Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/566807
58 • September 2015 • Western Real Estate Business www.REBusinessOnline.com now often equal to what investment- grade, single-tenant assets were sell- ing for just a couple years ago. It is a great time to sell — the trending ques- tion at the moment is 'where do I re- place my 1031 proceeds?'" Snyder notes the recent listing of a brand-new space near Fresno where CVS holds a ground lease as an ex- ample of this compression. Colliers listed the space at a 4 percent cap rate, but is receiving ofers between a 4 per- cent and 4.25 percent cap rate, "which is extraordinary, given that there are zero fxed rental increases in the 25- year primary term," he says. These conditions don't necessarily spell a bonanza for every single-ten- ant asset holder in California, how- ever. There still has to be someone willing to pay that premium price and appreciate the value of those credit tenants. Even then, Snyder points out some owners may be overly ambi- tious when it comes to price because they're aware it's a seller's market. "The primary challenge to investors today is capturing assets in line with their intrinsic value," he says. "For those looking to invest in single-tenant assets, an understanding of the funda- mentals is critical to making a prudent decision. It cannot be simply based on credit. As the market has grown and become more competitive over the past fve years, investors need to un- derstand how properties will be able to withstand forthcoming economic cycles. There are still plenty of these types of properties out there. It simply takes more efort to identify them to- day versus a couple years ago." Paying The Price Retail investors aren't the only ones price-conscious nowadays. Many of the state's consumers are also watch- ing their bottom lines, in search of the next good deal. "Today's retail trends all boil down to the buying power of price-savvy consumers," says Jack Nourafshan, CEO and president of Reliable Prop- erties in Los Angeles. "Too high of a price point for quality products does not work anymore." Nourafshan notes that grocers, dis- counters and big box stores are rolling out smaller footprints as they attempt to keep their prices low and their qual- ity high to accommodate consumer demand. These smaller footprints of- ten mean lower rents. "Big box retail- ers are downsizing to get better deal terms or serving as anchors in neighbor- hood centers with- out edging out mon- and-pop operators," he continues. "The challenge for land- lords is to convince retailers to think outside the box and go to locations they have not traditionally ventured into." Reliable has worked with Walmart to secure Southern California loca- tions for its smaller Neighborhood Market stores. The company has also worked with Smart & Final on its ex- panded Smart & Final Extra! store, which recently opened at one of Reli- able's centers in Ontario, California. Rivera has also seen a lot of move- ment on the dollar store front. CBM has worked with Dynamic Develop- ment Group on its development of Live.Play.Work Connect C o n n e c t FontanaCA | @CityofFontanaCA | Fontana.org SOUTHERN CALIFORNIA Fo ntana City of We are Open for Business! Connect & Get Involved with the City of Fontana! Reliable's Sunset & Francisquito Center in West Covina also showcases the discount and dollar store trend. If features tenants like dd's Discount and Dollar Super Store, in addition to Citiwear, Northgate Market, Metro PCS and Cricket Wireless, among others. Nourafshan