5Qs for Newmark’s Conor Lalor on retail’s new real estate game plan
Just last week, Conor Lalor, the head of Newmark’s Capital Retail Markets department arranged the $210 million sale of the retail component of Miami Worldcenter, a $6 billion project developed by CIM Group and Miami Worldcenter Associates.
"Miami Worldcenter represents one of the most significant retail investment opportunities ever brought to market in South Florida," said Lalor.
Chain Store Age recently talked to Lalor about the continued interest that real estate investors are showing in acquiring top-notch properties at a time when construction of valuable properties such as the Worldcenter, opened in 2024, is rare.
Real estate investors have been heavily involved in retail assets over the past few years. Is the action still hot in this category?
What’s happened over the last several years is that interest rates moved dramatically. Retail was one of the few asset classes that had positive leverage in the marketplace. Multifamily and industrial sectors faced supply challenges, but investors could attain good debt and a positive cash flow with retail. Investors also follow fundamentals, and the fundamentals in retail real estate are the best in the market.
What retail class types are getting the most attention from investors?
Grocery-anchored assets continue to garner a ton of attention, but lifestyle centers and high-street assets are drawing capital from investors betting on rent growth, strong demand, and landlord pricing power. You see a lot of others focusing on power centers. Strong box demand makes those assets similarly coveted by investors. It’s now getting to the point that, if tenants have less term, the value of the asset is going up.
Have lease terms changed materially due to the lack of new retail construction?
If you look at some of the leases at properties built in the late Nineties and early 2000s, tenants had initial 10-year terms and another 10-to-15 years of renewal options that are finally expiring. The limited remaining lease term is what is getting investors excited. You can take a lease originally signed in 2004 at $8 rent, where the tenant has exercised all its options, and now it’s paying $10. If you were to release that now it would be a $20-plus space. That lets you buy a six cap asset and move the yield to 8% or 9%.
International brands are aggressively expanding here, making premier spaces even harder to get. The Spanish brand Mango is on a 60-store plan for the U.S. and just opened at Mall of America.
International brands growing strongly in the U.S. just add to the demand and supply imbalance that exists. We’re seeing right now, for the first time in a long time, tenants competing with each other for space. You’re also seeing retailers being more creative and more flexible.
Going back a few years ago, some national brand tenant would say, “I need 35,000 square feet. Tear it down and give me exactly what I want.” Today that same tenant is saying, “If you’ve got 25,000 square feet, we’ll go with that.”
Do you see any national brands turning away from traditional centers and going their own way?
We certainly are seeing the emergence of high streets in some locations that didn’t historically have that. There’s a great street in Nashville called 12 South that’s now got brands like Vuori, Jenni Kayne, and Rag and Bone. We’re seeing retailers wanting to be where their customers are and not be beholden to the typical A-mall location.
