Retail vacancy across the nation is down to 4.7%, the lowest it has been since 2007. One retail asset manager of over 100 shopping centers told me, “The only spaces I can’t rent are the ugly spaces, and even those are starting to get a little attention.” Add in the continuing rise of retail sales (up .02% year over year, inflation adjusted) and tentative relief about the 10-year treasury hovering around 4.2%, and it’s no wonder that this year’s International Council of Shopping Centers (ICSC) convention had a primarily upbeat vibe.
However, even with rising demand for properties and plenty of capital poised to enter the retail real estate sector, the market faces strong cross currents. Financing remains the defining challenge of the times. High interest rates persist, and banks are playing Scrooge with cash to safeguard against runs like the Silicon Valley Bank debacle. Meanwhile, speculation abounds about the potential outcome of Blackstone’s purchase of a massive portfolio of Signature Bank loans. Yet in reality, no one knows what that outcome will look like.
We do know that buyers have a keen interest in buildings with vacancies, something I could not have said in the recent past. However, with store occupancy the highest it has been in years, such opportunities are scarce. With competition intense, buyers with a shot at properties with available spaces and/or high-value tenants would be well served to make a move, before too many others solve the financing puzzle.
Happy Holidays and I look forward to bringing you the latest in the New Year