REAL ESTATE NEWS

The Inland Empire retail investment market continues to normalize, a trend expected to continue through the next six to 12 months, according to Progressive Real Estate Partners' Senior Vice President and Managing Director Greg Bedell.

He told GlobeSt.com the most meaningful shift is that the marketplace has accepted the current lending landscape— buyers and sellers have stopped relying on a rate cut to close their pricing gap and owners are pricing to today rather than to 2021.

"Under $5 million is where a large share of our transactions occur," Bedell said.

"Most deals are all cash anyway; that buyer is weighing a 6% retail cap with depreciation against a money market fund paying about 3.5% and an equity market where the 10 largest companies are roughly 40% of the index.

He said supply levels keep it competitive.

"Junior and anchor boxes have been picked over, and when a shop tenant vacates, we're almost always backfilling at a higher rent than the last one paid," he said.

"I don't expect meaningful cap rate movement in either direction. The averages are close to useless here regardless.

Still, the balance is uneven depending on the type of retail and its location. Over the past year, Inland Empire single-tenant sales have ranged from a 3.5% cap on a McDonald's ground lease to 12% on a vacant Rite Aid.

"Normalization doesn't mean uniformity — well-located real estate in a strong trade area will continue to trade efficiently, and marginal assets will continue to sit," according to Bedell.

Progressive Real Estate Partners delivered 27,000 square feet regionally last quarter.

Particularly, Bedell recently represented a private Los Angeles-based investor in the acquisition of an 8,781-square-foot multi-tenant retail building at 32435 Temecula Parkway within Vail Ranch Plaza for $6.56 million. Brian Bielatowicz, Ryan Bennett and Drew Olson of Lee & Associates represented the seller.

The buyer acquired this property as part of a 1031 exchange after selling another retail property in Walnut, California.

"[The buyer] identified the Temecula asset as an opportunity to reinvest in a newer, well-located property with a strong and diversified tenant mix," Bedell said.

The building is along one of the city's busiest retail corridors with 42,826 cars per day. The seller is a private investor.

The building is 100% leased to national and regional lifestyle brands Better Buzz Coffee, Orangetheory Fitness, Krak Boba and D'Or Nail Lounges.

"Rather than relying on a single tenant, the asset balances risk across coffee, fitness, beverage, and personal-service operators—yet still functions as a low-touch, operationally efficient investment," Bedell said in a release.

"High-quality multi-tenant pads with a drive-thru in supply-constrained Temecula seldom come to market, which made this an exceptionally attractive acquisition for our buyer."

Source: GlobeSt/ALM