Private investors make their mark on retail sector

Chris Angelone

CHICAGO– As retail’s recovery continues, competition has never been tighter among investors for retail assets across U.S. markets, JLL says in its retail report.

Private investors have increasingly become a major acquirer of larger retail assets over the last five years by claiming 53% of all transactions greater than $50 million.

In 2021, private capital comprised 45.5% of total market share, investing $6.7 billion in single-asset transactions over $50 million. Between 2011 and 2016, that percentage was only 19.6%. Private capital is also chasing portfolio deals, picking up 11 retail portfolio acquisitions valued at just under $1.5 billion in 2021.

“Private capital has become a more active acquirer of higher-quality assets,” said Senior Managing Director Barry Brown, JLL’s retail co-leader in capital markets. “Until the past 12 to 18 months, investment managers have had limited retail appetite due to over allocations in their portfolios and public REITs had been relatively quiet, other than specific strategic acquisitions during this time frame.”

According to Brown, both investor types have become very active lately, and more experienced private investors have been able to raise large amounts of equity in a short amount of time.

Private capital also heavily favors the grocery-anchored segment. Last year, grocery-anchored retail investments totaled 31% of all private capital retail acquisitions, an increase from just 18% five years ago. Neighborhood and community centers accounted for 30% of private capital investments in 2021, followed by strip centers at 20%, urban retail at 11% and power/lifestyle centers totaling 8%.

“Private capital is winning bids on some of the largest retail transactions we have done over the past 18 months,” added Senior Managing Director Chris Angelone, JLL’s retail co-leader in capital markets. “In most of these cases, private investors outbid REITs and institutional investors.”

Recent examples of private investors acquiring high-profile retail assets include the sales of Whole Foods at Westbury in New York, Watters Creek in Texas, Galleria Edina in Minnesota, Promenade at Carolina Reserve in South Carolina and the net-leased retail collection within Gateway at Kearney Mesa in California.

Private capital has continued its buying spree in 2022. According to Real Capital Analytics, private investors have racked up 32 trades over $50 million through the first quarter, compared to institutional investors and REITs closing on 15 retail transactions.

“Looking ahead, we expect this trend to continue during 2022, as retail fundamentals continue to show signs of strength and investors can realize compelling risk-adjusted returns relative to other asset classes,” said Senior Managing Director Danny Finkle, JLL’s retail co-leader in capital markets.