ATLANTA—When you talk to retail gurus across the Southeast—and even in many parts of the United States—you’ll hear a similar statement: It’s hard to find good shopping centers to purchase. That’s one reason why sales of Publix-anchored grocery stores always seem to get a lot of reader interest. Folks want to see who landed the prize.
GlobeSt.com caught up with Gary Saykaly, senior director at Franklin Street‘s Atlanta office, to get his insights into what’s going on with shopping center sales—specifically why it’s so difficult for investors to find quality centers to purchase—in part two of this interview series. You can still read part one: Three Retail Real Estate Trends for 2015.
GlobeSt.com: How difficult is it for investors to find shopping centers to purchase?
Saykaly: In today’s demand-strong and supply-short market, it is extremely difficult for investors to find shopping centers to purchase on-market and, more specifically, off-market.
GlobeSt.com: You say “extremely difficult.” Are we at bidding war level?
Saykaly: From a demand standpoint for listed assets, the sheer number of investors who are signing confidentiality agreements and making bids on viable retail offerings is at least triple the historic level—making it extremely difficult for many investors to compete as the competitive bidding frenzy is pushing pricing to new levels.
GlobeSt.com: How has this affected the REIT strategy in this sector?
Saykaly: The supply of larger core assets in dominant markets with great demographics—the product of choice for institutions and REITs—is light, and if they are sold, they might not hit the market due to a private placement approach, a privately negotiated transaction that is relationship-based, or a partial interest sale. As a result, many public REITs are currently more active in entity-level or merger-and-acquisition situations, the latest being the announced purchase of AmREIT by EDENS.