As expected, investment sales volume in the retail sector in 2012 took a leap upwards from 2011.
Real Capital Analytics (RCA), a New York City-based research firm, reports that retail investment sales totaled $52.8 billion in 2012—a 20 percent increase from the year prior. The number of closed transactions involving significant retail properties also went up by 20 percent, to roughly 4,400.
Similarly, in its December “Capital Markets” report, brokerage firm Marcus & Millichap Real Estate Investment Services notes that sales volume for multi-tenant retail properties rose 17 percent year-over-year, while sales of single-tenant properties increased 8 percent.
The rise in acquisition activity was especially pronounced in the regional mall sector, where 117 properties were traded for $24.2 billion, according to RCA. The figure includes outright acquisitions, as well as acquisitions of majority and minority interests, and represents a 172 percent increase in deal volume from 2011.
For mall transactions, the average price per sq. ft. in 2012 was $237, while the average cap rate stood at 7 percent. For transactions involving strip centers, the average price was $145 per sq. ft., while the average cap rate was 7.7 percent.
Marcus & Millichap researchers estimate that overall, prices for multi-tenant retail centers currently average $141 per sq. ft. That’s still 13 percent below previous peak levels.
New York City, Chicago and Los Angeles saw the greatest volume of retail transactions over the past 12 months, but there are indications that other markets are picking up steam.
For example, retail investment sales in San Jose, Calif. rose 224 percent year-over-year, to $809 million. Investment sales in Orange County, Calif. were up 138 percent, to more than $1 billion. Investment sales in Cleveland, Ohio, increased 112 percent, to $587 million.
Simon Property Group, the Canada Pension Plan Investment Board and DDR were among the most active retail buyers by dollar volume, while Cole Real Estate Investments, Inland Real Estate Group and Realty Income Corp. led by the number of transactions. The Blackstone Group took the number four spot in both categories.
On the flip side, Fallaron Capital Partners, the Westfield Group and Macquarie disposed of significant retail holdings last year, along with Family Dollar, Inland and KBS Realty Advisors.