Voit Retail Brokers:As the market tightens over the next year, cap rates will certainly compress further.

Because historically low cost of capital has already compressed rates, vacancy rates throughout the Western US continue to go down, and lease rates are rising, buyers are hurrying to acquire retail as quickly as possible.

This trend will change, however, when interest rates increase. At that time, cap rate compression will cease.

In the meantime, sellers in the current market can command a low cap rate and high price, but are having difficulty identifying up-leg exchange opportunities. The best solution to this challenge is working with a broker who can help to identify off-market acquisition opportunities, as prices for these deals may be slightly lower due to less competitive bidding.

Currently, single tenant net lease deals backed by strong credit continue to be the preferred investment for those willing to pay a premium price for lower risk.

[IMGCAP(3)]

What retail sectors will grow fastest in the near future?

Voit Retail Brokers:Wellness, fitness and healthcare are particularly active areas for retail, and are poised for additional growth in the immediate future.

From specialty fitness, farm-to-table food, and healthy quick service restaurants, to medical uses in retail space, the market will continue to support health and wellness retailers. This trend will continue for the foreseeable future due to the depth of the aging population in the US.

[IMGCAP(4)]

GlobeSt.com: What's next for retail?

Voit Retail Brokers:Vacancies will continue to decline, retail development will recommence, and further retailer expansions are projected.

Quick-service restaurants are demonstrating an early lead in these expansions, and there will likely be a further influx of QSRs throughout the Western US in the coming years.

In addition, the trend of retailers with larger store footprints introducing smaller prototypes for infill locations, urban and mixed-use areas will continue.

Consolidation of retailers, such as Family Dollar and Dollar Tree, will continue, resulting in excess or duplicate locations similar to what has happened with Office Depot and Office Max. This will be an area of opportunity for owners to diversify their retail mix with newer concepts.

The Las Vegas strip is a specifically hot growth area. There are already several retail-focused developments in the works on the strip, and many retailers are now considering this location as a primary target. For example, Voit represented Famous Footwear as they opened a location on the strip last year, and the retailer is performing above expectations. As other retailers take notice of retail success on the strip, retail openings on the strip are likely to increase.

The retail market is heating up, and those who are poised to take advantage of the opportunities as they come will reap the benefits.