Domestic Private Investors Become the Fastest-Growing Buyer Pool for Multi-Tenant Retail Centers

Over the last five years, private property buyers have consistently taken market share away from REITs in the retail sector.

Private investors have become the fastest growing buyer pool for retail centers due to low interest rates and an increase in 1031 and 1033 exchange activity, according to research from brokerage firm Stan Johnson Company and Real Capital Analytics (RCA).

Private domestic investors represented approximately 72 percent of the buyer pool for multi-tenant retail in 2018, based on sales volume, according to Stan Johnson and RCA. That’s a significant increase from around 42 percent in 2014.

The recent uptick in private capital in multi-tenant retail is due to three reasons, according to Duff.
First, the new supply pipeline in the retail sector has been low in recent years. This has helped shore up occupancy levels and rents, in spite of high store closing numbers. In addition, private buyers do not have to answer to shareholders, giving them greater flexibility than publicly-traded REITs to pursue these types of investment opportunities, Duff notes. (The share of publicly-traded REITs investing in multi-tenant retail has shrunk to 5 percent of the overall sales volume in 2018 from 33 percent five years ago, according to Stan Johnson and RCA research.)

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