GlobeSt.com: So, the focus is still on daily needs retail?

Kozakov: The definition of daily needs has expanded into more service driven retail. It had not been focused on enough early on in the cycle.

GlobeSt.com: Strip centers generally have a lower price point. What types of investors are buying these properties?

Kozakov: It is interesting because we have seen private and high-net worth investors as well as developers interested in this product type, but we have also seen institutional money come in and do joint venture projects with local operators on bigger price point assets in higher income areas. We have sold a couple of properties in Santa Monica that have been joint venture between local operators and pension fund and institutional funds. We also see a lot of that in Venice, Silicon Beach and Beverly Hills, where you have higher price point retail.

GlobeSt.com: What is driving this demand among institutional capital?

Kozakov: Retail is changing and evolving, so a lot of institutional and private equity capital that has been going after the bigger box and grocery anchored centers is now starting to look at how they view retail. They want to be on high street markets and have properties that they feel are resistant to the internet. Because these are centers typically have been owned by families for years, there are not a lot of opportunities to get into these assets unless you have a local joint venture partner.

GlobeSt.com: Is there a higher risk in owning these assets because local daily needs tenants generally don't have credit?

Kozakov: There is risk in any property. Investors have to evaluate what the risk is based on the real estate itself as well as the tenant mix. Sure, mom and pop tenants have less credit and less financials, but that doesn't mean that they are a bad tenant. A lot of credit tenants today started off as mom and pop tenants or small regional operators. You have to take into consideration that in urban markets, some of the best retail and restaurants are more local operators, not big chains. That is what consumers in urban markets want. They want something that is unique.

GlobeSt.com: What do you think the next big trend in retail niches will be?

Kozakov: These are the properties that we are currently advising clients to look closely at. We look closely at rent growth. A lot of markets in the last 10 years have not seen rent growth outside of the urban areas, so for us, we advise clients to stay in areas with density and income that can support retail rather than looking at one product over another. Obviously, you have to be cautious of big box and some of the other retailers, but if you are in the right geographic markets, you can always backfill properties or redevelop into a higher and better use. We tend to take a more defined approach on the real estate side rather than looking at a specific tenant.