Retail property investment up for six straight months

Dollars invested in retail properties nationwide have increased for six consecutive quarters, making the sector the only major property type to show continued growth since the first quarter of 2002, according to the most recent CCIM/Landauer Investment Trends Quarterly.

Shopping centers generated 21.8 percent of the national investment volume, roughly equal to the percentage of sales reached in first quarter of this year.

During the six quarters from first quarter 2002, investment in retail properties nationwide increased 73 percent, a reflection of confidence in consumer spending, the ITQ survey reported.

Sales of shopping centers peaked in mid 1998, when the sector logged 36 percent of sales. Since that period, the investment profile for retail can be portrayed as a series of peaks and valleys before spending continued on an upward path last year.

Investor shift

"Investors are shifting property-type preferences to add weight to apartments and retail facilities beneficiaries of historically better risk-reward relationships," said 2003 CCIM Institute President Barry Spizer in a news release. "On the other hand, the share of total investments for offices, industrials, hotels and land has declined in the face of user demand retrenchment in those sectors."

The multifamily market also was active in second quarter, generating 20 percent of the deals and 20.3 percent of the sales volume.

Sales of apartments were spread among a wide range of complex sizes, with properties in the 200- to 500-unit range garnering 66.8 percent of closed transactions. The Pacific states remained the hotbed of apartment activity, garnering 44 percent of the dollar volume and 38.7 percent of the deal count.

The wide angle

From a national perspective, new records were set across all major property types in both dollars invested and the volume of sales, according to ITQ data. The report revealed spending increased a robust 18 percent compared to the previous quarter, and the number of deals climbed 13.4 percent. Office properties, historically the sales and volume leader, remained comfortably on top. Following a decline in early 2003, investors allocated 41 percent of investment dollars in offices in the second quarter. The deal count for the sector totaled 26 percent.

"Commercial property values have been a major investment hedge during the weak national economy of the early 2000s, in stark contrast to their performance in recession and early recovery of the 1990s business cycle," said Hugh F. Kelly, CRE, author of the report.

Other key findings reported in the second quarter 2003 issue of the Investment Trends Quarterly are:

The average price for all sales reported rose to $21.9 million per deal from $21 million the previous quarter.

With the exception of first quarter 2002 (the period immediately following the 9-11 terrorist attacks), the average price per deal has been above the $20 million mark since first quarter of 2000.

Interest in hotel properties remained flat in second quarter. The property type finished last in terms of dollars invested, with 3.9 percent of the national total. Even land sales outpaced the hospitality market by gathering 4 percent of cash spent.

Average capitalization rates declined a tenth of a point to 8.7 percent, the second consecutive quarter where the mean cap rate was under 9 percent. The mean cap rate dipped below 10 percent in mid 1997 and has declined slowly since then.

The CCIM/Landauer Investment Trends Quarterly represents a broad-based sampling of first quarter 2003 transactions with a total value of $17.2 billion, the majority of which have been reported by Certified Commercial Investment Members .Since the survey was initiated in 1995, 15,653 transactions valued at more than $255 billion have been analyzed.