Retail Property Picture Improving in Spots Around the U.S.

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Only one retail real estate market surveyed by Real Capital Analytics in its report for August hit peak property pricing levels--that is, at or above pricing levels reached in December 2007--and that was Boston. Reaching 105% of peak pricing, Boston's average retail property price was up by 23% year-over-year. Only two other markets, Seattle and Chicago, had prices which averaged more than 90% of peak pricing, and, in Chicago, prices were up year-over-year 31%, the most improvement of any market surveyed by RCA.

In Boston, one of the most exciting retail developments is happening, not in the suburbs, but in the urban core on Newbury Street, the city's fashionable shopping district, where 19th Century architecture is alive and well. It is here that Jamestown Properties bought a 130,000-square-foot portfolio for $226 million last fall that is spread out over 28 buildings, most of which are on Newbury Street. Plans for the Jamestown Properties' acquisition include a wide variety of renovations and the introduction of new retailers, according to a New York Times article from September 11, 2012.

In addition to Jamestown's plans, nearly $2 billion in other projects are in the works in the Newbury Street area. They are either under construction or in the planning stages, including an expanded Chanel store and a Restoration Hardware store as well as a $500 million redevelopment of Copley Place mall.

At the national level, according to RCA's US Capital Trends retail report for August, sales of significant retail properties totaled $2.7 billion in August, an increase compared to July and a small gain from the year before. Of all the markets charted by RCA, Manhattan had the highest sales volume, at $2.7 billion, followed by Los Angeles with $1.4 billion. Malls and single tenant property sales continue to grow, up 22% year-over-year in August and 88% in the first eight months of 2012. Sales of strip centers totaled $1.5 billion in August, down 10% year-over-year.

Investment momentum is stronger than the volume figures suggest if portfolio sales are omitted, according to RCA. One-off property sales were up 20% in the first eight months of the year and remained strong in July and August, with few major portfolios trading in either month. Distressed transactions reached their highest monthly level in August, accounting for 18% of the total volume.

Nationally cap rates for strip centers averaged close to 7.6% in the first eight months of 2012, but a wide variation in the quality and locations of the properties, make it hard to establish average per square foot prices.

While it is clear that prices for retail properties are rising, says RCA, the rate of appreciation slowed in  the first eight months of 2012. Prices for retail properties in the Northeast and Mid-Atlantic have recovered significantly more than in other regions.