Looking Back and Ahead at the Retail Property Investment Sales Market
January 30, 2023
By Joe Girardi, Mid-America Real Estate
As we look back at 2022, it provides a useful case study of how quickly real estate markets can cycle. The year started with historically low interest rates, an abundance of capital (both equity and debt), record-breaking prices and one of the most robust transaction environments in the last 15 years. Then, ultimately, it transitioned to a much slower deal market with borrowing costs effectively doubling and cap rates increasing by 150-200 basis points.
The Mid-America Investment Sales Group in Chicago is typically a good barometer for the overall transaction market of shopping centers, as historically our transaction volume has mirrored that of the national landscape. Over the last 10 years, our group has typically sold 30-35 shopping centers per year with an average transaction volume of $700 million annually. (Some years were better than others; for example, 2016 and 2017 were both very good years … 2020, not so much.)
As we look back at 2022, our group sold 50 shopping centers totaling over $850 million, indicating an above-average year for transactions. However, what is noteworthy in those statistics is that around 75% of that volume was completed in the first half of the year.
As we look ahead this year, we are encouraged by some green shoots that are emerging in the transaction market. Lenders are slowly coming back into the market and will need to hit fresh allocation goals for the year. Interest rates seem to be stabilizing, which will remove much of the uncertainty around the valuation question enabling buyers to get active again. And perhaps most important is that bricks and mortar retail has proven its importance in the consumer acquisition ecosystem, and investors have recognized this.
Highlights from 2022
Here are some highlights of our noteworthy deals in 2022.
In the first quarter, we sold Edens Plaza (pictured) in the heart of Chicago’s North Shore for $110 million on behalf of Newport Capital Partners to Boston firm WS Development, who is in the process of repositioning the center and bringing online retailer Wayfair’s first flagship bricks and mortar store to the property.
As we worked on that transaction with WS Development, we identified another opportunity for them to acquire the nearby historic Plaza Del Lago for $59 million in an off-market transaction from Kite Realty. WS Development will be reimagining that center into a true luxury lifestyle property with new tenants who you would traditionally only see in Chicago’s Gold Coast neighborhood along Oak Street or Rush Street.
In April, our team represented the Hornstein family in the legacy sale of two trophy shopping centers that they had owned for many years to public-REIT Brixmor for $135 million. These two assets (Elmhurst Commons and North Riverside Plaza) were both grocery-anchored centers that totaled over 725,000 square feet and featured tenants including Whole Foods, Amazon Fresh, Kohl’s, Best Buy, Burlington and Petco.
Another highlight we are extremely proud of was continuing to assist our longtime client IRC Retail Centers/DRA Advisors in the sale of four Chicagoland shopping centers (all managed by Pine Tree) to four unique buyers throughout the second half of 2022.
Many of these sales were transacted at extremely aggressive pricing reflecting our ability to consistently find the “needle-in-the-haystack” buyer when the market demands it. As we look back on what was a most interesting year, we would like to thank our clients and transaction partners for enabling us to participate in their overall investment goals and look forward to whatever 2023 may bring.
The Mid-America Investment Sales Group is one of the most active disposition teams serving clients with retail real estate sale needs in the greater Midwest region. We provide unparalleled expertise managing successful dispositions of shopping centers in the grocery-anchored, big box, large power and lifestyle formats; neighborhood and street-front retail; and single-tenant NNN leased assets. We annually execute assignments across 15 states, historically covering markets in Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Pennsylvania, South Dakota, Arkansas and Wisconsin. Please reach out to the Mid-America Investment Sales Group Marketing Coordinator, Olivia Simmons, with any questions or information we may be able to assist you with or find more information here on the Mid-America website.