Multi-tenant retail investment sales activity in Q1 was up 7.8% over the previous quarter but is down nearly 18% year-over-year, according to a new report from Northmarq.
The market, however, continues to outperform the days of the pandemic when activity nearly ground to a halt, Northmarq said.
Average cap rates for shopping centers have risen over the last several quarters, and at the current average of 7.14 – the highest it has been since mid-year 2014.
Northmarq reported that supply remains constrained, with low vacancy in existing properties and slow levels of new shopping center development.
“This dynamic is keeping rents elevated, but with interest rates also high, we’re seeing overall value erode in some cases, especially for larger retail properties including power centers and shopping malls,” the firm said.
Obtaining financing, however, for these two multi-tenant retail asset subtypes can be the most difficult for buyers to obtain.
Average cap rates for shopping centers have risen 42 basis points compared to one year ago. However, deals are still getting done.
The last year has seen a return of foreign capital to the sector, with international buyers making up 10% of the market’s activity in the first quarter.
Institutional investors captured just 3% market share to begin the year, a sign they have pulled back even further.
Private investors remain the most active buyer group for multi-tenant retail, driving more than half of the first quarter’s activity.
Public REITs are becoming more active as several key acquisitions exceeding $25 million each helped the investor group reach their highest level in 10 years, gaining 27% market share in the first quarter of 2024.
