Urban Retail Properties is Overly Popular

Urban Retail Properties News

 Urban Retail Properties is Overly Popular

Although the Urban retail market is overly popular, who or what in our industry is actually thriving in this period of a declining cap rate yield curve is rarely discussed.

In 2009, I wrote an article about the apparent high rate of attrition in the net lease brokerage community. Brokers couldn’t afford to be brokers, developers couldn’t develop, tenants shut down plans for new stores and closed existing locations. So what happened to everyone that hung in there and stuck it out? The cream has risen to the top. Developers of  Urban retail properties that stuck to what they knew, maintained and fostered existing relationships, and made people aware that they weren’t going anywhere fared extremely well when it became time to start building again. They had more opportunities to purchase land for new buildings or redeveloped vacant buildings.

The development team may have become a little smaller with a lot more multitasking within their ranks, but what it made them more efficient service providers. Developers realized that collective thinking and pooled efforts of fewer people made each project more manageable for any specific property. Developers found that scale was important and it was unique to each property.

www.calkain.com

CVS Pharmacy - Adams Morgan - Washington, DC Trades for $14.5 Million

Urban Retail Properties

Urban Retail Investment transaction Sets Record with $14.5MM in Adams Morgan

Calkain Urban Retail Investment Advisors recently completed the sale of a NNN investment property in Washington, DC. The purchaser, a private 1031 investor, seeking a stable, credit rated, income-producing asset. The sale, closing at over $1,154 per square foot, broke the record previously set by Calkain for a NNN investment sale.

Rick Fernandez, Managing Director of Calkain Urban retail  Investment Advisors, represented the seller in the transaction and Calkain Managing Director, Jerry Burg, represented the buyer on the purchase of the CVS on Columbia Road in Adams Morgan. “The AdamsMorgan CVS is well situated in a grocery anchored, dense, high traffic, urban location within a diverse residential and retail community,” explained Fernandez. “The investor understood that this CVS not only provided a stable income stream backed by a strong credit rated corporate tenant, but also a highly adaptable asset with rock solid generational value,” continued Burg.

The seller reviewed multiple offers from across the country before closing with a private investor who was working with Burg to identify $35MM in NNN investment properties for a 1031 exchange. The transactions closed in the past thirty days.

Calkain Companies is a boutique commercial real estate brokerage firm which specializes in assisting buyers and sellers with single and multi-tenant retail, industrial, hotel and office net leased transactions. While licensed to conduct business in many states, nationally, Calkain has multiple office locations throughout the Mid-Atlantic, Southeast and Northeast United States. Additional information about the firm and listings may be found at www.calkain.com.

Creating a Vibrant Urban Retail Centers in USA

Urban Retail Properties

Urban Retail Development Gaining Momentum 

It has been widely discussed that many big box retailers are making the move from suburban sprawl to the heart of urban centers. This trend had been triggered by a number of factors including strengthened urban demographics, inherent land value and stable demand for staple products - which big box retailers are increasingly featuring. Though it may seem like a tight fit, big box retailers are showing a willingness to adapt and reconfigure in order to enter the urban retail market.

Without question, key urban retail markets such as Washington DC, New York, Chicago, Boston and Miami consistently outperform the secondary  and tertiary markets. This trend has only been exacerbated by the recession and resulting economic turmoil. Prime urban locations have the advantage of strong inherent value in their real estate, increased foot traffic and an easier tenant replacement process. Furthermore, issues such as commute time and city gentrification are attracting an affluent – often young – demographic to these areas. As a result, cap rates in prime urban locations have markedly declined in the past 3-4 years.

Big Box retailers have taken note and are committing to widespread urban development.Wal-Mart has six new sites planned for the Washington DC Metro Area alone. Office Depot has recently opened eight stores (about 1/5th the size of the traditional 25,000 sf) in urban areas, including Hoboken NJ. Best Buy has urban locations in Washington DC, Baltimore, Chicago and New York City. Target has opened stores in Washington DC, Minneapolis, Denver, Chicago, San Francisco and Gaithersburg MD. Even Costco is developing a store in DC. 

