Part 1 of 2
NEW YORK CITY-In preparation for the big ICSC New York event in early December, we chatted with Jason Maier, director of the New York office of Stan Johnson, to talk about the current environment, where it is headed, the tidal wave of interest from investors, and net lease assets among other things.
GlobeSt.com: What is the current retail environment in NY and where do you see it headed?
Jason Maier: There has been a tremendous tidal wave of interest from investors on both the stable yield driven side and the value add investment players. As New York City proved to be the most resilient real estate market in country throughout the economic downturn. Investors seeking both stable yield and some value add players have driven cap rates as low as I have seen them in years. Major national tenants have begun to replace on an epic scale many of the remaining mom and pop stores on the most desirable retail corridors in the five boroughs, driving rents sky high and pushing cap rates farther down. However the early numbers from 4thQ 2013 shows signs of a slowdown from the major retailers. This is very typical to see this kind of momentum shift, first you see the “boom” and you know that it can't last forever. Every time retailers undergo a major expansion it is only natural that they pull back on the rains a bit, absorb. The next effect that it has, however, is the limited to no supply of new NNN leased assets on the market. Just a recycling of shorter term assets from investors looking to cash out, or looking or the next value-add investment.
GlobeSt.com: How would you describe investor interest in net lease retail assets?
Maier: Let's me say this, 22 years ago when Stan Johnson sold his first Wal-Mart when there was no such thing as net lease, I doubt even he could have predicted this level of demand. In most parts of the country all the shopping centers and retail corridors are dominated by net leased assets, New Jersey is one giant retail corridor, and everyone wants to own a piece.
GlobeSt.com: What are your clients seeking or asking for that is different from years past? Any trends you see continuing on that front?
Maier: Right now we see more and more of clients looking to reset term, or buy up the credit scale. We have also seen greater demand for industrial and distribution assets. Think about it this way, what seems just like yesterday a Dollar General brand new 15-year BTS was trading in the 8% or higher cap rate range, and are now trading in the 7%-7.5% range. Franchisee credit quick serve or QSR out parcels in major shopping plazas or retail trade zones were also trading in the 8's and now in the 7's. So if you own those assets and you're worried about interest rates stability of lesser credit tenants, you sell and look for the longer term safer credit investments and take advantage of the still reduced interest rates. Mostly our clients like to play it safe, that's what our segment of the market offers.
GlobeSt.com: Any concerns you clients have at the moment?
Maier: There have been some serious concerns posed about the potential accounting rule changes and the effects that it will have on national tenants signing longer term leases, or the benefits of owning more of their own real estate as the way they will have to book the liability will change. But I think it is too early to know, and most industry experts believe it is nothing more than another blip on the screen, but it is something we are keeping our eyes on.
Be sure to check back with GlobeSt.com for part 2 of this Q&A where we talk more about tourism, job growth, and the move to boroughs.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
