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Thursday, Jun 30, 2022

Investor Interest in Retail Real Estate Soars

Despite the pandemic, a number of large retail sales were completed in L.A. during the second half of 2021.

“Over the last three quarters, we’ve seen a significant increase in investor demand for retail properties now that financing has opened up more and interest rates are still historically extremely low,” said Patrick Wade, a senior vice president at CBRE Group Inc. “There’s still a lot of capital in the marketplace and retail is seeing great returns.”
Chris Maling, a principal at Avison Young Inc. agreed.

“The overall sentiment on the investor side from both the private client side and the intuitional side is still a demand for daily needs retail shopping centers as an investment class to be allocated toward their portfolio,” Maling said. “We feel that a lot of the pandemic-related fallout with retail is really more of a myth as opposed to actually having some legs, as an asset class that has depth.”

Jay Luchs, vice chairman at Newmark Group Inc., added that he was seeing interest from a lot of different types of investors.

“Investor interest is high in L.A.,” Luchs said. “There is a lot of 1031 trade money and there are owner users such as LVMH and locals that want to own more, there are people from New York and big cities that own a lot of real estate around the country that want to buy here.”

Bryan Ley, a managing director at Jones Lang LaSalle Inc., also said he was seeing a lot of 1031 exchanges. In a 1031 exchange, sellers avoid paying capital gains taxes by reinvesting sale proceeds within a specific time frame.

“Lots of people are selling properties and looking to exchange and retail looks pretty exciting from a risk-adjusted return perspective,” Ley said.

He added that industrial and multifamily real estate is really expensive right now, and there’s a lot of uncertainty surrounding office product, so retail makes sense for a lot of investors.

Redevelopment push

A number of the largest retail sales in the second half of last year had one thing in common: redevelopment potential.

Take Baldwin Hills Crenshaw Plaza, for example. The center, at 3650 W. Martin Luther King Jr. Blvd., was purchased by Century City-based Harridge Development Group. The bulk of the center sold for $110 million, while the Macy’s Inc. store sold in a separate $30 million deal.

Harridge Development plans to revitalize and add other asset types to the center.
To the south, the 6.2-acre Marina Shores in Long Beach, which is pegged for a multifamily redevelopment, sold for nearly $68 million. Onni Group of Cos. purchased the property from Regency Centers Corp.

And a mixed-use development is planned for 11111 Jefferson Blvd. in Culver City, which John Buck Co. purchased for $44 million.

“In greater L.A., there’s a lot of density bonuses for properties that are close to public transportation or Metro stations,” Wade said. “There’s a number of sites where the existing retail isn’t the highest and best use and there’s demand for buyers and investors to buy those properties as a covered land play or if it’s a short-term leased or vacant property, then they are redeveloped.”

Maling agreed, adding that many older centers are adding a multifamily component or are being reworked to allow for retail types that are doing well, such as individual net-leased, single-tenant buildings.

Ley added that “we’re sort of over-malled as a society” and many malls are being reimagined as a result.

Product types

Beyond redevelopment sites, other high-demand retail types include net-leased properties, drive-thrus and grocery-anchored centers.

Ley said because so many people moved to the suburbs or started spending more time there during the pandemic, he was also seeing more interest in suburban shopping centers.

“You saw a lot of flight to those markets as a lot of young people (were) exiting the city,” Ley said.

And going forward, experts expect to see continued demand for retail properties “with the asterisk that we’ve got some turbulence on the horizon,” Maling said. “That is an interest rate increase by the Fed in March of this year and future continual rate increases … (which) are hitting the break on inflation (and could) affect the overall values and curb demand for retail shopping centers.”

“Retail is going to be strong in 2022 and ‘23 and a bright horizon just with less development happening and more fixing the existing retail. That’s a healthier place for the retail sector as a whole. We were growing too much on the development side,” Ley added.

Long Beach Exchange

Long Beach Exchange

Buyer: DJM Capital Partners Inc. and PGIM Real Estate
Seller: Burnham-Ward Properties
Address: 4100-4250 Carson St.,
Long Beach
Price: $158 million
The Long Beach Exchange sold for $158 million.

Burbank Town center

Burbank Town Center

Buyer: Onni Group of Cos.
Seller: Barrings
Address: 201 E. Magnolia Blvd., Burbank
Price: $136 million
Onni Group of Cos. purchased the leasehold interest at the Burbank Town Center for $136 million.

Baldwin Hills Crenshaw Plaza

Baldwin Hills Crenshaw Plaza

Buyer: Harridge Development Group
Seller: Capri Investment Group
Address: 3650 W. Martin Luther King Jr. Blvd., Baldwin Hills
Price: $110 million
Harridge Development Group plans to add other uses to the center.

Marina Shores

Marina Shores

Buyer: Onni Group of Cos.
Seller: Regency Centers Corp.
Address: 6500-6550 E. Pacific Coast Highway, Long Beach
Price: $67.9 million
The 6.2-acre Marina Shores shopping center is pegged for multifamily redevelopment.

Glendale Marketplace

Glendale Marketplace

Buyer: Pine Tree
Seller: EB Arrow
Address: 128-146 S. Brand Blvd., Glendale
Price: $64.1 million
Pine Tree purchased the more than 154,000-square-foot center for $64.1 million.

Home Depot

Home Depot

Buyer: Charing Cross Partners
Seller: Decron Properties Corp.
Address: 5040 San Fernando Road, Glendale
Price: $61.8 million
The nearly 112,000-square-foot storefront sold for nearly $62 million.

Part of the South Bay Pavillion

Part of South Bay Pavilion

Buyer: Atlas Capital
Seller: PCCP
Address: 20700 Avalon Blvd., Carson
Price: $59.6 million
Part of the South Bay Pavilion, in Carson, sold for nearly $60 million.

Whole Foods

Whole Foods

Buyer: DekaBank
Seller: Tooley Investment Co.
Address: 2121 Cloverfield Blvd., Santa Monica
Price: $54.3 million
Tooley Investment Co. sold a Whole Foods storefront in Santa Monica.

11111 Jefferson Blvd.

11111 Jefferson Blvd.

Buyer: The John Buck Co.
Seller: A trust
Address: 11111 Jefferson Blvd., Culver City
Price: $44 million
The $210 million mixed-use development is planned for the site.

Ralphs

Ralphs

Buyer: Safco Capital Corp.
Seller: A trust
Address: 1233 N. La Brea Ave., West Hollywood
Price: $43.4 million
A Ralphs property in West Hollywood sold for more than $43 million.

Paola Mendez
Paola Mendez
Paola Mendez graduated from Los Angeles Valley College, then transferred to University of California, and now serves as a Receptionist and Office Assistant to the Los Angeles Business Journal. Paola wears many hats in different departments and is trilingual in English, Spanish and French.

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