This is a major trend and is changing the previous suburban image of Big Box retail. Another important development concerns the expansion of grocery products offered at stores such asWal-Mart and Target. With the recession making customers more value focused and web retail services such as Amazon.com growing more popular, big box retailers have begun to place a higher emphasis on groceries. Unlike entertainment products like TVs, Computers, Games and CDs which consumers are increasingly willing to buy from online sources groceries often require a human to visit a bricks and mortar store. 

Furthermore, groceries and other staple products have inherently stable demand, making them essentially recession proof. Intact, Wal-Mart has developed a new concept Wal-Mart Express with a much smaller footprint and healthy offering of grocery/staple products. These new stores are specifically targeting both rural and urban areas. By placing a focus on these items, big box retailers are hoping to take out a new lease on life. 

www.calkain.com

Urban Retail Properties Continues its Evolution

Urban Retail Properties News

Urban Retail Properties Sale Over $1050 Per Square Foot

Calkain Urban Retail Investment Advisors, the Urban Retail Division of Calkain Companies, recently completed two sales of fully leased NNN urban retail condominiums in Washington DC.  Two of the urban retail condominiums are located on the ground floor of The Alta, a luxury mixed-use condominium just below Thomas Circle on 14th street.  The second sale was of the urban retail condominium at 14th and P, the heart of Logan’s Circle’s retail core, and the home of one of DC’s most renowned restaurants.  The purchasers were private investors seeking stabile incoming-producing assets along DC’s robust 14thstreet corridor.

The transactions illustrate the strengths of well-situated urban retail investment properties, namely the adaptability of an urban retail space and the upside potential flowing from a dynamic urban setting. Perhaps most remarkably, the sellers were able to capitalize on those key strengths just a few years after first acquiring the properties. The sales, one closing at over $1050 per square foot set new benchmarks for what is attainable in non-credit, locally tenanted NNN investment property.  Similar to an in-line space in a shadow anchored or power center a single urban box (owned fee simple) can accommodate a variety of uses with the key difference being that it is the convergence of people and traffic that acts as the anchor in the urban scene.  In the case of the property at 14Th and P, the loss of the original tenant (a garden store) provided the owner with an opportunity to secure a more favorable lease with a stronger use (a fine-dining restaurant) under a higher rent per square foot.  The recent sale closed at a cap rate 150bps below his original purchase.

Well situated urban retail within high traffic locations in diverse residential, office and retail communities provides an investor with broadly adaptable real estate.  While some may reject NNN properties in this setting a closer looks reveals that these urban retail properties provide a stable income stream with real upside potential that far exceeds anything offered by a suburban pad site in the shadow of a big box store.

Future of Urban Retail Properties in America

Urban Retail Properties News

Future of Urban Retail Properties in America...

There are many emerging factors which make urban retail properties more appealing. The long term rise in oil prices along with increased traffic and congestion has translated into a rising desire for proximity to public transit, which has made urban retail properties more desirable. To illustrate this fact, suburban households typically spend 25% of their budgets on transportation, compared to 9% for urban households. Subsequently, the number of households desiring to be within one-half mile of urban transit is expected to double, reaching 14.8 million by 2025.

Besides concerns about transportation, other factors are also making urban investment more appealing. The younger generation, so called "echo-boomers" or "Generation Y" is 50% more likely to live in urban areas. It has also been recorded that the top 100 MSAs (Metropolitan Statistical Areas) generate 75% of the U.S. GDP and 66% of its jobs, while only making up 12% of its land mass. Furthermore, the top 10 MSAs are home to 33% of the nations "knowledge jobs" and 27% of its research universities. In an economy which is increasingly based on technology and is in-fact referred to as the "knowledge economy", these numbers point to increased viability and prosperity for urban areas.

Lastly, the retrofit-ability (or reusability) of a particular urban retail property is typically much greater than standard suburban real estate. Urban retail properties usually require less identity-driven structures and tenants are comfortable in a specific space mainly because its location. Therefore, if a new tenant is ever needed to fill a specific property, the options of that tenant are much larger than a specifically designed building for the previous occupant.

In 2007, retail sales per Manhattan resident totaled $23,250, nearly three times the national average. That number has only grown. By contrast, in the Bronx, there were just $3,362 in retail sales per resident, about half of the average.

