The retail space is full of uncertainty and has been for a while. Is retail all doom and gloom? To do a deeper dive into the state of retail, AZRE talked with Jake Baratz, vice president at Matthews. Baratz brings years of experience in the disposition and acquisition of single and multi-tenant retail assets nationwide. His comprehensive market knowledge and extensive database in the industry, working alongside private capital clients, investors, developers, syndicators, institutions, and 1031 Exchange buyers, have aided him in becoming one of real estate’s top-trusted brokers.
AZRE: What trends are you predicting in net lease retail for 2023?
Jake Baratz: We’re starting to experience some of the more opportunistic single-tenant buyers shifting their focus from freestanding single tenant net lease (STNL) assets into multi-tenant, PAD-style deals. These multi-tenant assets offer investors many of the same benefits of STNL deals – with long-term leases & strong credit profiles. But the assets often have stronger cash flow and some value-add potential through rental growth or lease-up. They are an excellent option for the traditional single tenant investor looking to maintain yield right now.
AZRE: What advice are you giving buyers and sellers to navigate the current market? Is retail all doom and gloom?
Jake Baratz: So, we’ve definitely experienced a slowdown in the net lease retail market in the face of rising interest rates over the last few months. In saying that, there are still plenty of transactions happening, particularly in high-growth markets like Phoenix, where we have tremendous population and economic growth and have become a destination for tourism and world-class events like the Super Bowl and Phoenix Open. We expect that this positive growth and attention on Phoenix will continue to generate investment activity and offer positive returns to investors from all over the country who park their capital in Phoenix during this period of uncertainty.
We’re recommending that all of our clients use this period to connect with a trusted real estate advisor. Now is the time to evaluate and analyze the status of their current portfolio and any opportunities to buy new assets or position their existing assets for recapitalization based on changes in the current market relative to what we’ve experienced in the last few years.
AZRE: Is there anything else you would like to add regarding the current state of net lease retail?
Jake Baratz: Definitely, even though the current state and short-term outlook for the market are in a different place than where we were just 6-9 months ago, the net lease market isn’t as much “doom and gloom” as many people would make you think – particularly here in the Phoenix MSA, there are still plenty of active buyers and transactions are still happening. Now is an excellent time to sit down with a trusted real estate advisor to understand how a changing market has affected your portfolio’s value and work on how to best position yourself for the next few years.