By: Adam Vanlerberghe, Managing Director, Lever Capital Partners
With news of a different large retail chain closing down stores or filing for bankruptcy seemingly every week, there has been little reason for optimism for the retail real estate owner and investor. While the collapse of large retailers is very real and prevalent, there are signals that the sector’s decline has leveled off. There are several contributing factors to this apparent stabilization including creative tenant-mix repositioning, federal interest rate cuts and an overall improvement about the sentiment in the retail sector from the lending/investing community.
Retail owners and managers now have more of a focus on bringing in a tenant mix which includes entertainment and lifestyle businesses in order to create centers with more of a social experience. Restaurants, bars and other entertainment related businesses are helping drive consumers to the centers thus increasing the overall foot traffic and exposure to all surrounding businesses. Service oriented tenants are also being sought after by retail owners and managers as these businesses cannot be as easily replaced by the ever-growing online shopping phenomenon.
Notable changes in the federal interest rate have also helped the retail industry rebound. Just as quickly as we watched the Federal Reserve raise rates in 2018, we saw them fall once again with three straight rate cuts to end 2019. Due in part to the federal rate cuts and the repositioning to more entertainment-focused tenant mixes, the lending and investing community within the retail real estate sector has finally started to thaw.
National Real Estate Investor (“NREI”) recently published an article which highlights notable findings from a survey of 231 real estate professionals about the sentiment in the retail sector and found that “the share of respondents saying capital is more available than a year ago rose to 20.8 percent for equity (up from 12.7 percent last year) and 18.9 percent for debt (up from 13.3 percent in 2018)”. With regard to real estate investors buying, selling or holding retail property, the article further noted that “…sentiment began to swing a bit on investors’ plans to buy… The buy figure is the highest in the five years NREI has been conducting this research.”
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Lever Capital Partners has helped our clients fulfill their capital needs including ground-up development financing, bridge financing, permanent financing as well as joint venture equity investments. To learn more about these trends and how they might affect your business, or if you have questions regarding a commercial property, reach out to us at Lever Capital Partners and we will evaluate your project.