Cap rates fell in first half of 2011

Cap rates fell in first half of 2011, report says

The average cap rate for shopping centers sold in the U.S. dropped from 7.9 percent in the second half of last year to 7.5 percent in this year’s first half, according to ChainLinks Retail Advisors. “The heightened sense of economic uncertainty that has been in place since August has impacted the retail investment market,” said Garrick Brown, research director at ChainLinks. “Deal activity slowed during the third quarter as many investors initially reacted with caution. That being said, continued Wall Street volatility is bringing many investors back to the relative security of commercial real estate, and most of our brokers across the country are reporting increased investor requirements over the past few weeks.”

 

Cap rates for drugstore and grocery-anchored neighborhood and community centers declined over the period, from 7.7 percent to 7.4 percent. Unanchored open-air centers, one of the most challenged segments in occupancy terms, saw cap rates creep upward from 7.7 percent to 8 percent. “Look for both pricing and cap rate trends to become more bifurcated in the months ahead,” said Brown. “With increased investor interest in only the strongest properties in terms of occupancy, and with fewer of those properties available, we should see higher pricing and lower cap rates for these properties. Yet, retail properties with vacancy issues may increasingly struggle to find buyers. The exact opposite trend will take place for the market’s weaker projects.”

 

Jim Young

Sabot Development, Ltd

jyoung@sabotdevelopment.com

512-565-7509

 

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