Sales of multi-tenant retail assets are off by 44% over the past year, while single-tenant transactions have fallen 33% since the midpoint of 2007. However, the report states that cap rates for fast-food properties, particularly those with strong national tenants, have increased slightly over the year to around 7%.
"Fast-food properties are expected to remain the single-tenant asset of choice for investors," says John Leonard, Marcus & Millichap's regional manager in Atlanta. "Cap rates for all single-tenant assets will likely continue to be fairly stable this year despite the drop off in velocity."
Other local retail brokers point out that it takes a lot of those small deals to match a larger shopping center sale. Even though commercial mortgage-backed securities are all but out of the picture for larger deals, they say financing is attainable for the right properties by solid credit buyers.
"There are plenty of buyers out there and there is plenty of equity capital," observes Kris Cooper, capital markets managing director with Jones Lang LaSalle in Atlanta. "The market here is still pretty doggone good."
Cooper also tells GlobeSt.com that a gap exists between the expectations of buyers and sellers in the current retail market, which is also being hindered by store closing decisions by national chains. Marcus & Millichap states that pricing for multi-tenant properties appears to be leveling at $164 per sf, while cap rates have averaged in the mid-7% range.
Construction activity has slowed from last year's feverish pace, with 4.9-million sf slated for delivery this year, yet that is on par with the five-year average for the Atlanta market, Marcus & Millichap reports. One of the biggest retail centers expected to open this year is the 600,000-sf Avenue Forsyth project by Cousins Properties Inc., at Georgia 400 and Peachtree Parkway in the northeastern suburb of Cumming.
Vacancy is expected to rise a full percentage point to 9.7% through the latter half of this year, the result of strong development activity meeting weaker retail spending. Cooling economic conditions and reduced consumer confidence will lead to moderate rent growth, with asking rents reaching $17.56 per sf and effective rents at $15.87 per sf, Marcus & Millichap states.
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