Four Forces that will Propel Retail Investment Sales in 2014

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ICSC New York UPDATE: The recession took a major toll on the retail real estate sector but, despite waffling consumer confidence, the sector continues to improve. Retail now accounts for 19 percent of total U.S. investment volume year-to-date 2013. Today, JLL’s retail experts predict upwards of a 20% increase in retail transaction volume in the year ahead driven by four key forces.

1. Strengthening Fundamentals: the retail market will continue to turn around despite store closings and consolidation. Vacancy rates are projected to inch downward driven by power center popularity while rents are expected to increase albeit slightly for the fourth straight quarter. We expect gains to become more widespread across markets in the coming year.

2. Retail Portfolios to Hit the Market: a broad spectrum of B and C retail assets, are expected to increase as REITs continue to dispose of assets in the year ahead. As sellers look to maximize the cycle and their proceeds, putting product on the market in bulk will take advantage of economies of scale; while acquiring small portfolios will allow buyers to immediately expand their footprint in a region.

3. Liquidity in the Debt Markets: right now it’s primetime for long-term holders of core and stabilized retail assets to secure fixed-rate financing and lock in today’s historically low rates. Borrowers will continue to take advantage of floating-rate debt for redevelopment of transitional assets in core to secondary plus locations.

4. Improvements Pay Dividends: improved operating performance and consumer demand for physical points of sale are pushing retail owners to invest into existing assets, giving properties a long-overdue makeover. Investors that execute stalled expansions and renovations can profit tremendously from the market’s upswing and ability to re-tenant vacant space.

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