Northeast Comps Report

SUMMARY

TOTAL SALES VOLUME

AVERAGE PRICE PER SQUARE FOOT

GROCERY-ANCHORED CENTERS REMAIN RESILIENT AS STRIP CENTERS SURGE:

The data reveals a clear trend: Grocery-anchored centers continue to demonstrate exceptional resilience across market cycles, solidifying their position as a “flight to safety” asset class. Concurrently, strip centers have experienced a remarkable surge in transaction volume, driven by investor interest in their growth potential and adaptability to evolving consumer needs.

KEY OBSERVATIONS

Grocery-Anchored Resilience: Despite market fluctuations, groceryanchored centers maintain consistent investment activity. This underscores their enduring appeal as a stable and predictable income stream.

Strip Center Surge: As we predicted nine months ago, transaction volume for strip centers experienced a dramatic uptick in 2024, indicating a renewed investor focus on this asset class. Their adaptability and potential for growth make them attractive investment targets.

Cap Rate Volatility: Cap rates across all property types have shown some volatility, reflecting market dynamics and investor risk assessments. While an important valuation metric, cap rates do not always reflect the real estate fundamentals and risk profile, both positive and negative

Navigating the volatile Northeastern markets requires expert guidance. Our team specializes in delivering insightful market reports that capture the nuances of these dynamic trends. We’re here to answer your questions and provide tailored solutions to your real estate investment needs.

grocery anchored centers

GROCERY-ANCHORED SHOPPING CENTERS SHOW STRONGEST PERFORMANCE CONSISTENTLY

KEY TAKEAWAYS

Grocery-Anchored Centers Remain a Desirable Asset Class: The data reveals consistent investor interest in grocery-anchored centers. Despite fluctuations in average price per square foot and cap rates, these properties continue to attract capital. This resilience highlights the essential nature of grocery stores and their ability to weather economic downturns.

Cap Rate Volatility: Cap rates for different grocery anchors exhibit varying levels of volatility. While some chains like Whole Foods and Trader Joe’s show relatively stable cap rates, others like Stop & Shop and Giant have experienced more significant fluctuations. This suggests that investor perception and risk assessments can vary significantly across different grocery operators

Price Per Square Foot Fluctuations: The average price per square foot has also experienced fluctuations, with some chains seeing significant declines in 2024. This could be attributed to various factors, including macroeconomic conditions, interest rate changes, and shifts in investor sentiment.

Northeastern Market Dynamics: The data likely reflects the specific dynamics of the Northeastern market. The resilience of grocery and essential retail in this region has driven strong and stable investment activity in grocery-anchored centers. However, the relatively smaller deal volume in the Northeast can significantly impact average cap rates and prices. Overall, the data suggests that grocery-anchored centers remain a sought-after asset class, offering investors a relatively stable and predictable income stream. However, investors should carefully consider the specific characteristics of each grocery anchor, as well as the broader economic and market conditions, to assess risk and potential returns.

Grocery Anchored

Strip centers

KEY TAKEAWAYS

Investor Interest Surge: Strip center sales volume surged dramatically in 2024, reaching $397M, a significant increase compared to previous years. This indicates a renewed investor interest in this asset class.

Cap Rate Volatility: Cap rates for strip centers have shown some volatility, ranging from 6.81% in 2021 to 7.97% in 2023, before settling at 7.50% in 2024. This fluctuation suggests that market conditions and investor sentiment are influencing risk assessments.

Price Per Square Foot Fluctuation: The average price per square foot for strip centers also exhibited volatility, declining from $284 in 2021 to $173 in 2023, before rebounding to $211 in 2024. This variation likely reflects shifts in market demand and investor expectations.

Market Nuance Matters: Cap rates and prices can vary significantly within a region. Local market dynamics, tenant quality, and property condition all play a crucial role in determining investment valuations.

Overall, the data suggests a dynamic market for strip centers, with increased investor interest driving higher sales volumes. However, investors should carefully consider market-specific factors and conduct thorough due diligence to assess risk and potential returns.

Note: This analysis is based on the provided data and general market observations. It may not reflect all market conditions or individual property performance.

Strip Centers

KEY TAKEAWAYS

Cap Rate Low Point: Power Centers witnessed their lowest average cap rates in 2022, likely influenced by a favorable interest rate environment.

Reduced Transaction Volume: The significant drop in transaction volume in 2023 suggests a potential slowdown in activity, possibly due to a large number of deals being completed in 2022.

Cap Rate Expansion: Despite continued transaction activity in 2023 and 2024, cap rates have expanded compared to 2022 levels. This indicates a shift in investor sentiment and a potential reassessment of risk. In essence, the Power Center sector experienced a period of high activity and low cap rates in 2022, followed by a potential slowdown in 2023 and a subsequent adjustment in investor expectations reflected in higher cap rates.

Power Centers

Lifestyle centers

KEY TAKEAWAYS:

Low Transaction Volume: Lifestyle centers exhibit the lowest transaction velocity among all property types, indicating infrequent trading activity.

Consistent Cap Rates: Despite limited transactions, average cap rates remain relatively stable, suggesting consistent investor demand for well-located lifestyle centers.

Price Per Square Foot Volatility: Significant fluctuations in average price per square foot are observed, likely driven by premium locations commanding higher rents.

Cap Rate Focus: Due to limited transaction data, monitoring cap rate trends is more reliable than price per square foot for understanding market movements $59,050,000

$254,000,000 2022 $22,000,000 2023 TOTAL SALES VOLUME 7.62% 2022 7.90% 2023 AVERAGE CAP RATE $160

$169 2023 AVERAGE PRICE PER SQUARE FOOT

STILL FINDING ITS FOOTING KEY TAKEAWAYS

Limited Transaction Volume: While the total sales volume for malls has increased from 2022 to 2024, the number of transactions remains relatively low. This limited data makes it challenging to draw definitive conclusions about the overall health of the mall sector.

JCPenney Portfolio: The JCPenney retail portfolio is currently on the market for close to a billion dollars. This significant transaction, along with other large-scale retail box sales, such as Sears, highlights the ongoing evolution of the retail landscape.

Repurposing and Refinancing: Repurposing of former retail boxes into industrial, flex, and multi-family uses is gaining traction. Lenders are also actively working with mall owners on refinancing strategies to address the challenges of high leverage and declining foot traffic.

Overall, the mall sector continues to face challenges, but there are signs of adaptation and evolution. Increased investor interest , coupled with innovative approaches to repurposing and redevelopment, may pave the way for a more sustainable future for this asset class.

JOANNA