Investors View Anchored Centers as Best Source of Opportunity in Changing Retail Landscape, Real Capital Markets Reports

Courtesy of Real Capital Markets. Courtesy of Real Capital Markets.

An evolution is taking place in the retail sector today. Big box retailers are no longer en vogue with today’s active and experience-driven consumer, and the growth of e-commerce continues to spark a need for change throughout the retail landscape. Bankruptcies and store closures may be topping the headlines, but the sentiment in the sector remains cautiously optimistic, according to Real Capital Market’s May 2017 Retail Sentiment Report.  

For this month’s report, RCM surveyed its database of principals and brokers from across the country to gauge their sentiment on investing in today’s market, the greatest threats to the industry, the factors most influencing their acquisition decisions and where they see the greatest opportunities.

Investors point towards anchored retail centers — particularly those with grocery tenants — as one of the greatest avenues for growth, with the category cited by more than 40 percent of investors. “Anchored centers, whether highlighted by a grocery store or another strong big box retailer, remain the category where the majority of investors see the greatest opportunity,” says Steve Shanahan, executive managing director of Real Capital Markets. “Though e-commerce is highly disruptive for so many businesses, grocery stores may be among the least vulnerable.”

Shifting consumer buying habits were cited as the greatest threat to the industry today by almost 36 percent of respondents, followed by the impact of e-commerce and big box vacancy rates. Participants were quick to add that the retail closures seen today do not mean the end of bricks-and-mortar. In fact, some respondents suggested that the closures might be a good thing, and that the “threats” to the industry are simply stimuli for reinvention.

One third of investors said that the current state of retail is having — and will continue to have — an impact on their acquisition plans. More than 42 percent of respondents stated that the combination of retail issues and financial market concerns are dictating investment strategy.

“Some retail property investors are taking a broader look at the impact of e-commerce and other influences as they fine-tune their investment strategies moving forward,” says Tina Lichens, COO of Real Capital Markets. “At the same time, others are choosing to observe how those strategies unfold before making any financial commitments.”

In spite of the prognosis for further interest rate hikes, respondents reported that they still weren’t motivated to accelerate their acquisition plans in order to lock in low rates. According to the survey, almost 63 percent of participants said that they are not stirred to action by interest rate activity.

“RCM’s Retail Investor Sentiment Survey shows that investors continue to believe in the value of retail investments, overwhelmingly characterizing themselves as either net buyers or holding to manage what they already own,” says Shanahan. “That tells me that should the right opportunity come along, they won’t hesitate to act quickly and decisively.”

Katie Sloan 

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