When it comes to retail investing these days, an old baseball adage might apply best: Don’t swing for the fences when a single will get you on base. (It’s spring training time here in Florida, so the analogy seems a little more appropriate.)
In this case, single-tenant retail properties might be the smartest play among commercial real estate investments, experts say. While strip centers sit empty and larger shopping centers struggle to backfill vacancies, smaller standalone spaces appear to be weathering the recession pretty well.
“Sales of single-tenant assets will dominate activity in 2010, with buyers’ conservative return objectives sustaining interest in nationally branded drugstores and fast-food restaurants,” observes Richard Matricaria, regional manager with Marcus & Millichap in Orlando. Although retail development in that market has slowed substantially, vacancy is expected to rise at least a percentage point to 124% by the end of this year, he says.
Even in the face of such dismal news, brokers will argue that fortune still favors the bold. David Sobelman, executive vice president with Calkain in Tampa, points out in this column that this is the Year of the Tiger (no, not that guy) in Chinese astrology, and may also be for net-lease investments.
“Net lease investments seem to be the one bright spot on the commercial real estate investment horizon,” Sobelman writes. “The sector is attracting many new investors to the property type for its low or complete lack of management/maintenance as well as its above-average return compared to other passive investments in today’s market.”