‘There’s No Bailout For Landlords’: What To Expect As Anxious April Begins

‘There’s No Bailout For Landlords’: What To Expect As Anxious April Begins

The rent is due today.

For the tenants and property owners tied to trillions of dollars of commercial real estate properties in the U.S., what happens on April 1 is no joke this year.

Retailers have been closed or their businesses are deeply battered. Companies across sectors have been forced to carry out layoffs or furlough staff, while others have been directly impacted by a virus that has afflicted more than 170,000 Americans to date. 

Millions of Americans are already jobless, worried about paying the rent today. And the virus is weeks away from its peak, health experts warn.

Continue reading “‘There’s No Bailout For Landlords’: What To Expect As Anxious April Begins”

CAN INVESTORS STILL PROFIT BY INVESTING IN RETAIL REAL ESTATE?

CAN INVESTORS STILL PROFIT BY INVESTING IN RETAIL REAL ESTATE?

The retail sector can still offer attractive returns, as long as investors focus on well-performing market segments.

John Egan | Jan 18, 2019

We’re barely into 2019, and the shaky future of Sears continues to grab many of the big headlines in the retail sector. But that’s not the story that high-net-worth (HNW) investors should be following in terms of retail real estate.

Rather, experts advise, HNW investors should be evaluating retail prospects based on geography and strategy—not on Sears-level machinations in the retail sector.

Continue reading “CAN INVESTORS STILL PROFIT BY INVESTING IN RETAIL REAL ESTATE?”

Fred Segal on Melrose Sells for $43 million

Fred Segal on Melrose Sells for $43 million

The original location of high-end fashion retailer Fred Segal on Melrose Avenue has been sold for $43 million to CormackHill, a Vancouver, British Columbia, retail real estate investor. Beverly Hills real estate investment firm Kennedy Wilson brokered the deal for the 29,000-square-foot, ivy-coated shopping landmark.
Continue reading “Fred Segal on Melrose Sells for $43 million”

CHANEL PAYS $13,000 PER SQUARE FOOT FOR RODEO DRIVE BUILDING

CHANEL PAYS $13,000 PER SQUARE FOOT FOR RODEO DRIVE BUILDING

French luxury retailer Chanel is paying a record price for retail space in Los Angeles as prime shopping locations in the nation’s major urban areas command rising premiums.

By Liam Pleven

French luxury retailer Chanel SA is paying a record price for retail space in Los Angeles as prime shopping locations in the nation’s major urban areas command rising premiums. Continue reading “CHANEL PAYS $13,000 PER SQUARE FOOT FOR RODEO DRIVE BUILDING”

BIG DEMAND FOR NET LEASE PROPERTIES

BIG DEMAND FOR NET LEASE PROPERTIES
By Natalie Dolce

LOS ANGELES—Why are sale-leasebacks and build-to-suit deals so popular? According to Andrew White, CCIM, managing director of the western region at Gladstone Commercial REIT, and a moderator at the recent RealShare Net Lease Westconference here, the answer is because “Cap rate spread to treasury is still high.”stnllogos

The “Opportunities” panel discussed the opportunities in sale-leasebacks and the advantages of build-to-suit developments. Panelist Peter Deltondo, director of Marcus & Millichap Net Leased Retail Group, said that the most aggressive capital he is seeing in this space is from the 1031 buyers. “Most of them are coming out of the apartment sector and they are paying the most aggressive cap rates.” Continue reading “BIG DEMAND FOR NET LEASE PROPERTIES”

RENTS PUSH RETAILERS TO FRINGE LOCATIONS 

Retail tenants are moving out into fringe-street locations–locations that are parallel or perpendicular to a high street–to avoid rising rents.

LOS ANGELES—Retail tenants are moving out into fringe-street locations—locations that are parallel or perpendicular to a high street—to avoid rising rents. According to a new report from JLL, which GlobeSt.com has seen exclusively, high-street rents have increased as much as 100% in some markets. It is a trend that happens often in peak market conditions when rents begin to crest, and the fact that it is starting to happen now, indicates that we are at or approaching the peak of the cycle.

“Our business is as cyclical as it gets,” Jason Charms of JLL, tells GlobeSt.com. “When rents start to crest and break through levels of previous ‘peaks’ in the cycle, retailers are going to look at areas that can give them a bit more bang for their buck. There’s always going to be a trade off between sales volume and occupancy cost. For example, if the marketing exposure of being on a Rodeo Dr. isn’t important, the lower occupancy cost of being on Brighton Way may well offset the drop in sales.”

In Los Angeles, retail tenants in Santa Monica and Beverly Hills, where high street rents have skyrocketed, are looking for fringe spots where retail sales better justify rents. “We are starting to see retailers consider “fringe” areas due to purely economic reasons. Smart retailers are constantly on the lookout for the new, upcoming areas, in part due to price,” says Charms. “It’s becoming quite difficult to make money at some of the rent numbers we are beginning to see. The larger corporations can write off the occupancy cost as a marketing/advertising expense but the smaller companies don’t have that luxury.”

Charms is currently marketing a space at 420 North Camden, a fringe location of Rodeo Drive, near the Golden Triangle. Retail tenants who fall into this category—someone who is concerned about or can’t afford the high rents on Rodeo Dr. but want the prestige of the area and the traffic that overflows from Rodeo Dr., would be the perfect fit for the location, says Charms, who has been advising his retail clients to find these spots as a solution to the rental increases.

