Four Forces That Will Propel Retail Investment Sales in 2014
The recession took a major toll on the retail real estate sector but, despite waffling consumer confidence, the sector continues to improve. Retail now accounts for 19% of total U.S. investment volume year-to-date 2013.
Retail experts from Jones Lang LaSalle predict four key forces that will drive an increase in the retail transaction market during 2014:
1. Strengthening Fundamentals
“Total retail investment is expected to increase upwards of 20% in 2014, as pent up demand that was not satisfied in 2013 fuels investments and investors look to balance their portfolios. Driven by strengthening fundamentals, the retail market will continue to turn around despite store closings and consolidation. Vacancy rates are projected to inch downward driven by power center popularity while rents are expected to increase albeit slightly for the fourth straight quarter. We expect gains to become more widespread across markets in the coming year.” — Greg Maloney, president and CEO, Jones Lang LaSalle Retail
2. Retail Portfolios to Hit the Market
"The number of portfolios coming to market, which combine a broad spectrum of B and C retail assets, is expected to increase as REITs continue to dispose of assets in the year ahead. As sellers look to maximize the cycle and their proceeds, putting product on the market in bulk will take advantage of economies of scale; while acquiring small portfolios will allow buyers to immediately expand their footprint in a region. We expect these small portfolio sales to pique the interest of investors looking to deploy capital into value-add assets, with private equity remaining an active buyer in the segment. Institutional investors will still be aggressively looking for single core retail assets around the country.” — Kris Cooper, managing director, capital aarkets, Jones Lang LaSalle
3. Liquidity in the Debt Markets:
“Lenders will continue to seek retail opportunities in 2014 to diversify their allocation of funds. We expect investors to take advantage of the liquidity in the capital markets for retail product and readily available debt to facilitate new acquisitions and refinancings that will ultimately increase leveraged returns. Right now it’s primetime for long-term holders of core and stabilized retail assets to secure fixed-rate financing and lock in today’s historically low rates. Borrowers will continue to take advantage of floating-rate debt for redevelopment of transitional assets in core to secondary plus locations.” — Jimmy Board, executive VP, real estate Investment banking, Jones Lang LaSalle
4. Improvements Pay Dividends
“Improved operating performance and consumer demand for physical points of sale are pushing retail owners to invest into existing assets, giving properties a long-overdue makeover. Investors that execute stalled expansions and renovations can profit tremendously from the market’s upswing and ability to re-tenant vacant space. The much-needed injection of capital will benefit investors who plan to go to market before 2020 with updated product, as they’ll capitalize on the constricted new development pipeline, increased property values and stabilized rent rolls.” — Kristin Mueller, COO, Jones Lang LaSalle Retail
Rose Paving donates to St. Jude Children’s Research Hospital
Bridgeview, Ill. — Rose Paving Company, a provider of complete parking lot management solutions to commercial and industrial properties nationwide, announced it raised $7,000 during its year-long, multi-event fundraising campaign benefiting St. Jude Children’s Research Hospital. The donation, presented to St. Jude in December, will help support the lifesaving mission of one of the world’s premier pediatric cancer research centers.
Fundraising for this special cause kicked off in February, 2013, at the BOMA (Building Owners & Management Association) Suburban Chicago show and concluded at the NACS (National Association of Convenience Stores) Expo in Atlanta in mid-October. Conference attendees from around the nation visited Rose Paving’s booth at various industry events and autographed a banner in support of St. Jude. Rose Paving donated $5 for each signature received and made a combined contribution of $7,000 to St. Jude.
“It was an honor and privilege to fundraise for St. Jude Children’s Research Hospital at many high-profile conferences and expos this year. We are grateful to all the attendees who lined up to sign our banner. Because of you, we filled four banners and met our goal to obtain over 1,000 signatures,” commented Ed Campbell, president.
Since opening more than 50 years ago, St. Jude has changed the way the world understands, treats, and defeats childhood cancer and other life-threatening diseases. St. Jude freely shares its research discoveries with medical communities everywhere, so one child saved at St. Jude means thousands more saved worldwide. And no family ever pays St. Jude for anything. With a daily operating cost of $1.9 million, St. Jude depends mostly on public contributions.
Divisions Maintenance Group makes largest box plow purchase in its history
Newport, Ky. — Divisions Maintenance Group, a provider of facilities maintenance services for retail properties, recently purchased 19 box plows for its Denver district in preparation for the 2013-14 snow season. This represents the largest influx of box plows purchased by the company in one year for one specific district.
“We’ve seen a substantial increase in the amount of retail parking lots over 250,000 sq. ft. that we’re servicing in the Denver area,” said Bill Volz, VP of field operations for Divisions. “Based on historical snow accumulation trends, we knew that we needed to increase the amount of equipment staged and ready for use on the properties.”
Because pricing for snow removal services is extremely competitive for retail properties, the use of box plows is growing in popularity with snow removal companies. They are designed to move maximum yards of snow in minimal time, while maintaining a high level of efficiency and the integrity of the pavement beneath. Ultimately, these plows can push snow up to five times faster than a standard snow plow.
“With the winter weather conditions we’ve seen in Denver in the past few years” said Volz, “snow removal companies have to adjust strategies for snow removal. Ultimately the box plows will help us avoid equipment failures and give our customers a greater peace of mind.”
As the 2013-14 snow season commences, Divisions holds snow removal contracts for over 1,300 retail properties nationwide.