CREJ

Page 26 — Retail Properties Quarterly — May 2018 www.crej.com READ THE NEXT EDITION: Thursday, May 17 RESERVE YOUR SPACE BY: Wednesday, April 27 AD SIZES: Quarter Page $XXX Half Page $XXX Full Page $XXX Full Color $200 Additional Frequency Discounts Available. While the Colorado Real Estate Journal continues to run a retail news section in each issue of the newspaper, Retail Properties Quarterly features the most interesting projects and people, trends and analysis, and covers development, investment, leasing, finance, design, construction and management. The publication is mailed with the Colorado Real Estate Journal newspaper, a 4,000-plus distribution that includes developers, investors, brokers, lenders, contractors, architects and property managers. Fitness concepts increase retail competition ergers, including 24Hour September 2015 Photo courtesy:Wellbridge ter (above) andWelton Street facilities. Ì Market Reports Ì Development & Investment Updates Ì Design & Construction Trends Ì Capital Markets Ì Legal Updates Ì and more ADVERTISING Lori Golightly | 303-623-1148 x102 | lgolightly@crej.com SUBMIT EXPERT ARTICLES Michelle Askeland | 303-623-1148 | maskeland@crej.com MEDIA KIT & SAMPLES crej.com/RetailProperties Wednesday, August 1 July 11 395 595 995 After five consecutive years of over 2 percent growth, the pace has slowed; it was 1.6 percent in 2017. Consumer spending increased year over year in every month of 2017 as compared to 2016, second only to Houston, which had unique circum- stances. Unemployment reached a low point of 2.3 percent but is now slightly above 3 percent. The point is, Denver’s economy is extremely strong and the drivers of retail sales remain strong. Transaction volume hit a peak in first-quarter 2016, due to record-set- ting cross-border transactions and the culmination of post-recession recovery. Since then, sales volumes have cooled. Two property profiles are receiving the strongest buyer interest and premium pricing sup- port. The first is grocery-anchored centers with supportive sales vol- umes. The second is value-add acquisitions with lease up and man- agement opportunities and shorter- term hold intentions. Extremely safe or extremely profitable leads to cur- rent pricing strength. Our company recently conducted a survey of the top shopping center owners in the United States. A few interesting trends emerged: 1. Ninety-one percent of owners hope to acquire more in 2018, while only 47 percent intend to sell more in 2018. 2. Seventy-two percent believe power center cap rates will increase, while only 21 percent believe grocery-anchored cap rates will increase in 2018. 3. If/when interest rates increase 50-100 basis points, pricing will be significantly impacted. There are headwinds that can’t be ignored, such as property tax assess- ments, increasing gross rental rates, costs of tenant improvements, a ris- ing interest rate environment and the continuous evolution of e-com- merce. However, investors are smart and sophisticated, they understand all of these threats and more, and many learned hard lessons a decade ago. Investors understand how to utilize information and experience to guide future investment probabili- ties. As a result, we believe the mar- ket is in balance, lenders and inves- tors are disciplined and overall retail property values are sustainable. s Hendrickson Continued from Page 8 reason is that the internet grocery store model is evolving away from large warehouse fulfillment centers to one where internet grocery orders are being fulfilled from grocery stores closest to the consumer. A perfect case in point is Amazon’s purchase of Whole Foods, providing Amazon with an instant, well-located distribution network to serve its higher-income online grocery customers. The result is that internet grocery sales are driv- ing sales at grocery stores, rather than competing with them. Another interesting grocery trend is the growth in ethnic markets, of which we have several in our port- folio. We have one market in Balti- more that has per sf sales that are almost double of a typical national grocery store. There are several rea- sons for this higher performance, one being that ethnic markets can serve as distribution centers for ethnic restaurants, helping to drive grocery sales. Next time you are in an ethnic market, notice the stacks of 50-pound bags of rice that are probably not intended for the typi- cal grocery shopper. s Yockey Continued from Page 16 however they tend to be located in highly sought-after infill loca- tions on large tracts of land in trade areas with high barriers to entry. While we expect there to continue to be tepid demand and histori- cally soft pricing for this asset class in the near term, there is a grow- ing sentiment among investors for entry into this market sector given the attainable attractive cap rates that often equate to a basis below replacement cost. While the retail sector nation- ally has seen a softening in values and overall transaction velocity as investors work to evaluate the ongoing evolution of tenant opera- tions and consumer purchasing habits, the next generation of brick- and-mortar retail is evolving in real time. It is clear the baseline is shift- ing and the new normal is yet to be fully defined. In a world where the greatest purchasing power will soon lie in the hands of a generation seeking a dynamic hands-on con- sumer experience, investors on the frontier of this market transition stand to reap the greatest benefit from making informed investment decisions that push and sometimes exceed the boundary for investment in the retail sector. s Henrichs Continued from Page 10 Internet grocery sales can drive sales at grocery stores, rather than competing with them.