 |
Albertville Crossing, located at 5620 Lacentre Ave. in Albertville, MN, sold for $12.8 million in February 2018.
Nearly a decade after the end of the Great Recession and in the midst of the retail sector right-sizing, the overall investor interest in retail real estate has remained strong in Minneapolis, despite the attention-grabbing headlines that have been declaring the end of brick and mortar retailing.
To be sure, there are some issues with the sector nationwide, as store closures continue to make headlines. These closures are as much about a correction from being oversupplied the past two decades as the impact of e-commerce.
The U.S. has roughly five times more retail space per capita than the retail-abundant U.K. But despite that, U.S. retail vacancy rate has fallen to below 5 percent, a much lower figure than those in the more-talked-about office and multifamily property types.
In fact, retail vacancy is less than it was at the peak of the last economic cycle, when it hit 5.7 percent in 2006. This trend of low retail vacancies has also played out in greater Minneapolis.
Retail vacancy through mid-2018 in the Minneapolis metropolitan area is considerably lower than the national average at 3 percent. Big-name stores, including Sears, Herberger’s and Toys R Us have closed locations in the area, just as they have across the U.S. But even though robust multifamily sales have garnered much of the attention in recent years, the investment volume of retail buildings has accelerated later in this cycle.
The historical average for volume in the market is about $790 million. Following a string of years from the end of the previous cycle though the middle of the current one, where volume was below that average, the tide turned in 2014. The acceleration continued, as 2015 topped $1 billion and 2016 surpassed $1.1 billion. While 2017 was slightly off that pace, volume came in just shy of that $1 billion mark.
Neighborhood centers have been a popular play for investors in Minneapolis. This type of shopping center is typically anchored by a grocery store, which is an area that e-commerce has not yet substantially penetrated. The supply chain and logistics of cold storage and transportation is simply not yet in place. Most people still do their grocery shopping at brick and mortar locations, where they have the ability to also visit ancillary stores in these centers.
As a result, these shopping centers are somewhat more insulated from the challenges facing other retail property types, such as non-luxury malls. This factor has made neighborhood shopping centers a popular choice with investors here and nationwide.
One example is the February 2018 sale of Albertville Crossing. Located on LaCentre Ave. N., in Albertville, MN, the center was purchased for $12.8 million, or about $129 per square foot. The property is anchored by a Coborn’s grocery store and was fully leased at the time of sale. In total, Albertville Plaza measures 99,000 square feet and also includes a Great Clips and Verizon Wireless store.
