Investors are turning to commercial real estate for stable returns in an increasingly volatile market. And the retail sector is seeing outsize growth as traffic and sales increasingly recover from the pandemic blues, according to CBRE. The firm reports that U.S. commercial real estate investment volume rose 10% year over year in in the second quarter, while the retail subsector skyrocketed 41.3%. Retail made up $21 billion of commercial real estate’s total $167 billion. Investors are coming back to retail as they see reports of increased traffic and strong leasing activity in news reports and financial data.

The action was more property based than entity or portfolio based. About $17 billion in single-asset retail property sales closed during the quarter, including such deals as Continental Realty Corp.’s $97 million purchase of Atlanta’s 330,000-square-foot Shoppes at Webb Gin lifestyle center. The Sprouts Farmers Market-anchored asset, sold by Olshan Properties, was 89% leased to such additional tenants as Barnes & Noble, DSW and H&M. Choosy investors handpicked their properties, carving up some portfolios that had been for sale. After a series of megamergers earlier in the year, the change in deal makeup is noticeable and likely owes to rising interest rates.

The biggest growth markets were not necessarily the usual suspects. Buyers found deals outside the biggest markets and beyond the much-hyped Sunbelt. Baltimore, for example, was the hottest growth market for retail property investment in the second quarter; the dollar volume climbed 413% year over year to $972 million. Continental Realty Corp. sold the 88,332-square-foot, Gold’s Gym-anchored Merritt Manor Shopping Center in the Dundalk section of Baltimore County to Abrams Development Group for $11.9 million.

Sacramento, California, was the second-hottest growth market, up 330% to $1.6 billion. During the second quarter, Edens acquired several Northern California retail assets from Donahue Schriber, including Sacramento’s Target-anchored Rocklin Commons.

Meanwhile, Seattle; Las Vegas; Philadelphia; the Washington, D.C., area; Atlanta; South Florida; Tampa, Florida; and Houston rounded out the top 10 growth markets in the second quarter.

• In Seattle, investment volume climbed 302% to $2.7 billion. In that market, Edens purchased the supermarket-anchored Lakeland Town Center and mixed-use Westgate North Shopping Center from Donahue Schriber.
• In Las Vegas, investment rose 226% to $1.7 billion. CenterSquare bought its third property in the market, the 49,554-square foot, five-building Tenaya Village in Centennial Hills. it was 97% leased to 25 tenants, including Starbucks, Capriotti’s Sandwich Shop and Edward Jones.
• And in the Philadelphia market, investment volume surged 218% to $1.6 billion. Wharton Realty purchased two Philadelphia supermarket-anchored centers in separate deals totaling $140 million. And in suburban Bucks County, Pennsylvania, Lamar Cos. acquired the 293,550-square-foot Shops at Valley Square. The mixed-use lifestyle center was built in 2007 as part of a 120-acre-plus master-planned development.

Private investors were the biggest spenders on U.S. commercial real estate in the second quarter. They accounted for $102 billion, or 61%, of volume across all property types. In Miami Beach, Florida, BH Properties acquired the 129,360-square-foot Lincoln Center from Vornado Realty Trust for $93.6 million. Built in 1999, the four-story building is anchored by an 18-screen Regal cinema, the only movie theater in the trendy South Beach neighborhood. The asset was 74% leased.

What’s Happening with Prices?

Commercial property prices are rising, and retail properties are no exception. The RCA Commercial Property Price Index increased 18.5% year over year in the second quarter. Retail beat the average with 19% growth. Industrial rose 27% and multifamily 24%. One of the highest per-square-foot prices in recent memory closed during the quarter when Blatteis & Schnur paid $1,838 per square foot, or $52.25 million, for Pasadena, California’s Tiffany and Shops. The 28,421-square-foot high street complex is tenanted by Tiffany & Co., Crate & Barrel and sneaker brand House of Hoops. It sits on the city’s top retail thoroughfare, Colorado Boulevard, in the Old Town shopping district, known for the annual Tournament of Roses parade.

Check out CBRE’s full report.