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Consumers are buying food in smaller amounts more frequently these days, fueling growth for convenience concepts like Neon Marketplace, Street Corner and Yesway. Many are tied to the fuel stations where customers already must stop during their daily routines.
The latest transaction is Realty Income’s $1.5 billion deal to acquire as many as 415 single-tenant convenience store properties in the U.S. from U.K.-based convenience retailer EG Group. The portfolio is expected to be acquired at an estimated cap rate of 6.9% and have a 20-year weighted average initial lease term. Brands in the portfolio include Cumberland Farms, Tom Thumb, Fastrac and Sprint, and the average property is 3,700 square feet.
Landlords aren’t the only companies investing in the convenience sector. Last month, British oil giant BP made a major convenience play to buy TravelCenters of America for $1.3 billion. The acquisition will add 281 highway locations in 44 states. The locations operate under the TA, Petro and TA Express brands.
Established grocery brands also have beefed up convenience retail and smaller-format models to serve these customers. SpartanNash recently appointed a new vice president of fuel centers and convenience stores — Ryan Speakes, former market leader of operations at 7-Eleven — to expand the supermarket’s fuel stations and convenience stores, most of which are attached to its supermarkets. “The [convenience store] market is growing globally, and SpartanNash sees tremendous opportunity to bring new innovations to this segment of our retail business,” executive vice president of corporate retail Tom Swanson said.
The retail property sector’s fundamentals are strong enough to soar through market turbulence in 2023, according to Cushman & Wakefield’s recent macroeconomic forecast. The firm projects that the national vacancy rate for shopping centers will end 2023 roughly where the year began, at 5.6%, and then tick up to 6.1% by the end of 2024 as tenant demand recoils amid tougher economic conditions.
For context, the vacancy rate hit 10.2% in 2009 at the peak of the Great Recession, so this downturn is expected to be much less stormy for retail property investors and developers. Consumers can manage inflation by trading down to less-expensive goods, but they can’t keep spending if they don’t have jobs. So the labor market will be the main factor to watch in 2023, according to Cushman & Wakefield.
Biotech expansion is providing yet another tenant source for landlords of properties that previously were exclusively retail, especially in the top U.S. life sciences clusters of Boston, San Francisco, San Diego and Raleigh/Durham. According to Newmark, these markets collectively had a future construction and renovation pipeline of 33.2 million square feet of lab space as of August.
In Boston’s East Cambridge, SmartLabs will move into the third floor of 100 CambridgeSide, part of the mixed-use redevelopment of a former mall. Upon completion, CambridgeSide, a partnership between New England Development and a UBS Asset Management client, will feature five interconnected buildings totaling 2 million square feet, including life sciences, retail, restaurants, office and residential. Two levels of shops and restaurants will remain open during construction. SmartLabs, which will open there in late 2024, offers lab and office space that’s customizable to accommodate life sciences companies from fewer than 10 to more than 100 employees. Since spring 2021, it has more than doubled its footprint nationwide.
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Last week, Commerce + Communities Today reported on retailers’ health care moves, and the news didn’t stop when we hit publish. Best Buy now has sealed a three-year partnership with hospital-services company Atrium Health to sell the technology and installation services that will allow for in-home hospital care. Best Buy has bought three health care companies over the past five years, and the retailer expects sales in its health care division to grow at a faster rate than the rest of the retailer's business this year, CEO Corie Barry said. Retailer involvement in the health care sector is a trend that’s likely to trigger new construction or boost values of existing properties, so investors are taking note.
Consumers are cutting back on online grocery spending and plan to visit the mall fewer times this winter because of the perceived need to save money, according to KPMG, which polled 1,091 U.S. consumers for its Consumer Pulse Survey for Winter 2023. Some highlights:
Westwood Financial promoted Lauren Ball to COO. She joined the company as senior vice president and head of leasing in 2021 and has led the leasing team to the highest percentage of leased space in the company’s history. Ball will oversee leasing, construction, legal, marketing and property management of the company’s 127 shopping centers. She previously served as vice president of leasing for Site Centers.
The company also promoted Juyuan Wei to CFO. He joined Westwood in 2018 and has served as senior vice president of finance and accounting. Wei will play a pivotal role in strategic planning, business development and risk management for Westwood’s $1.6 billion retail portfolio. He previously worked as senior finance manager for Irvine Co., overseeing real estate strategy, financial analysis and development planning for the office and retail divisions.
By Brannon Boswell
Executive Editor, Commerce + Communities Today
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