Retail Sector Update 11/19/2015

"Redefining ‘Going to Church’"

It has become increasingly difficult for churches to self-sustain when faced with declining membership and high maintenance costs. The few successful churches, on the other hand, are moving further out into suburban areas to increase in size. This leaves a large buyers’ market for churches in urban areas. Companies such as New York-based HFZ Capital have been teaming up with church leaders to repurpose some of the land owned by the church for mixed use. The Marble Collegiate Church in Manhattan is a prime example of this trend. A new development plan aims to incorporate the existing structure of the church into a 64-story building that includes retail space and condominiums as well as space for congregation and administration for the church. On top of creating stability for the church through rental income, the condo development incorporating the church is exactly the kind of unique living space for which buyers in the city are willing to pay a premium. The new trend of investing in churches allows investors to purchase prime land at a low cost, and supplies an existing structure off which a new development can be created.­redeveloping­properties­to­give­them­new­life­1443519001

"Casting Wider Nets on Domestic Investment"

Secondary markets, with a primary focus on 18-hour cities, which calm down at night, are forecasted to be more compelling to investors in 2016 than 24-hour gateway cities, which are active all hours of the day. Low costs of living coupled with high growth potential make cities such as Austin, Portland, and Nashville ripe for investment in the coming year. This growth potential comes from an influx of new inhabitants that are able to afford rent while having income to spare. Opportunities for retail markets specifically are expected to be over six times larger, both in margin for profit and numbers, than those in New York, Boston and the Bay Area. Domestic investors who face compressed cap rates as values rise and the market heats up in the core markets of gateway cities, along with the competition of foreign investors, have little choice but to turn to these secondary markets for investment. This explains the nearly 13.5 percent growth in non-major markets from June 2014 to June 2015 as opposed to only 6.5 percent growth in major markets. But domestic investors may not be alone in some of the newly ‘hip’ cities such as Denver, Austin, and San Diego. Foreign investors have been casting wider nets when it comes to investment in the United States, realising the opportunities presented by these newly hot secondary markets.