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Quick explainer on how freestanding chain stores proliferate: https://twitter.com/ambrown/status/1344133862260002817
Freestanding chain stores are catnip for "net lease" landlords, investors* who want a boring, zero-work asset to absentee landlord... a corporate bond, but with a depreciation deduction.
* In CRE brokers' imaginations, most are
,
, &c.
* In CRE brokers' imaginations, most are
,, &c.
Currently, investors will pay a "cap rate" (aka yield) of 5.63% for a standalone CVS on a long lease.
https://www.netleaseadvisor.com/tenant/cvs-pharmacy/
Cap rate = annual income / price, in %.
5.63% = avg CVS rental income of $259K / avg $4.6M sale price
https://www.netleaseadvisor.com/tenant/cvs-pharmacy/
Cap rate = annual income / price, in %.
5.63% = avg CVS rental income of $259K / avg $4.6M sale price
That is WAY lower (i.e., much pricier) than the cap rates paid for any other retail. Taubman, which owns deluxe malls (Short Hills, Cherry Creek, Country Club Plaza, Beverly Center) just sold at a 7.2 cap. https://seekingalpha.com/article/4389218-simon-property-group-to-again-acquire-taubman-centers-driving-value
Doesn't sound like a huge difference, but remember, you're multiplying, not adding. On that same $259K in rent, that means a $1M difference!
How about buildings with cool local retailers? They're unpredictable & harder to manage, and so lenders/investors value them at much lower prices. https://www.bloomberg.com/news/articles/2016-09-22/blame-the-banks-for-all-those-boring-chain-stores-ruining-your-city
Rich retailers get cheap money, which allows them to outbid everyone else--even when they pay less in rent.
New/unproven ideas need cheap spaces, which usually means not-new, lower-profile spaces.
https://twitter.com/paytonchung/status/1203057472384184320
(Too bad those are all zoned R1.)
New/unproven ideas need cheap spaces, which usually means not-new, lower-profile spaces.
https://twitter.com/paytonchung/status/1203057472384184320
(Too bad those are all zoned R1.)
