Savvy Investors Flock to Premium Retail Assets

Savvy real estate investors are flocking to premium retail assets. The evolution of retail had driven investors away from the retail asset class, but attractive pricing and yield spreads are driving investment activity back again. Institutional capital in particular has been finding opportunities in the retail market. This year, activity for class-A, well-located retail assets has increased, and experts expect the momentum to carry through the fourth quarter.

“We’ve seen an increase in investor demand for retail over the last quarter driven by an attractive spread in yields relative to other asset classes,” Tom Lagos, EVP at JLL, tells GlobeSt.com. “Savvy investors who are appropriately underwriting risk are getting a premium for pursuing this asset class. We anticipate more activity in the last quarter of the year along these lines.”

Exemplary of the new trend, an unnamed institutional investor has acquired Towne Center East in Signal Hill from BIG Shopping Centers USA, GlobeSt.com has learned exclusively. The 154,750-square-foot property is a multi-tenant shopping center with national anchor tenants, The Home Depot and PetSmart. The remaining tenant roster includes Supercuts, T-Mobile, Subway, GNC, Chinese Combo, Tutti Frutti Yogurt. “The sale of Towne Center East is another example of the strong demand for quality retail real estate in Southern California,” Lagos says. “The property attracted a spectrum of private and institutional bidders seeking well-located real estate with a risk averse income stream.” Lagos, along with Patrick Toomey, represented the seller in the deal.

Location is a major factor in the viability of a retail investment. Investors are looking for high traffic, high visibility and strong surrounding demographics. The Towne Center East property is exposed to 63,000 vehicles per day and from both the 405 and 710 Freeways. It is proximate to 320,000 residents earning an average annual household income of nearly $80,000, and the center is proximate to California State University, which has an enrollment of 37,000 students.

Another sign of the shifting retail sentiment, the institutional buyer also secured acquisition financing through a global investment bank. The loan has a fixed-rate, however, other details along with the sale price, were not disclosed. The JLL capital markets debt placement team representing the new owner included director Matthew Stewart and EVP Reid McGlamery.