Investor Appetite for Retail Real Estate Is Heating Up Again
Big investment firms that have shunned retail real estate for years are giving the sector a fresh look, the latest sign that this long beleaguered property type is on the mend. Institutional buyers are snapping up grocery stores, pharmacies and other recession-resilient stores.
Retail’s strong performance in recent years has also increased the sector’s appeal as remote work depresses demand for office buildings. “We think there’s going to be probably a lot more money that’s going to look at retail," said Steve Plenge, chief executive of Pacific Retail Capital Partners, which buys, develops and manages retail properties.
Private-equity funds, in particular, are showing more interest as industrial and multifamily real estate has gotten more expensive, Plenge said. Overall commercial-property sales, including retail, have slowed significantly since the Federal Reserve began increasing rates last year.
And family offices, wealthy individuals and small private-investment firms are still dominating acquisitions, with these private investors snapping up $1 billion more retail assets than they sold in the third quarter, according to data firm MSCI Real Assets. “The institutional buyers were a bit gun-shy about retail for a while," said Jim Costello, chief economist for MSCI Real Assets, adding that the declining value of many enclosed malls soured many bigger investors on retail entirely.
“It got painted with a broad brush." Institutional investors and real-estate investment trusts, or REITs, are still net sellers of retail, although the pace of dispositions has slowed over the past year. Retail owners and analysts said they expect to see more institutional capital flowing to the sector in 2024, especially amid expectations that
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