published on February 11, 2022 - 4:28 PM
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This past year the multi-tenant retail investment market not only recovered from COVID-19 but bounced back in a big way.

The average cap rate for multi-tenant retail transactions between $1M- $5M was a record low of 6.35%. Prior to 2021, the 10-year cap rate average in the Central Valley was 7.45%. To put in perspective, if a property has a net income of $200,000 at a 6.35% cap rate, the value would be $3,150,000 while the 10-year average of 7.45% would bring the value down to $2,685,000 – a 15% difference in value.

When the pandemic hit, it forced investors and lenders alike to re-evaluate the way they analyzed retail investments. In the early days of the pandemic, almost all multi-tenant retail investments were deemed as high risk. Single Tenant Net Leased investments (STNL) occupied by essential tenants (Drug, Fast Food, Grocery, Auto, Medical) with long leases in place is where the demand shifted. After a year of this trend and diminished returns on single tenant investments due to the high demand from buyers, investing in multi-tenant centers began to regain popularity amongst retail buyers. In a
market where multifamily, industrial, and STNL investments are selling at record low cap rates, multi-tenant retail investments have become a reasonable alternative to investors searching for an attractive return.

This sharp decline in retail cap rates has increased property values and allowed owners to take advantage of their appreciation. Retail owners who purchased their property prior to 2014 could see their value appreciate by as much as 43% if they sold in today’s market conditions. Owners who have experienced steady rent growth during this hold period could see this appreciation rate increase even greater than the average of 43%.

The chart below shows the appreciation growth per year based on today’s cap rate compared to a previous year cap rate.

One way owners are increasing cashflow in the current market is by leveraging debt with historically low interest rates to purchase property of greater value than what they sold. In 2021, cap rates on shopping centers that sold between $5-10 million were 125 basis points higher than cap rates in the $1-5 million range. By leveraging into larger properties, investors can compete in smaller buyer pools and utilize their equity to increase their overall cash flow.

Repositioning assets locally and nationally is another reason owners are swapping properties in this market. Maintaining cashflow is just as important as increasing it. In some cases, owners have been able to utilize their appreciation and equity to reposition their investments in markets with strong population growth, low vacancy rates, and escalating rent – all with no additional out-of-pocket investment.

Holding a property is still a decision to consider, and something owners should evaluate annually. If selling does not make sense in this market, having a plan in place over a hold period will help ensure the best performance of your investment.

Even if you’re a long-term holder, reevaluating your property and comparing it to alternatives will help keep you in sync with a trending market and maximize your return on equity year over year.

The Visintainer Group tracks each retail transaction and where buyers are located on a quarterly basis. This provides timely insight into market trends within the region that owners and prospective investors rely on.

Understanding the underlying fundamentals of current market conditions as well as identifying trends are key components in determining which of three choices each investor faces — sell, buy, or hold.


John Kourafas, CCIM, is a Commercial Investment Advisor with the Visintainer Group in Fresno, CA. Formed in 2018 and built on a foundation of investment real estate, the Visintainer Group is a client-first commercial real estate firm. The Group has executed over $450 million in transactions across the United States. John specializes in commercial property acquisitions and dispositions for owners in the Central Valley, Sacramento, and Central Coast markets. He can be reached at 559.890.0419 or john@visintainergroup.com.


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