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NREI: Retail Buying Opportunities Ahead

Here's an interesting piece from our sister publication. They use Real Capital Analytics' data that January represented the lowest volume of retail property sales in four years as a jumping off point to examine what opportunities lie ahead for investors.

The conclusion:

A good place to watch for buying opportunities will be in secondary and tertiary markets, Haddigan says. In the flight to quality that typically occurs during times of trouble, retailers will focus their growth on major cities and the newest, best-quality properties. That means the greatest vacancy increases and price declines will occur at older properties and in secondary and tertiary markets.

Cap rates in those secondary and tertiary markets could rise 100 basis points this year, Marcus & Millichap predicts. “From the summer of 2007 through the end of this year, I wouldn't be surprised if cap rates increase 125 basis points on the lower end of the market,” Haddigan says.

Nationally, cap rates have risen on retail properties since last fall. In the fourth quarter, average cap rates climbed to 7.2% from about 7.08% in the third quarter, according to research company Reis Inc.

You can see the full story here.

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