Investment Sales of Retail Properties Spike as Sector Continues to Recover

   

Michael Bull at the mike

ATLANTA, GA – With commercial real estate investors searching for higher yields, investment sales of retail properties have spiked, and buyers are showing more interest in purchasing properties in secondary and tertiary markets.

 That was one of the market insights provided on the most recent episode of the “Commercial Real Estate Show” radio program, hosted by Michael Bull of Bull Realty.

The episode provided an enlightening look at the U.S. retail sector. Topics included investment sales volume, in-demand markets, the federal Marketplace Fairness Act and the upcoming RECon 2013 convention in Las Vegas.

Dan Fasulo

 Retail investment sales totaled more than $20 billion in fourth-quarter 2012, a pace not seen since before the Great Recession, said Dan Fasulo, managing director of Real Capital Analytics (RCA). The brisk activity was fueled in part by sellers’ motivation to close deals before higher capital-gains tax rates took effect early this year, he added.

 Overall, nearly $53 billion of retail investment sales were completed in 2012, a 20 percent increase from the year before, according toRCA.

Laurel David

 “There were a lot of buyers, institutional investors, that had focused on office and multifamily earlier in this recovery cycle, but who have now shifted to other property sectors like industrial and certainly retail because of the higher yields available,” Fasulo said.

 Nationwide, retail cap rates average just above 7 percent, a mark that has remained the same for several years. However, “you’ve got to dig underneath [that average],” Fasulo said. “Where we have seen some cap rate compression recently is in the secondary and tertiary markets, which were late to the party a little bit.”

 In another positive development for the retail sector, the federal Marketplace Fairness Act, which would give states the authority to require large Internet retailers to collect state and local sales taxes at the point of sale, seems to have a good chance of soon becoming law, said Laurel David, an attorney with The Galloway Law Group and the chair of the ICSC Georgia Government Relations group.

President Barack Obama

 The bill is slated for a Monday vote in the U.S. Senate, where it appears to have broad bipartisan support. If passed in the Senate, it would go to the House. President Obama has indicated he would sign the legislation if passed by Congress, David said.

Bricks-and-mortar retailers, who do have to collect sales taxes at the time of a transaction, support the legislation because they feel the current system gives an unfair advantage to their online counterparts, and state and local governments are behind the measure because of the tax revenue they lose.

Jesse Tron

Even though consumers are technically required to eventually pay sales taxes for their online purchases, hardly any ever do, and the result is that state governments lose $23 billion in taxes each year, David said.

 “The bill will level the playing field,” David said.

 Indicative of the gathering momentum in retail real estate, the International Council of Shopping Centers’ (ICSC) annual RECon convention is on pace for a noticeable increase in attendance, according to Jesse Tron, communications manager for ICSC.

The show is the sector’s largest convention by far, and should draw 33,000 to 35,000 attendees this year, up from about 32,000 in 2012, Tron said. “I think the buzz (about the industry) has picked up, probably the most since the recession,” he said.

 The entire episode on the U.S. retail market is available for download at www.CREshow.com. The next “Commercial Real Estate Show” will be available May 9 and will examine the U.S. multifamily market.

 For a complete copy of the company’s news release, please contact:

Stephen Ursery

The Wilbert Group

E-mail: sursery@thewilbertgroup.com

Office: (404) 965-5026

Cell: (404) 405-2354

www.thewilbertgroup.com