Private Investors Look To Retail Sector

Photo credit: JLL

Private investors are acquiring larger and more expensive retail assets as the sector’s recovery continues.

JLL, Chicago, said private investors have claimed 53 percent of all retail property transactions exceeding $50 million over the past five years.

Last yea,r private capital comprised 45.5 percent of total market share, compared to just 19.6 percent between 2011 and 2016. Private capital is also chasing portfolio deals, picking up 11 retail portfolio acquisitions valued at just under $1.5 billion last year, JLL said.

“Private capital has become a more active acquirer of higher-quality assets,” said JLL Senior Managing Director Barry Brown. “Until the past 12 to 18 months, investment managers have had limited retail appetite due to over allocations in their portfolios and public real estate investment trusts had been relatively quiet, other than specific strategic acquisitions during this time frame.”

Brown noted both investor types have become very active lately, “and more experienced private investors have been able to raise large amounts of equity in a short amount of time,” he said.

Private capital heavily favors the grocery-anchored segment, JLL reported. Last year, grocery-anchored retail investments totaled 31 percent of all private capital retail acquisitions, up from just 18 percent five years ago. Neighborhood and community centers accounted for 30 percent of private capital investments in 2021, followed by strip centers at 20 percent, urban retail at 11 percent and power/lifestyle centers totaling 8 percent.

“Private capital is winning bids on some of the largest retail transactions we have done over the past 18 months,” JLL Senior Managing Director Chris Angelone said.

Real Capital Analytics, New York, said private investors have racked up 32 trades exceeding $50 million through the first quarter while institutional investors and REITs closed on 15 retail transactions.

“Looking ahead, we expect this trend to continue during 2022, as retail fundamentals continue to show signs of strength and investors can realize compelling risk-adjusted returns relative to other asset classes,” said JLL Senior Managing Director Danny Finkle.