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Kidder Mathews 2nd Quarter Retail Report August 2, 2011

Posted by Erik Swanson in Articles, Research/Data, Retail News, Retail Sales Comps.
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Below is the Kidder Mathews 2Q retail market report compiled by Andy Robinson in our appraisal department. The report details construction activity, retail sales, rent forecasts and highlights sales comparables for the first half of 2011.

The investment activity chart shows continued improvement in both deal volume and cap rate compression.

The full report is available by clicking here: Retail-Market-Research-Seattle-2011-2q.


Institutional Retail Grab June 9, 2011

Posted by Sean Tufts in Articles, Blogs, Retail News.
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As previously discussed in recent blog posts, sales volume has significantly jumped this year in the retail sector led by institutions with a nearly unlimited and practically free capital source. Their focus on purchasing retail centers has done many things to retail landscape, most importantly by driving CAP rates down to unexpected levels. It continues to change the ownership profile across the country as private capital controls less and less product.

This has always been the case for large shopping centers but was less of a concern for the single tenant market, where private investors dominated. That has changed significantly in the last six months as the share of institutional ownership of single tenant retail assets grew from 5% to 25%.

Check out the article in National Real Estate for more detail.



For Sale: Marysville Investment Property – $1,163,000 June 1, 2011

Posted by Sean Tufts in Listings.
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Just Sold: Normandy Park Towne Center April 8, 2011

Posted by Sean Tufts in Retail Sales Comps, Sale.
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Puget Sound Investment Review – March 2011 March 15, 2011

Posted by Sean Tufts in Articles, Blogs, Puget Sound Investment Review, Research/Data, Retail News, Retail Sales Comps.
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Friday News March 4, 2011

Posted by Sean Tufts in Articles, Blogs, Research/Data, Retail News.
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PSBJ – Cascade Fin. acquired by Calif. bank: “Opus said as the new owner of Cascade Financial, it will infuse $460 million of capital into Cascade Bank, bringing it to a healthy position.”

Costar – For Distressed Investors, There is No Where To Go But Up: “If conditions in commercial real estate have indeed hit bottom, then an increased amount of distressed assets could hit the market this year — and values could also begin to tick up…Up until very recently, banks have been reluctant to foreclose on distressed loans because they would be forced to take huge write downs – i.e. losses on those assets. So a policy regarding under-performing loans on commercial real estate that has come to be called “extend and pretend” has become prevalent in banking for the last three years.”

PSBJ Magazine – For King County retailers, fourth quarter bump may be beginning of a long recovery: “If you look at the turnaround, 2010 was not a bad year for retail sales in the Puget Sound area,” Conway told the Puget Sound Business Journal, in an interview. “Sales declined by 4.4 percent in 2009, but turned positive by 3.5 percent in 2010. We now see spending increases of 3.9 percent this year and 4 percent in 2012.”

National Real Estate Investor – Why This Recovery Is So Hard to Gauge: “Meanwhile, transaction volume throughout the industry is ramping up as the pricing gap between buyers and sellers narrows and investors start to deploy the billions of dollars in equity they’ve been amassing. Dare we say it? There is giddiness over the growth prospects for the commercial mortgage-backed securities (CMBS) market. Domestic issuance is expected to rise from $11.6 billion in 2010 to possibly $50 billion this year.”

Seattle Times – Burst of hiring could mark turning point for jobs: “The 222,000 jobs the private sector created more than offset layoffs by financially squeezed state and local governments. They slashed 30,000 jobs, the most since November. The unemployment rate sank to 8.9 percent, the lowest since April 2009. The rate has now fallen almost a full percentage point in just three months – the sharpest drop in a generation.”

Retail Traffic: Blackstone’s Centro Grab Marks a Turning Point in the CRE Cycle March 2, 2011

Posted by Sean Tufts in Articles, Research/Data, Retail News, Retail Sales Comps, Sale.
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Quick link to an article featured in Retail Traffic.

“Blackstone Group’s agreement to acquire Centro Properties Group’s U.S. shopping center portfolio for $9.4 billion is being hailed as a sign that the retail real estate market has officially turned a corner.

The deal means that two Blackstone acquisitions—Equity Office Properties in early 2007 and Centro’s retail properties today—make for neat bookends in marking the commercial real estate’s cyclical peak and the end of the bottom.

Overall, the deal ranks as the second largest retail real estate acquisition ever, surpassed only by General Growth Properties’ $12.4 billion acquisition of Rouse Co. in 2004.”

Centro does not own any retail centers in Washington State, but you can bet that Blackstone just jumped to near the top of many broker’s lists of potential purchasers for grocery anchored deals in the state.

The full article is here.

Puget Sound Investment Review – February 2011 February 16, 2011

Posted by Sean Tufts in Puget Sound Investment Review.
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Part 3: CAP Rates & $/SF January 14, 2011

Posted by Sean Tufts in Research/Data, Retail News.
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Using the same set of criteria as described in yesterday’s post, the average CAP rate for multi-tenant non-distressed retail centers in the Seattle area continued to rise.  From 2006 to 2008, the average CAP rate hovered around 6.5%.  2009 saw a big jump as real estate and retailers got hit hard. The 2009 average was 7.65%. The average for 2010 continued northward to land at 8.2%. We believe this to be in line with historic averages and expect 2011 to have similar results. On a five million dollar asset, this increase in CAP rate from 6.5% to 8.2% results in a loss of over a million dollars of value.

The average CAP rate for single tenant sales also rose from 7.37% to 7.64%.

The average price per square foot continued to fall as well as very few high quality retail centers traded hands. Only one center sold with a price per square foot above $300. From the average high of $292/sf in 2008, the average has fallen all the way to $192/sf. This is only a 4% decrease from 2009 numbers. It is interesting to note that the average price per square foot for the distressed retail centers taken back by lenders was only $5/sf lower than the arms-length investment deals.

We anticipate the average price per square foot to improve in 2011 as more quality product hits the market.  We are under contract on a couple of centers with prices above $300/sf.

Retailers vs. Developers December 14, 2010

Posted by Sean Tufts in Articles, Blogs, Development, Retail News.
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Retail traffic posted an article today about the rise in retailers outbidding developers for vacant big box stores.  There are obvious economic factors that give the advantage to the retailer over the developer as stated in the article,

For tenants, the incentive is that they can acquire an empty site today at a steep discount to what the asset would have traded for three or four years ago. In the process, they can lock in lower occupancy costs than if they were to lease that same space from a developer. What’s more, they have greater control over their real estate.

Large retailers typically have low borrowing costs and are not looking to the asset to generate cash flow. Consequently, they are able to pay a premium beyond what an opportunistic investor would be willing to bid for the same asset.”

The biggest advantage I hear is about the unknown.  Developers remain paralyzed without a firm commitment from a tenant.  In the past, the optimistic view of the retail world was that eventually you would find a tenant.  Even as the tenant market continues to gather steam, we are a long way from developers gambling on deals like this.  Maybe that’s because now they have to use their own money!

In the Puget Sound we have seen only a couple of large owner/user purchases by retailers   This year these include Target’s purchase of 103k sf at Pike Plaza in downtown Seattle, Winco’s purchase of 104k sf in Tacoma Place Shopping Center, and Furniture Factory Direct’s purchase of a building in the Lakewood Cinema Plaza.  As more vacant big box stores go back to the banks and owners get desperate, we expect retailers to have plenty more opportunities.

The full article is here.