve out a share of the future revenue associated with the Affordable Care Act.

CVS, Target and Walgreens are opening clinics in existing stores, while Wal-Mart, which had announced plans for 2,000 clinics, has struggled to gain traction.

Nonetheless, the world’s largest retailer will eventually become a factor in the healthcare clinic industry, though competitors are better positioned at this point. Outside of healthcare, a resurgent housing market is generating support for a wide swath of retailers.

Building supply heavyweights Lowe’s and Home Depot, in particular, have benefited from a surge in home sales. The housing market is being pushed forward primarily by investors, who are more likely to utilize the warehouse stores.

In recent months, fi rst-time home buyers accounted for less than 30 percent of sales, down from the long-term average of 40 percent, while all-cash transactions approached 40 percent, up from a long-term average of 10 percent.

Investment in net-leased properties may step back from the brisk pace set over the past two years as rising interest rates