Whitmer says he sees continued concern about e-commerce and how it will affect the future of retail. “Here in the Northeast, landlords are also looking to fill the voids left in 2016 by the loss of big-box anchors like A&P and its affiliated brands, and Sports Authority,” he says. “We are seeing a general trend to incorporate service, food and entertainment tenants, which are somewhat immune to e-commerce.”

Seth Pollack, a director at Cushman & Wakefield, says many industry players expect the rise of interest rates to influence retail property trades going forward. But other product types – like multifamily and industrial – will see a greater impact, he says. “Retail is more sheltered than other sectors, given that average cap rates are slightly higher, which still allows for leverage to be accretive,” Pollack says.

Cushman & Wakefield's Metropolitan Area Capital Markets Group, itself, marketed six grocery-anchored centers in 2016, receiving a wide array of investor interest from REITS, institutional funds, regional private investors and 1031 exchange buyers. The offerings with investment-grade grocers and future revenue growth were the most sought-after by REITS and institutions. The centers that did not meet these criteria attracted the most aggressive capital from high-net-worth and 1031 exchange investors.

NEW YORK, NY—There is no shortage of capital chasing retail real estate heading into 2017, according to Cushman & Wakefield's Metropolitan Area Capital Markets Group. At the same time, limited product coming online for sale continues to dampen transactional volume.

“We are still seeing a lot of interest in the retail sector, but investors are having trouble finding quality product in the market,” says Brian Whitmer, retail practice lead of the Metropolitan Area Capital Markets Group. “They have been increasingly more selective, targeting core markets, urban street retail and grocery-anchored shopping centers with strong credit. Yet most of the product coming online is located in secondary or tertiary assets, or non-core locations.”

For context, Whitmer's group has tracked a 38 percent drop in total retail real estate sales volume in the tristate market year-over-year, with $1.9 billion in trades through mid-December 2016. The number of transactions is down 28 percent, to a total of 86 sales. Grocery-anchored properties in Northern New Jersey accounted for 86 percent of total transactions.

At the same time, Nick Karali, an associate director with the team, says a contrarian view is beginning to emerge. “Some investors are going after secondary product at slightly higher cap rates,” he commented. “In turn, we expect REITs to shed some of their secondary and tertiary assets in 2017 as they continue to hold core grocery-anchored and urban retail properties.”

Whitmer says he sees continued concern about e-commerce and how it will affect the future of retail. “Here in the Northeast, landlords are also looking to fill the voids left in 2016 by the loss of big-box anchors like A&P and its affiliated brands, and Sports Authority,” he says. “We are seeing a general trend to incorporate service, food and entertainment tenants, which are somewhat immune to e-commerce.”

Seth Pollack, a director at Cushman & Wakefield, says many industry players expect the rise of interest rates to influence retail property trades going forward. But other product types – like multifamily and industrial – will see a greater impact, he says. “Retail is more sheltered than other sectors, given that average cap rates are slightly higher, which still allows for leverage to be accretive,” Pollack says.

Cushman & Wakefield's Metropolitan Area Capital Markets Group, itself, marketed six grocery-anchored centers in 2016, receiving a wide array of investor interest from REITS, institutional funds, regional private investors and 1031 exchange buyers. The offerings with investment-grade grocers and future revenue growth were the most sought-after by REITS and institutions. The centers that did not meet these criteria attracted the most aggressive capital from high-net-worth and 1031 exchange investors.