At the property sector level, industrial was deemed to represent the greatest value relative to price for the fifth quarter in a row. More precisely, industrial tied with retail for this distinction. Although industrial value dropped slightly in Q3 from the previous quarter, it still represented one of the highest ratings since Situs RERC began collecting the data, and held enough value to come in on par with retail, which jumped in value from Q2.

Despite concerns about the future of certain segments of the retail sector, ValTrends experts were more optimistic about values supporting prices for the overall retail sector than the office, hotel and apartment sectors, according to Situs RERC. Relative value vs. price ratings declined for the office and hotel sectors but rose slightly for the apartment sector between Q2 and Q3.

Similar to the industrial sector, Q3 2017 retail rating was among the highest since Situs RERC began collecting these data. However, “investors should be particularly cautious about the retail sector as the industry continues to evolve in order to compete in a digital world,” according to Situs RERC's report.

Indeed, Situs RERC notes that “the world is now built on Amazon,” which represents both a boon for the industrial sector as online retailers need more space for logistics and fulfillment centers and a serious challenge to retailers as shoppers are doing more of their purchasing online. “The market is penalizing all retail for e-commerce's effect on brick-and-mortar retail,” says Ken Riggs, president of Situs RERC. “Pricing for high-quality retail is holding up although the market is quiet on the transaction side. The reality is that e-commerce is clearly having an impact, but we are way over-retailed by 40%; many malls were built 40 years ago, and retail has always been a Darwinian environment.”

As the sector “shakes off the oversupply of retail space,” investors will need to consider property-level factors such as location, infrastructure and tenant improvement costs to determine where to find the best opportunities,” according to Situs RERC. “Retention and quality of the anchor tenant is very important as many traditional mall anchors become obsolete. Investors still want shopping centers, but their preference is straying from the traditional enclosed, two-story centers toward open-air lifestyle centers with theaters, hotels, offices, restaurants and shops that are siphoning tenants from traditional malls.”