Sperry CGA’s Rand Sperry: Top Retail Trends, Investor Preferences & Hot Markets

By Dennis Kaiser

The retail sector takes center stage this week in Las Vegas, as the biggest industry conference brings together the players to cut deals. As ICSC’s RECon gets underway, Connect Media talked with Sperry Commercial Global Affiliates’ CEO Rand Sperry to hear his insights about the retail investment market, how investors are viewing opportunities given the current landscape, and what’s hot or not in our latest 3 CRE Q&A.

Q: What are some of the overarching trends you see driving the retail investment market as the year progresses?
A: Despite the strong performance of brick and mortar stores, investors still fear the age of internet shopping. There’s a strong trend towards service-oriented retail investments, rather than tangible goods that can be bought online from retailers such as Amazon. However, core retail properties in primary markets still have the strongest demands because of its resiliency despite of market fluctuations.

Q: How does the 2019 retail landscape differ from previous years, and how should investors approach their decisions today given the length of the cycle, interest rates and overall economic conditions or challenges?
A: Retail investment is slowing in activity. Deals are taking longer to sell, prices are being adjusted, and lenders are slowly backing away. With that said, retail overall is still very hot in core markets. There is still very strong activity, and lenders are still issuing competitive quotes. The adjustments have been more or less about 25bps in the deals we’re seeing, which is hardly a change in market activity. For the retail world, there are plenty of deals under $5 million that are not sensitive to financing since there are plenty of cash buyers.

Interest rates haven’t changed much, but the activity level reflects a different story because more so of the uncertainty of when will the market make another correction. We are beyond the typical market cycle of a correction, and that leaves investors on the sidelines to watch and observe instead of making investment decisions now.

Q: What are some examples of the types of assets, deals or geographies you advise exploring and why? How does being a part of a global network help leverage those opportunities?
A: We tell our clients to stick to the three fundamentals of real estate; location, location, location. Deals in primary markets that are located well will always be superior because when we face a market correction, these deals will have the ability to weather the storm and be resilient on the turnaround. Because these deals are superior, the demand is much greater, therefore the yield is tighter. This is where Sperry Commercial Global Affiliates have the advantage, because we are able to source capital globally (foreign buyers) that may see a 3.75% cap deal in California as a good enough cap rate, but more importantly their goal is to preserve capital.

One of our deals now is in escrow with capital from Europe, where the U.S. Dollar is deemed more stable than the Euro over the uncertainty of Brexit.

For comments, questions or concerns, please contact Dennis Kaiser