Metro Volume and Pricing
Investment in retail property picked up late last year but slowed somewhat during the second quarter of 2012.* For 12 closed deals, the latest quarter saw $78.5 million change hands at an average selling price of $114 psf. The total year-to-date was $194.7 million for 32 transactions at an average of $140 psf. In the second quarter’s largest sale, DDR Corporation paid Macquarie Bank Ltd. $23.5 million ($103 psf) in June for the 12.5%-vacant, 572,262-square-foot Pioneer Hills power center on S. Parker Road in Aurora. Anchor stores occupied by Walmart and Home Depot were not included in the sale. The center was built in 2002.
Sales activity measured by property volume over the past four quarters has been distributed relatively abundantly among several submarkets. The Southeast claimed the largest total as 612,816 square feet traded for $86 million. Not far behind was Midtown-CBD, where 597,362 square feet sold for $120 million, the largest dollar volume for the period. The South submarket followed in property exchanged at 584,774 square feet. Its dollar total was $96 million. At $201 psf, Midtown-CBD claimed the highest average selling price among submarkets with substantial totals. The South followed at $165 psf.
Cap Rate Comparisons and Forecasts
Average cap rates measured by the quarter have been erratic in the recent period. The average for the latest quarter was 8.9%, up from 7.1% the quarter before, down from the 11.0% rate recorded for the second quarter of 2011. The 12-month rolling cap rate has been somewhat steadier, tracking an overall downward course through recent quarters. The 6.9% 12-month rolling rate recorded for the latest was down from 7.7% the quarter before and from 8.8% as of second quarter 2012. Rates below 7.0% are expected for the 12-month period ahead. The second quarter 12-month rolling caps for the Western region and the U.S. were each 7.8%, down 10 basis points and unchanged from the quarter before.