Investor interest in commercial real estate is skyrocketing
“Over the past three quarters we have seen a significant increase in investor demand for commercial properties now that financing has opened up more and interest rates are still historically extremely low,” said Patrick Wade. , senior vice president of CBRE Group Inc. “There is still a lot of capital in the market and the retail business is performing very well.”
Chris Maling, a director at Avison Young Inc. agreed.
“The general sentiment on the investor side, both from the private client side and the intuitive side, is still a demand for the day-to-day needs of shopping centers as an investment class to allocate to their portfolio,” Maling said. “We think a lot of the pandemic fallout with retail is really more of a myth than actually having legs, as an asset class that has depth.”
Jay Luchs, vice president of Newmark Group Inc., added that he is seeing interest from many different types of investors.
“Investor interest is high in Los Angeles,” Luchs said. “There’s a lot of 1031 commerce money and there’s owner users like LVMH and locals who want to own more, there’s people in New York and big cities who own a lot of real estate across the country who want to buy here.”
Bryan Ley, general manager of Jones Lang LaSalle Inc., also said he was seeing a lot of 1031 trades. In a 1031 exchange, sellers avoid paying capital gains taxes by reinvesting the sale proceeds within a specific time frame.
“A lot of people selling properties and looking to trade and retail sounds pretty exciting from a risk-adjusted return perspective,” Ley said.
He added that industrial and multi-family real estate is very expensive right now, and there’s a lot of uncertainty around office products, so retail makes sense for many investors.
Take Baldwin Hills Crenshaw Plaza, for example. The center, located at 3650 W. Martin Luther King Jr. Blvd., was purchased by Century City-based Harridge Development Group. Most of the center sold for $110 million, while the Macy’s Inc. store sold in a separate transaction for $30 million.
Harridge Development plans to revitalize and add other types of assets to the center.
To the south, the 6.2-acre Marina Shores in Long Beach, which is slated for multi-family redevelopment, has sold for nearly $68 million. Onni Group of Cos. purchased the property from Regency Centers Corp.
And a mixed-use development is planned for 11111 Jefferson Blvd. in Culver City, which John Buck Co. bought for $44 million.
“In greater LA, there are a lot of density bonuses for properties that are close to transit or subway stations,” Wade said. “There are a number of sites where the existing retail is not the highest and best use and there is demand from buyers and investors to purchase these properties as covered land or if it is a short term rented or vacant property then they are redeveloped.”
Maling agreed, adding that many older centers are adding a multi-family component or are being reworked to allow for types of retail that are doing well, such as single-tenant, net-rent, single-tenant buildings.
Ley added that “we are kind of overstretched as a society” and many malls are being redesigned accordingly.
Types of products
Types of products
Ley said that because so many people moved to the suburbs or started spending more time there during the pandemic, he also saw more interest in suburban malls.
“You saw a lot of thefts to these markets because a lot of young people (were going) out of town,” Ley said.
And going forward, experts expect to see continued demand for commercial properties “with the asterisk that we have turbulence on the horizon,” Maling said. “This is an interest rate hike by the Fed in March of this year and future continued rate increases… (which) are dampening inflation (and could) affect global values and dampen demand for retail malls.”
“Retail is going to be strong in 2022 and 23 and a bright horizon with less development and more repair of existing retail. It’s a healthier place for the retail industry as a whole. We were growing too much on the development side,” Ley added.
Long Beach Interchange
Seller: Burnham-Ward properties
Address: 4100-4250 Carson Street,
Price: $158 million
The Long Beach Exchange sold for $158 million.
Address: 201 E. Magnolia Blvd., Burbank
Price: $136 million
Onni Group of Cos. purchased the downtown Burbank leasehold interest for $136 million.
Baldwin Hills Crenshaw Plaza
Buyer: Harridge Development Group
Seller: Capri Investment Group
Address: 3650 W. Martin Luther King Jr. Blvd., Baldwin Hills
Price: $110 million
Harridge Development Group plans to add other uses to the center.
Shores of the marina
Buyer: Onni Group of Cos.
Seller: Regency Centers Corp.
Address: 6500-6550 E. Pacific Coast Highway, Long Beach
Price: $67.9 million
The 6.2-acre Marina Shores shopping center is slated for multi-family redevelopment.
Seller: Arrow EB
Address: 128-146 S. Brand Blvd., Glendale
Price: $64.1 million
Pine Tree purchased the more than 154,000 square foot center for $64.1 million.
Buyer: Charing Cross Partners
Seller: Decron Properties Corp.
Address: 5040 San Fernando Road, Glendale
Price: $61.8 million
The nearly 112,000 square foot storefront sold for nearly $62 million.
Part of the South Bay Pavilion
Buyer: Capital of the Atlas
Address: 20700 Avalon Blvd., Carson
Price: $59.6 million
Part of the South Bay Pavilion in Carson sold for nearly $60 million.
Seller: Tooley Investment Co.
Address: 2121 Cloverfield Blvd, Santa Monica
Price: $54.3 million
Tooley Investment Co. has sold a Whole Foods storefront in Santa Monica.
11111 Jefferson Blvd.
Buyer: The John Buck Company.
Seller: A confidence
Address: 11111 Jefferson Blvd, Culver City
Price: $44 million
The $210 million mixed-use development is planned for the site.
Buyer: Safco Capital Corp.
Seller: A confidence
Address: 1233 N. La Brea Ave., West Hollywood
Price: $43.4 million
A Ralphs property in West Hollywood sold for over $43 million.
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