The Times said drugstores present the one exception to the rule of retailers shunning the four boroughs outside of Manhattan. There sales are strong throughout the city, as chains including Duane Reade and CVS have spread far and wide and offer many products, albeit at higher prices, that most Americans buy at discount retailers such as Target. Driven by a desire to spend less time in traffic, live in a smaller footprint and work and play within an urban atmosphere, aging boomers and Gen XYZers alike are leaving the edge and making their way back to the city.  Developers have capitalized on this trend by coupling high-rise condominium living with easily accessible ground floor retail space.  The convenience of these on-hand amenities makes for an attractive lifestyle for local residents and nearby office workers.  While not a new phenomenon, the rise in urban mixed-use development meets the market at a very good time

For developers, the rise of urban retail properties and mixed-use office projects and the willingness of traditional urban retail investors to pursue these assets offer an opportunity to monetize portions of the assets as well as unhook from the completed portion of the project.  Developers using this streamlined method of disposition have used their newly found proceeds to either pay down existing debt or fund new projects.  Additionally, a properly structured urban retail property provides flexibility in how a developer can subdivide the spaces often providing an infusion of cash from the sale of the retail units long before the residential properties have sold out.

www.calkain.com

Urban Retail Properties The Hottest Deals

Urban Retail Properties News

Urban Retail Properties The Hottest Deals in Real Estate!

The market for urban retail properties has witnessed a sharp resurgence in the past couple months. In-fact, we are seeing cap rates and prices that are reminiscent of the markets heyday back in 2005-2007. There is such a strong demand for these properties that they are routinely receiving multiple offers. This trend is being fueled by a number of factors such as inherently strong real estate quality, low interest rates, and a surplus of investors willing to deploy capital.

It is no secret that a great deal of the net lease market’s recent success is due to the security it offers investors. Net lease properties offer investors reliable income streams with little to no active management. These qualities are only enhanced in the context of urban condos. Unlike properties located in tertiary markets, urban retail can depend on higher foot traffic and a greater intrinsic value. This serves to add an extra layer of security to the investment – should a tenant leave it will not be hard to replace them.

Investors know this and are actively seeking these properties. Low interest rates coupled with a surplus of capital (that had previously been sitting on the sidelines) have led to a perfect storm of rising prices and falling cap rates. Likewise, many sellers are reluctant to sell because they would face the same problem in redeploying their capital. As demand continues to gain momentum it is likely investors will dig even deeper for tenant and location, resulting in downward pressure on cap rates.

http://www.globest.com/blogs

Urban Retail Economic Report

Urban Retail Properties News

The most aggressive cap rates Jonathan Hipp, CEO of Calkain, says he has seen has been in the mid 4s for “McDonald’s-type credit.”  Expect compression to continue, he tells GlobeSt.com.

The report also notes there is stronger investor demand for bank branches, pharmacies, and the best-performing fast food chains.Bank branches registered average cap rates of 6.1% in Q1, for example--100 basis points lower than the 7.1% average cap rate for pharmacies.

Investors, however, can be counted on to show a high degree of sophistication in their acquisitions not only across classes of tenants but specific tenants, as well. Sam Chandan, president and chief economist of Chandan Economics, tells GlobeSt.com. “Some pharmacy and bank branches are trading at sharply lower cap rates than their peers, even after controlling for variation in property quality and time to lease maturity.” For these most coveted assets, he says, debt yields are lower, as well, meaning that lenders perceive many of the same differences as relates to credit risk.

The most aggressive cap rates Jonathan Hipp, CEO ofCalkain, says he has seen has been in the mid 4s for “McDonald’s-type credit.”  Expect compression to continue, he tells GlobeSt.com. “Given where Treasuries are headed, people are looking for yield. Also, there is so much buyer interest in this product now we have gotten to the point where we almost don’t need new buyers. What we would like to have is more products.”

Not that the demand-supply imbalance will give investors pause, Hipp adds. “With everything going on, from the uncertain employment picture to the European debt crisis, at end of day people are still cautious on the economy. With the right combination of credit, location and length of lease it is a great time to be a seller in the net lease market.”

Or even a buyer, he says—but with a caveat. In this environment, current buyers should beware that an eventual exit strategy could happen in a period of higher interest rates and a diminishing flight to quality.

Source: GlobeSt.com