ATLANTA, GEORGIA (December 22, 2022) - The word from the recent ICSC conference in New York? Clients were “super positive” about the shopping center sector, Northmarq Senior Vice President/Managing Director Margaret Caldwell recently shared with Wealth Management Magazine. The story, titled "As Interest Rates Rise, Shopping Centers Look More Attractive to Investors," focuses attention on neighborhood shopping centers and power centers, which rebounded strongly from the early days of the pandemic. It highlights that analysts remain bullish on the previously out-of-favor sector for investor interest in 2023 and beyond.
Before interest rates started rising in the spring and early summer, the market was “extremely strong” with no lack of investor demand, Caldwell noted. When her team put out offering demands in the early summer, they were getting more than 200 confidentiality agreements back from investors digging through deals, she said.
With interest rates rising, Caldwell told WMRE they’re getting some pushback. However, compared to multifamily, industrial or office, retail is “going to shake out to be much stronger” than those sectors because of the yields it currently offers, she notes. In November, cap rates on sales involving retail assets averaged 6.3 percent, according to MSCI Real Assets, compared to 4.7 percent on sales involving multifamily properties and 5.4 percent on industrial transactions.
“They have gone up not necessarily as much as rates have gone up, but they have increased and I think we’re going to see investors rolling out of multifamily and industrial and trying to diversify into retail (chasing) more returns,” Caldwell said. “We continue to see more investors looking to buy retail and looking to come back to retail.”
Other topics include:
- The overall retail sector
- Occupancy levels
- Rents on the rise
- Investment opportunities