The Rise of Retail Urban Condominiums
Regular visitors to the Calkain website
(www.Calkain.com) have seen considerable attention given to documenting over
the past 12 months the sale of Triple Net (NNN) retail urban condominiums
properties. Demand for credit rated property in the urban core of primary
markets has always been strong but we now see inclusion of local, non-credit
tenants involving smaller transaction sizes drawn into the mix of investment
properties sought by investors. Investors have shown a willingness to pay
aggressive caps for urban properties. An increase in mixed use residential
condominiums brought about by population movement towards the urban core and a
pause in expansion by national retailers has contributed to the wide-ranging demand
for retail urban condom properties. Coming on the heels of the
recession and the ensuing across-the-board hike in cap rates, this move to
retail urban condominiums dense, high traffic urban locations signals where
investors want to be over the next decade.
Recently identified as a top niche investment trend
by the Urban Land Institute (ULI), mixed-use urban projects have drawn
retailers and investors to this asset type even in the current market cycle.
Driven by a desire to spend less time in traffic, live in a smaller footprint
and work and play within an urban atmosphere, aging boomers and Gen XYZers
alike are leaving the edge and making their way back to the city. Developers
have capitalized on this trend by coupling high-rise condominium living with
easily accessible ground floor retail space. The convenience of these on-hand
amenities makes for an attractive lifestyle for local residents and nearby
office workers. While not a new phenomenon, the rise in urban mixed-use
development meets the market at a very good time.
Unable to find quality assets in a tight market,
unable to secure favorable debt for less well known tenants in secondary and
tertiary markets, investors are finding that lenders are putting more emphasis
on the intrinsic value of the real estate. Urban properties are typically more
easily adaptable to alternative uses and are viewed favorably by lenders.
Investors seeking passive real estate investments are turning to urban,
income-producing condominiums (the new “infill”) of varying types as a suitable
component of their investment portfolios. You may have seen the Real Capital
Analytics (REA) report where they quoted that there was over $20 billion in
retail condominium sales over the past five years. What you may not know is
that total only includes transactions of $5 million or greater in size. As the
chart below indicates, our own experience proves that there were a significant
number of transactions well below REA’s $5 million baseline. Included in the
mix of under $5 Million condominiums is a broad array of tenants ranging from
companies with Standard and Poors AA+ credit ratings to start up restaurant
concepts with personal guarantees. That broad range of tenants is good news for
developers and investors alike.
Thanks for sharing these information. I found so much interesting information that will help us to know more about the Retail Urban Condominiums. Keep it up.
ReplyDeleteGaile @ condo for sale Philippines