Retail property investment is likely to grow in the second half of 2021 thanks to improving fundamentals, according to real estate services firm Colliers.

About $13.7 billion worth of retail property, mainly grocery anchored, traded in the U.S. during the second quarter, a 3.2% increase compared to the same period last year, according to Colliers. That’s a promising indicator of future volume, experts say.

In the first half, wary investors focused on one-off, supermarket-anchored properties and freestanding drug stores and fast-food restaurants. But as store openings continue to outpace store closings, rent collections return to 2019 levels and traffic proves resilient, they’re likely to spend their money on a broader range of retail properties, including whole portfolios and nonessential retail properties, according to El Warner, retail lead of the U.S. capital markets board of advisors for Colliers.

Retail property investment activity is still below historical levels and has a lot of room for growth, he added. “While retail sales activity is improving, it currently accounts for just 10% of aggregate sales volume, well below its 16% average from 2014 to 2019,” Warner said.

Other shopping centers have begun trading, suggesting the market is thawing, he added. “The distress that seemed likely at the outset of the pandemic has not come to pass,” Warner said. “CMBS delinquency levels are improving. While they’re still above those of other asset types, they’re falling. Retailers are adapting to the ‘new normal’ by adopting omnichannel services, opening new formats and automating tasks. These changes should make retailers more profitable and entice additional investment activity.”

The top three markets for deals during the first half by dollar amount were Los Angeles, Dallas and Atlanta, respectively. The largest single-asset retail sale in the second quarter was Big V Properties, Kimco and Equity Street Capital’s $218.6 million purchase of The Rim, pictured at top, a 1.1 million square-foot center in San Antonio, Texas. The Rim traded for $204 per square foot at a quoted 7.3% cap rate.

By Brannon Boswell

Executive Editor, Commerce + Communities Today