retail - hendrickson & johnson investment... · retail employment has also increased and has...

RETAIL

OHNSON CAPITAL MARKETS TEAM | INVESTMENT SALES & ACQUISITIONS

ENDRICKSON


ENDRICKSON

PRODUCED BY:

AARON D. JOHNSONManaging DirectorInvestment Sales & Acquisitions303 813 [email protected]

JON D. HENDRICKSONManaging DirectorInvestment Sales & Acquisitions303 813 [email protected]

DENVER INVESTMENT SALES TEAMQ1 2017 RETAIL REPORT

mailto:[email protected]


Amidst negative headlines and uncertainty at times, a broad range of fundamentals point to a strengthening US economy. This was observed in the second half of 2016 and has continued into 2017. Core drivers of commercial real estate space demand, such as employment and wage growth, remain healthy. Consumer spending continues to grow across the country, with Denver’s consumer spending growth outpacing all other MSA’s. These factors will sustain economic expansion and lead to a positive outlook for 2017 and 2018.

From a retail standpoint, amidst a year of various closures, shopping center vacancy has actually declined to 7.3%. Cushman & Wakefield’s survey covers strip centers, neighborhood/community, lifestyle and power/regional centers. Much of the recent wave of closures have been from the apparel and department store categories, which will predominantly impact mall locations. The Conference Board Consumer Confidence Index improved sharply during the month of March, reaching its highest level since December, 2000. Consumers are optimistic regarding the short-term outlook for business, jobs and personal income prospects. Retail employment has also increased and has surpassed pre-recession peaks. The industry now employs about 15.9 million workers, according to the Bureau of Labor Statistics.

U. S. Investment Sales (All Product Types)$ Billions

6.70%

6.80%

6.90%

7.00%

7.10%

7.20%

7.30%

7.40%

7.50%

7.60%

$-

$5.00

$10.00

$15.00

$20.00

$25.00

Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Rental Rate vs. Overall Vacancy

Average Asking Rate Vacancy Rate

Transaction velocity peaked in 2015, in large part due to record setting cross-border transactions. Although we saw a slight decrease in investment sales transactions in 2016 compared to 2015, investment sales were up compared to 2014. These figures account for all product types across the United States. We expect investment sales to remain healthy in the future. We forecast $455.7 billion in investment sales in 2017 and $422.0 billion in 2018. Price growth remained healthy over the past 12 months. We do not expect cap rates to increase substantially and put negative pressure on prices. Although there is no shortage of uncertainty in the world, U.S. fundamentals remain strong. We believe the safety of U.S. assets and the potential for upside will continue to work in favor of U.S. commercial real estate.

Down from #1 last year, US News ranked Denver the 2nd best place to live in the country. Net migration into the state remains healthy. Consumer spending is up in Denver, and has grown at one of the fastest rates in the country. From a real estate standpoint, vacancy rates have declined for another quarter, but we’ve also seen asking rents decrease slightly. We believe that as a result of uncertainty and closures, negative pricing has already been priced into the market. Although neighborhood and community centers will generally fare better than malls, we believe that we may begin to see a slight increase in vacancy rate throughout 2017, specifically amongst class B and C properties. Denver continues to experience multifaceted growth. Due to increasing population, the CBD has realized the need for grocery in the urban setting. A Whole Foods is set to open in the Union Station neighborhood later this year, and there was a recent announcement of a Target along the 16th Street Mall. The influx of people also results in expansion past the CBD, leading to healthy retail in suburban areas as well.

Q1 2017 RETAIL REPORTMACRO O

VERVIE

WLOCAL O

VERVIE

WIN

VESTMENT O

VERVIE

W

Rental Rate Vs. Overall Vacancy (National)

Rental Rate Vs. Overall Vacancy (Denver)

U. S. SHOPPING CENTER

2017 HENDRICKSON JOHNSON RETAIL INVENTORY

FOX CREEK VILLAGE

CliCk Here To View CurrenT lisTings


ENDRICKSON


ENDRICKSON

EAGLE BENDMARKETPLACE

SALE PRICE: $5,100,000MARCH, 2017

THE SHOPS AT

REENWOOD VILLAGG E

ERINDALE SQUARELINCOLN CENTER

UNDER CONTRACT

UNDER CONTRACT

UNDER CONTRACT

ON MARKET

ON MARKET

http://www.hendricksonjohnson.com/get_listings.cfm

Senate Bill 197 passed during the Summer of 2016, allowing grocers and major retailers to compete directly with liquor stores and sell full strength beer and liquor. • In March, 2017, the Colorado Senate killed a measure that would have extended full alcohol sales licenses to Walmart

and Target.• Senate Bill 199 was introduced, which will allow locally owned liquor stores that can currently operate just one

location to get licenses for as many as 19 more locations over the next 20 years. ° These stores will also have to buy out any existing licenses of any retail liquor stores within 1,500 feet of where

they want to open.

Reform of Colorado’s construction defects law has failed for the past three years. The law allows as few as two condo owners to bring a class-action lawsuit against a builder. The current law has led to homebuilders avoiding building condo units and has led to a shortage of affordable housing in a market where home prices are soaring. • Senate Bill 156 would require HOAs to use mediation or arbitration to try and settle issues before a

lawsuit can be filed. The bill passed out of Senate, but hit a snag amongst the House Committee over a statute of limitations provision. The next step is to get the lawmaker and the committee back to the table to continue talks and hopefully reach a compromise.

• Just 163 condominiums were built in the Denver Metro area in all of 2016, less than three percent of the new home stock. Condominiums typically represent 23%-27% of new housing in other cities.

Target is eying a 28,130-square-foot urban store in the heart of downtown Denver, along 16th Street Mall, at the intersection of 16th Street and California Street. • Denver City Council approved a $4 million incentives package, including $2 million in

tenant improvements, for Target to open a store downtown. • This is part of Target’s new growth model, focusing on flexible-format, smaller stores

located in dense urban and suburban neighborhoods.

The most significant spike in the 10-year treasury rate occurred right after the presidential election in November. In the week following the election, the 10-year treasury increased from 1.82% to 2.23%. This 40 basis point spike is being referred to as the “Trump Bump.” Since then, the 10-year has experienced slight variation; it is currently at 2.25%. We have also seen the US Federal Reserve increase the Federal Funds rate twice since the election. Most recently, they increased it by 25 basis points to 0.75% in March, 2017. Two additional rate hikes are expected in the latter half of 2017. The forecasted rate hikes are a sign of a healthy economy. The federal funds rate is a tool used to keep inflation and rising prices in check. Inflation is a sign of economic growth and strength. We will continue to keep a close eye on debt markets throughout 2017, as numerous changes affecting the industry begin to take hold.

PRODUCED BY:AARON D. JOHNSONManaging DirectorInvestment Sales & Acquisitions303 813 [email protected]

JON D. HENDRICKSONManaging DirectorInvestment Sales & Acquisitions303 813 [email protected]


ENDRICKSON


ENDRICKSON

DEBT

LOCAL OVERVIEW

Treasury Bond Rate

Trump Bump



retail - hendrickson & johnson investment... · retail employment has also increased and has...

Documents