Outside of fringe street locations, Charms says that retailers don’t have many options for avoiding high rents. “The easy answer here is to talk ‘online presence this, digital sales that,’ but we are seeing strong data show that consumers still enjoy a full retail experience,” he says. “Downsizing their retail footprint is always an option. It says more about the overall economy than anything else.”

Savvy retailers are finding multiple ways to adapt at this point in the cycle. In addition to leasing fringe locations, some retailers are also leasing multiple spaces within a single dense urban submarket to control the path of travel and gain more market share.

 

 

 

 

Source: Rents Push Retailers to the Fringe – Daily News Article – GlobeSt.com

A CLOSER LOOK AT NET LEASE INVESTMENT

A CLOSER LOOK AT NET LEASE INVESTMENT

By Natalie Dolce

LOS ANGELES—If a good deal comes along with good yield and credits that you can get comfortable with, whether the deal is in a secondary or tertiary market isn’t the main focus. That was according to panelists on the “Investment and Transaction Outlook panel at RealShare Net Lease West on Thursday.

Continue reading “A CLOSER LOOK AT NET LEASE INVESTMENT”

Net Lease Cap Rates May Increase As Pressure Softens

Net Lease Cap Rates May Increase As Pressure Softens

According to Dominic Cerminara, of Kingsbarn Realty Capital, cap rates in the net lease sector have seen immense pressure, thanks to the extreme demand and competition for product, but that may be changing.

Continue reading “Net Lease Cap Rates May Increase As Pressure Softens”

Beverly Hills Retail Rebounds

beverly-hills-real-estate-90210-2
Beverly Hills Golden Triangle

BEVERLY HILLS, CA-They’re coming to Beverly Hills.   Retailers, that is. And they’re helping to create a mini retail-boomlet in this city, which is on the rebound after some tough recessionary times.

Such high-end clothing retailers as Theory and Alice + Olivia have recently opened in Beverly Hills, joining fellow clothiers Scoop NYC, Intermix and AllSaints. Also opening are Fleming’s Steakhouse and Wine Bar, while Nespresso has opened a new outlet. They are nestled in the famed “Golden Triangle” shopping district, a tourist Mecca and the subject of numerous television and film examinations.

Just this week, 450 N. Camden Drive, a 5,500 square foot retail property occupied by the Gagosian Gallery, sold for a record $2,000 per square foot for $11,050,000.

450 N. Camden Drive
450 N. Camden Drive

What’s causing the boom? Beyond the end of the recession, “I think retailers want to be in proven retail locations in terms of their expansion,” says Greg Schott, managing principal of L3 Capital, which owns properties in the North Beverly Drive area of Beverly Hills. “They are foregoing those secondary and tertiary markets and going where, historically, there’s been strong retail shopping.”

Continue reading “Beverly Hills Retail Rebounds”

As Los Angeles Economy Improves – Retail Follows

Los Angeles employers added more positions in the second quarter than during any other three-month period over the last decade — an indication that the county’s economic recovery could be gaining traction, which will support retailers, according to the latest research from national real estate investment services firm Marcus & Milichap. Nonetheless, the return to prerecession retail operations will requires several quarters of healthy job growth before improvements in vacancy and rents reflect the stronger economy. As a result, tenants still hold the upper hand when negotiating new leases in most areas, especially for dark in-line space, where there are far more vacancies than interested retailers. 

The Westside Cities remain an exception due to the consistent demand for space near the coast. South Bay/Long Beach also has a neutral leasing situation as the limited amount of new demand is directed entirely at existing centers. Overall, however, inland operators will remain handcuffed in raising rents, and will instead focus on generating revenue through occupancy gains.

While the large inventory of available retail properties in Los Angeles generally provides investors with several options to acquire assets, the most active buyers are having trouble finding listings that suit their strategies. Many multi-tenant investors are scouring the county for value-add deals in B+ or better locations, but few banks have been willing to foreclose and divest these assets. Instead, lenders will extend loans until a more robust recovery in operations emerges, which could facilitate more refinancing opportunities or elevate the value of the asset before disposition. Some stabilized properties are changing hands at cap rates near 7 percent for anchored product and 100 basis points higher for strip centers. Single-tenant buildings are also changing hands, though the number of prime, long-lease assets available has been limited by the slowdown in construction. When available, a triple-net deal with a corporate-backed lease will trade at cap rates starting in the high-5 percent range, and first-year returns will climb up to 8 percent for local retailers with a proven track record.

Here is a snapshot of Marcus & Millichap’s latest findings on the retail market for LA County:

Employment: Employers will add 52,000 jobs across Los Angeles County this year, expanding payrolls by 1.4 percent. More than 20,000 of those jobs will come in the typically high-paying professional and business services sector, which will bode well for local retailers.

Construction: Developers will add nearly 950k sf of retail space to inventory this year, expanding countywide stock by 0.4 percent. Last year, builders delivered 690k sf in the market.

Vacancy: The pace of store openings will improve in the second half as major retailers position for the holiday season. As a result, vacancy will finish the year at 6.2 percent, down 10 basis points from year-end 2011.

Rents: As owners in desirable areas push rents higher, asking rents will rise 0.8 percent to $28.29 per square foot in 2012, while effective rents climb 1.2 percent to $24.62 per square foot. Last year, asking and effective rents each advanced 0.6 percent.