Many folks are aware that Starwood Capital Group agreed to acquire $1 billion in seven shopping centers from Westfield and KKR. As Starwood is starting to acquire retail commercial real estate we expect other REITs to do the same across the country as an expected surge in new retail properties are expected to hit the market in the seconds half of the year.
We certainly need it as there’s so little newer triple net or absolute net, single tenant, long corporate lease product on the market. Plus, much of the expect increase is coming in select secondary markets such as Columbus, Indianapolis, Minneapolis, and etc.. Retailer REITs such as Columbus’ Glimcher Realty Trust have reported strong net absorption in tier 2 malls in secondary markets.
“We’ve been happy to see the tick up in the Tier 2,” Marshall Loeb, the company’s president, said in an investor conference call this week. “Maybe with the lack of new supply coming online, there are tenants that a few years ago could have gone to a power center. We’ve done a lot with a fair amount with exporting goods, Ultra Cosmetics, (maurices, Justice, which are related entities), Rue 21, Children’s Place, Crazy 8. It’s been a nice mix, and I know even recently, a week ago, we met with Chico’s,” Loeb said. “Chico’s, White House, Black Market, Soma that group and they are setting their smaller market categories.”
Michael Glimcher also said that this activity has found more buyer interest in B mall space. “I think our market is starting to be there for these B assets. There are more buyers out there and I think we’re optimistic,” Glimcher said.
David Simon, chairman and CEO of Simon Property Group said much the same thing to investors.
As REITs sell they will also balance with acquisitions so it is expected to be a robust year in triple net retail. What we need to make it a bit better is more new construction. As banks get their balance sheets back in order and either liquidate their distressed properties or get them performing again, I expect to see the available of construction financing from community and regional banks loosen up again. We might be in for five or six goods years ahead in the retail segment.