It is not easy to get a grip on the retail caps. With COVID decimating the sector, few assets have been liquidated.
On the CBRE podcast, The Weekly Take, Melina Cordero, a general manager who leads CBRE's American capital markets business, said the decline in transactions made it difficult to draw real conclusions about cap rates in various retail sectors.
There is one exception, however. While COVID has lost profits in many retail sectors, stabilized food-anchored centers have had minimal impact.
According to Cordero, the local CBRE teams have seen very little price movement, "although that big headline assumes that retail prices are only going to fall and cap rates are going to rise tremendously."
Cordero believes the grocery-anchored segments could be "a bulletproof grade" where we "may see some compression in cap rate in the coming months".
Part of the uncertainty arises from the fact that the market does not know how to value retail assets after COVID. Adam Ifshin, founder and CEO of DLC Management Corp., believes the company is currently at a pre-pricing stage.
"I can't tell you how long it will take," says Ifshin. "There are still six months to go. It can be 12 months. It can be 18 months. It can be 24 months."
After that time, Ifshin sees cap rates as "the tail wagging the dog on investment sales," provided "the economy is still in a period of extremely accommodative rates and very low returns for a wide range of investment opportunities." "
In this environment, Ifshin predicts that the ability to maintain and even increase cash flow streams will be more important than cap rates.
Christopher Ressa, EVP and COO at DLC, believes there has been an overcorrection in the net rental market "that will really help open air value retailing."
Between an anchored center with a Walmart and other Fortune 500 companies and triple net rental assets with a three-location franchisee, Ressa thinks the company's creditworthiness is far more enduring.
"I think there has been an overcorrection in some of the big value retail stores that I think will be very positive for value retailing," says Ressa.