Capital Returns to Shopping Centers as Market Conditions Improve
As retail real estate players head toward ICSC Las Vegas, a sense of momentum is building—particularly in the shopping center sector, where improving market conditions are sharpening investor appetite.
That optimism is rooted in a clearer picture of capital markets and a growing alignment between buyers and sellers. Ethan Offenbecher, vice president of shopping centers at Sands Investment Group, tells GlobeSt.com that stabilizing interest rates is helping unlock deal flow after a prolonged period of uncertainty.
"I'm bullish on the overall investment market right now, especially for shopping centers," Offenbecher said. "We're seeing strong transaction velocity driven by stabilized interest rates, which is creating price certainty for buyers and sellers."
He added that a significant amount of capital remains on the sidelines, with REITs, large family offices, and syndicators actively seeking opportunities to deploy funds in the coming year.
At the same time, fundamentals in the retail sector are reinforcing that confidence. A persistent supply-demand imbalance—driven in part by historically low vacancy rates—is pushing rents higher and drawing increased investor interest. Offenbecher said that dynamic is especially evident in Sun Belt markets, where well-located strip and power centers are delivering returns that meet investor expectations.
"With interest rates somewhat stabilizing, it's creating an opportunity for investors to hit their yield targets in the low to high teens," he noted.
Within that broader landscape, value-add retail assets are emerging as a focal point. Offenbecher pointed to properties typically ranging from 10,000 to 150,000 square feet, built between 1990 and 2020, and operating at 75 to 90 percent occupancy as particularly attractive in the current cycle. These assets offer investors a defined path to growth through lease-up and rent increases.
"They often feature below-market rents and upcoming lease expirations, giving investors a tangible opportunity to increase net operating income and overall asset value within a three- to five-year window," he explained.
As ICSC Las Vegas approaches, these converging trends—stabilizing capital markets, limited supply and clear value-add opportunities—are expected to shape discussions on the ground. Offenbecher's outlook reflects a broader return of confidence in retail investment, positioning the sector for a more active year ahead.
Source: GlobeSt/ALM