With the 2017 ICSC Recon in the books we thought a recap would be in order. In general the mood was positive and there was an air of cautious optimism in the halls. Attendance was strong, but in comparison to likes of 2006 and 2007, somewhat muted. Below are some takeaways from the event:
- Skepticism in the single tenant net lease space continues to creep into the sector. Sales transaction volume has tapered off bit in the single tenant net lease space with closed transactions reaching a 12 month low. However, there is still general interest on well located credit tenant deals. Expect to see a little shift upward in cap rates for non-credit secondary and tertiary market deals.
- Shift of investor and lender focus toward multi-tenant properties that provide the best combination of entertainment, health, and specialty focused retailers. Restaurants in particular continue to be in vogue. One owner in particular stated that 10 years ago they targeted between 10-12% restaurant tenants in their centers, but today that number is between 20-40%.
- One large national REIT stated that the retail market is in an evolution period not a revolution period. The time of retail, entertainment, office and medical tenants to co-exist in the same center is here.
- Although many headlines continue to focus on what is next for big box spaces vacated by the likes of Sears, Kmart, JC Penny and Sports Authority there was some encouraging commentary from landlord/developers regarding their business plans to renovate and adapt those large spaces to alternate uses. One use that has made its way into some of the large box space is storage. With high clear height and large space, vacated big boxes can lend themselves well to an interior climate controlled storage facility.
- Many active CMBS, Banks, Credit Unions and Life Company lenders were in attendance. Financing for all retail sectors remains strong and available. There is certainly a flight to quality and to moderate and lower leverage transactions. Rates for low to moderate leverage multi-tenant properties range from high 3% to high 4% across the different lending platforms. Higher leverage multi-tenant and most single tenant deals range in the mid/low 4% to 5% range.