“The capital markets are again awash in liquidity so the availability of financing for retail projects, even in secondary and tertiary markets has improved significantly. The return of a healthy CMBS market is particularly beneficial for retail, as it is the primary source of non-recourse financing for second and third tier projects/locations.” as per Cushman & Wakefield’s Patrick Crandall.
According to Gary Mozer, principal and managing director at George Smith Partners, the most prominent trends in today's capital markets is a shift in lender focus from a property's static performance to the sustainability of a property's cash flow over time.
“Lenders learned valuable lessons from the economic downturn, and are now much more concerned with the underlying characteristics of tenants themselves as opposed to simply the cash flow they produce on paper.”
Previously, he adds, lenders often only looked at the quantitative basics of a project when determining whether to finance the asset. “These basics would typically include tenants' sales figures, the anchor tenant's credit rating, and the asset's payment history. Today however, lenders are much more focused on the longevity of the asset's income stream and are delving deeper into the long-term viability of a retail property's tenants.”
New trends and considerations are: “Additional qualitative considerations include how retail tenants are marketing themselves in order to attract customers.” For example,lenders now often explore the depth of a retailer's online presence to determine a tenant's longevity because “today's retailers must sustain an online presence in order to support physical locations.”
Craig Killman, SVP at JLL Retail, predicts that the retail centers that offer a “human experience,” such as entertainment—movies, sports bars, high energy restaurants, progressive grocers—will do well. “Whole Foods, Trader Joes for example coupled with Lifestyle retail like Anthropology, Apple, or Lululemon, will do very well as the economy continues to improve.”
The “human experience,” Killman continues, is something that can’t be duplicated on the internet. “While e-tailing will continue to take a bite out of bricks and mortar retail sales, centers that offer a human experience will thrive in this multi-dimensional consumer market,” he says. “The internet has provided so much convenience to our everyday lives but it can't replace the human need to connect and socialize and the successful centers will continue to build around this concept.”
Excerpts from Natalie Dolce, Report from the ICSC in Las vegas. She is editor of the West Coast region for GlobeSt.com and Real Estate Forum,
is responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, Natalie was Northeast bureau chief, covering New York City for GlobeSt.com. Dolce’s background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats Arthur Frommer’s Budget Travel magazine, FashionLedge.com, Co-Ed magazine, and has also freelanced for a number of publications including MSNBC.com and Museums New York magazine
The “human experience,” Killman continues, is something that can’t be duplicated on the internet. “While e-tailing will continue to take a bite out of bricks and mortar retail sales, centers that offer a human experience will thrive in this multi-dimensional consumer market,” he says. “The internet has provided so much convenience to our everyday lives but it can't replace the human need to connect and socialize and the successful centers will continue to build around this concept.”
Excerpts from Natalie Dolce, Report from the ICSC in Las vegas. She is editor of the West Coast region for GlobeSt.com and Real Estate Forum,
is responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, Natalie was Northeast bureau chief, covering New York City for GlobeSt.com. Dolce’s background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats Arthur Frommer’s Budget Travel magazine, FashionLedge.com, Co-Ed magazine, and has also freelanced for a number of publications including MSNBC.com and Museums New York magazine
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