By Taylor Williams Retail owners are facing critical questions about whether to sell or hold their properties in the current environment, which is still defined by uncertainty about whether interest rate hikes have truly peaked and investment sales prices have actually bottomed out. Investment sales decisions frequently hinge on analysis of cap rates, defined as a property’s net operating income divided by its sales price. Generally speaking, higher cap rates indicate lower sales prices and are therefore sought by buyers, whereas lower cap rates reflect higher prices and are preferred by sellers. Cap rates are fluid and tend to move linearly with interest rates. Thus, the Federal Reserve’s campaign of 11 interest rate hikes totaling 500 basis points over the last 20 months has caused cap rates in all asset classes to rise, or as industry folks say, to decompress. The extent to which this cap rate movement influences an investor’s sell-or-hold dilemma varies from deal to deal, but the common denominator is that it complicates all such decisions. At the inaugural InterFace Houston Retail conference, a panel of capital markets professionals delved into the numerical analysis and anecdotal evidence that investment sales brokers are relying on to guide clients …
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Is a Rebound in the Cards for Investment Sales Anytime Soon?
Would-be commercial real estate investors and sellers for the last several months have been waiting for a sign that the Federal Reserve has tamed inflation, therefore giving the central bank reason to officially end its tightening program. October’s better-than-expected consumer price index increase of 3.2 percent — versus the 3.3 percent consensus — may have delivered that signal. The futures markets immediately reduced the probability of a Fed interest rate hike in December to zero, with many capital markets analysts suggesting that it would begin to cut rates midway through 2024. But just an end to rate hikes could fuel investment sales activity, says Jeff Rinkov, CEO of Lee & Associates Commercial Real Estate Services. “Once investors see some positive sentiment from the Fed, I think they’ll start to get interested in deploying what we believe is an enormous amount of capital that has been waiting on the sidelines,” he explains. “I also think that’s when investors will be met by more accommodating sellers. At the moment, price discovery continues to be very challenging and is driving a sluggish transaction environment.” Crashing Sales Indeed, investment sales volume through three quarters of 2023 totaled $276.3 billion, a year-over-year decline of 55 …
LOS ANGELES — Gantry has arranged $21.6 million in construction-to-permanent financing for the development of a grocery-anchored retail project in the Studio City submarket of Los Angeles. Located at 11265-11321 Ventura Blvd., the project will feature 33,700 square feet of retail space. Braden Turnbull, George Mitsanas and Austin Ridge of Gantry arranged the five-year loan, which one of the firm’s correspondent lenders provided, for the private real estate entity borrower.
Cushman & Wakefield: Manhattan’s Fifth Avenue Remains Most Expensive Street in the World for Retailers
by John Nelson
NEW YORK CITY — Fifth Avenue in Manhattan has retained its No. 1 ranking as the world’s most expensive retail destination at approximately $2,000 per square foot, which is unchanged from last year. That’s according to the 33rd edition of the Cushman & Wakefield (NYSE: CWK) Main Streets Across the World, an annual report that examines retail rental rates around the world in “high street” locations, referring to bustling, high-end retail districts. Fifth Avenue is world-renowned for its luxury offerings, including Bergdorf Goodman, Prada, Saks and Tiffany, among others. Additions to Fifth Avenue’s retail store count this year include a new store for Harry Winston and newcomers to the corridor Asics, Dyson, Skechers, Johnston & Murphy and Bandier, according to online directory Visit 5th Avenue. While on par with the rents charged last year, Fifth Avenue’s average retail rate is up 14 percent from pre-pandemic levels, making it only one of three high streets in the top 10 that have increased rates since that time span. The No. 2 retail destination in Main Streets Across the World is Milan’s Via Montenapoleone at $1,766 per square foot. The district jumped a spot into second from last year’s report by pushing rental …
Urban Network Capital, Vertical Development Break Ground on $170M Mixed-Use Residential Project in Metro Orlando
by John Nelson
DAVENPORT, FLA. — Urban Network Capital Group and Vertical Developments have broken ground on Visions Resort & Spa, a $170 million mixed-use development located at 7007 Osceola Park Line Road in Davenport, a suburb of Orlando. The property will comprise 48 single-family homes, 132 multi-level townhomes, a 180-unit condo/hotel and 70,000 square feet of retail and restaurant space. Starting sales prices range from $229,000 for condo-hotel units to $879,000 for single-family homes, according to the co-developers. The townhomes are completely presold and the single-family and condo-hotel units are 85 percent presold. Visions Resort will include a 12,000-square-foot clubhouse and an amenity package comprising a pool with cabanas with a wet bar for poolside refreshments, sports courts, a meditation garden, Pilates/yoga center, a gym facility and an outdoor cross-training gym. First residential units at Visions Resort are expected to deliver in first-quarter 2025.
HUTTO, TEXAS — Academy Sports + Outdoors has opened a 50,886-square-foot store at Townwest Commons, a shopping center located in the northeastern Austin suburb of Hutto. The retailer will join EVO Entertainment as the newest tenant of the next phase of the 24.5-acre development. The EVO Entertainment space, which will span 53,000 square feet and open late next year, will feature an 800-seat cinema, bowling lanes, restaurant and bar and an arcade area. NewQuest Properties owns Townwest Commons.
Connolly Signs Retail Tenants for $70M Parkside on Dresden Mixed-Use Project in Brookhaven, Georgia
by John Nelson
BROOKHAVEN, GA. — Connolly has recently signed new retail tenants at Parkside on Dresden, a $70 million mixed-use development underway in the Atlanta suburb of Brookhaven. The four-acre development is set to open in fall 2024 and will comprise the 183-unit Solis Dresden Village apartment community that Terwilliger Pappas is developing. The project will also include 32,000 square feet of retail and restaurant space that will be leased to tenants including Confab Kitchen and Bar, Honeysuckle Gelato, Café Vendome, Clean Juice, El Valle, MIRAE and F45 Training. Mindy Elms and Ed O’Connor of Lavista Associates Inc. are handling the retail leasing assignment at Parkside on Dresden on behalf of Connolly. The development will be situated at 1350 Dresden Drive between Caldwell Road and Parkside Drive, which is within walking distance to the Brookhaven-Oglethorpe MARTA station.
ADDISON, TEXAS — EoS Fitness has preleased a 37,292-square-foot anchor retail space at Addison Town Center, a retail power center located on the northern outskirts of Dallas. Ben Terry, Matt Luedke and Bernard Shaw of Weitzman represented the undisclosed landlord in the lease negotiations. Jack Breard with Segovia Partners represented EōS Fitness, which plans to open in 2025. Other tenants at Addison Town Center include Target, Kroger, Ross Dress for Less and PetSmart.
SCOTTSVILLE, KY. — Legacy Realty Group Advisors has brokered the sale of Scottsville Shopping Center, a 31,800-square-foot retail center located at 1224 Gallatin Road in Scottsville, a city in southern Kentucky near the Tennessee border. The center sold for $3 million in the off-market transaction. Food Lion anchors the property. Jacob Baruch and Jonah Warshaw of Legacy Realty represented both the buyer and seller in the transaction, both of which requested anonymity.
MADISON, WIS. — Whole Foods Market will open a 50,000-square-foot store in Madison on Wednesday, Dec. 13. The new store at 4710 Madison Yards Way replaces an existing Whole Foods Market at 3313 University Ave. that had served the community since 1996. The new store anchors the 21-acre Madison Yards mixed-use development, which features retail, restaurant and entertainment space surrounding a central green plaza. The store will feature more than 800 local items from the Midwest.