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There’s only one way to go… August 25, 2010

Posted by Erik Swanson in Research/Data, Retail News, Retail Sales Comps, Uncategorized.
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“How is business?” is a question I get a lot lately from friends, family, colleagues and clients. My cautious reply, “we’re busy!” has been  met with welcome surprise. I think most are generally relieved to hear what they believe is evidence of the CRE market coming back. Sure, one of the first rules in sales is when anyone asks about your business, you always respond by saying that you’re busy (I think it was Dale Carnegie). But this isn’t me just throwing out broker hype. Discounting the slow down that generally occurs in the summer when much of the Northwest takes vacation, we are busier. Don’t get me wrong, it’s hard to sugar coat the situation and I’m guilty of plenty of belly aching about the sorry state of CRE. Increasingly however, owners are contacting us for advice, to analyze or strategize, and curious investors are requesting listing packages. Sure, some of this activity is “tire kicking” or perhaps curious investors just trying to make sense of the market. Hopefully though it’s a bigger sign that  confidence is coming back and we’re achieving market equilibrium in mind of buyers and sellers. Because even though we are busier, it hasn’t yet translated into sales velocity. And to most of us brokers and investors alike, that’s one market measure that really matters.   

Excluding foreclosures and distressed asset sales, $1 million plus multi-tenant retail investment purchases have been almost non-existent in the Puget Sound this year. Here’s the run down:

  • A New York based REIT purchased grocery anchored centers in Lake Stevens (8.0% Cap) and in Kent (8.4% Cap).
  • A three tenant strip in Queen Anne sold to a 1031 exchange buyer at an 8.25% Cap
  • In Tacoma, a 65% occupied strip center with an extra pad was purchased by a Sonic drive-in operator as a value-add play. 
  • In Everett, a two-year old strip center that had sat vacant since completion sold to an exchange buyer for $115/sf. Financing provided by the developer.

I’m not counting a handful of strip centers that have been foreclosed on. Most were taken back by lenders who are now attempting to lease up and stabilize assets before trying to get them off their books. Mostly, that’s a flawed strategy and a frustrating story for another post.

So, through the end of July 2010 there were only 3 multi-tenant retail centers that were purchased based on a Cap rate?!  The average annual velocity between 2004 and 2008 was give or take 70 sales (I didn’t include the 16 sales that occurred in 2009). Where we’ll end the year is anyone’s guess. The increase in activity is a positive sign and looking at the numbers, there’s only really one direction for the market to go…let’s get busy.

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