ACRE SoCal 2017 Real Estate Industry Forecast Recap
Another year has passed and a lot has changed. An election has occurred, a new Republican administration has taken over and the US is still in midst of one of the longest, albeit slowest, financial recoveries since WWII. Amid all these happenings, ACRE SoCal hosted its annual Real Estate Industry Forecast featuring a panel of top Southern California commercial real estate specialists. The outstanding group included Bill Asher of Hanley Investment Group, Chris Redfearn of USC, Rick Rivera of Centers Business Management and Ian Schroeder of CBRE. And Ryan E. Garcia had the privilege of moderating the panel.
The hesitation of many investors throughout the events of the past year – Brexit, impending interest rate hikes and the presidential election – made for some sudden stops and starts in the investment world. But, a significant number of deals were consummated nonetheless. And if the experts are correct, reluctance toward future investment is now behind us. International capital continues to flow into the U.S. as investors seek security, stability and future value. 1031 Exchange buyers and high-net worth individuals represent the majority of domestic capital currently gobbling up well-located properties leased to credit tenants. Cap rates are likely to remain low with slight increases as interest rates begin to rise. Short of a dramatic increase in supply, cap rates and expectations on returns are likely to remain in this range for the foreseeable future.
The panel acknowledged concerns over the steady downsizing of large scale retailers such as Mary’s, JC Penny and Sears, but remain confident creative options will arise to fill the growing void.Experiential uses are certain to dominate the retail sector and serve as alternative options for the dwindling department store segment. Other options could see mixed use developments filling former malls and big box retail spaces. The relaxed parking requirements that accompany residential and office uses will allow for more food, experiential and even medical uses. The increase in place-making “village” retail environments seems inevitable as consumer shopping habits continue to evolve.
Restaurants, service providers and experiential uses will continue to drive retail centers. In turn, it’s imperative traditional retail consistently adapts, as e-commerce will undoubtedly continue to impact brick and mortar’s modus operandi. The inability to ship a haircut, manicure or a full-service dining experience, however, will continue to separate retail centers from e-commerce.
Overall, the perspective for 2017 remains positive and promises to be an exciting time filled with new opportunities in retail. As developers seek to keep their projects relevant and interesting for consumers, the U.S. will likely see a new chapter of development toward the next roaring 20s!