The recent Connect Retail West conference brought together investment and finance professionals, mortgage brokers, and lenders to discuss the current state of the retail market. Despite some challenges, there is a sense of optimism for 2024.
Moderated by Shauna Smith from Chicago Title, the Capital Markets panel featured industry experts including Gary Bechtel from Red Oak Capital Holdings, Greg Bedell from Progressive Real Estate Partners and Glenn Rudy from Newmark. The overall theme that emerged was one of high volatility but also opportunities in the market.
Rudy acknowledged that there are still challenges ahead but emphasized the importance of staying positive in order to see potential opportunities. He encouraged retailers to focus on present circumstances rather than getting bogged down by negative news about their sector or economy as a whole.
Bedell echoed this sentiment stating that despite some struggles with Class B and C malls, retail is no longer facing an “apocalypse.” Private capital players are eager to invest but may be hesitant due to uncertainty in certain markets or product types.
Bechtel pointed out another challenge facing lenders – large amounts of debt maturing soon which has caused banks to become more conservative with lending. However he remains optimistic about future opportunities for private equity firms who can step in when borrowers struggle with refinancing their loans.
Overall fundamentals remain strong for retail properties according to panelists who noted low vacancies and resilient performance across most segments except for Class B/C malls. While institutional investors may face difficulties if they have exhausted all strategies at a property before returning it back over lender ownership (known as giving back keys), California’s West Coast will always attract institutional capital according Rudy .
Bedell added that sellers have gone through various stages throughout this year such as grief or bargaining before reaching acceptance which could lead them towards wanting buyers jump into pool even though it can be challenging process sometimes . Bechtel agreed saying earlier this year many were not accepting changes interest rates availability capital until August/September when they finally got memo that rates would not go down and if they wanted to transact, it was time swallow their pride move forward.
One area where transactions are still occurring is in second generation retail space which remains in high demand. However cooling has been observed market-by-market and product type-by-product type according Bedell. Bechtel noted securing insurance as one of the biggest challenges when underwriting deals so borrowers should disclose any potential issues early on to avoid problems later on.
Despite these challenges, there is a sense of optimism for 2024 with many opportunities expected to emerge in the marketplace according Rudy . He believes once stability returns after upcoming events like an election or changes interest rates indices , deal pricing will drive transaction volume going forward .
Bechtel expects conditions remain similar through 2024 with capital constraints and interest rate environment remaining unchanged but notes this can be a good thing historically speaking. While everyone may have become accustomed lower interest rates over last decade, current situation still presents favorable environment overall .
In conclusion, while there may be some struggles ahead for retailers and lenders alike , panelists at Connect Retail West conference remain optimistic about future opportunities emerging from current market conditions . They encourage industry professionals stay positive focus present circumstances rather than getting bogged down by negative news surrounding sector or economy as whole .
