Investors ready to snatch up retail assets again? It depends on which investor types you’re looking at

Are investors eager to sink their dollars in retail property? That depends on how you look at it.

According to the first quarter 2024 multi-tenant retail snapshot released May 7 by Northmarq, the U.S. multi-tenant retail sector saw $11.5 billion in investment sales during the first three months of 2024.

That is up 7.8% from the fourth quarter of 2023. That sounds good. But when you compare investment sales activity in the retail sector to the first quarter of 2023? Sales volume in the first quarter of this year was down 18% on a year-over-year basis. That doesn’t look as good.

But what if you compare multi-tenant retail sales activity today to the sluggish months at the height of the COVID-19 pandemic? The retail sector is attracting far more investment sales actvity today, Northmarq said in its snapshot.

In another key number from Northmarq’s report, the overall average cap rate for multi-tenant retail properties stood at 7.14% in the first quarter of 2024. That is up 12 basis points from the fourth quarter of 2023 and 42 from the same period one year earlier. Northmarq reported that the average cap rate for multi-tenant retail in the United States is the highest it’s been since the middle of 2014.

Despite this, deals are still closing. Northmarq said that the last year has seen a return of foreigh capital to the U.S. retail sector, with international buyers making up 10% of the market’s activity in the first quarter.

On a more negative note, institutional investors are still holding onto their dollars. Northmarq reported that these larger investors captured just 3% market share in the multi-tenent retail sector during the first three months of the year.

Public REITs have picked up some of the slack, with Northmarq reporting that these trusts reached 27% market share in the first quarter of 2024. That’s the highest market share that REITs have captured in the multi-tenant retail sector in 10 years.

Private investors remain the most active buyer group for multi-tenant retail, accounting for more than half of the activity in this sector in the first quarter.