NEW YORK, NY--(Marketwired - Dec 10, 2014) - As the flow of capital throughout the world increases, and retailers and investors chase diversification and strong returns, the U.S. retail market is attracting more time in the international spotlight. Despite the continuing pressure retailers have to improve profitability and margins, JLL's (
Cross-border capital flows soar into U.S. retail assets
Global capital markets competition is pushing overseas investor demand for U.S.-based retail assets, as evidenced by the $5.49 billion foreign investors funnelled into 134 property purchases this year, marking a six percent increase year-over-year. According to JLL's Global Capital Flows report, the top five countries placing capital into U.S. retail include Canada, Australia, Germany, the Netherlands and China. These five countries contribute more than three-fourths of the total foreign direct investment into U.S. retail real estate.
"The U.S. has always been a target for foreign capital, but we are finally seeing investors going outside their typical comfort zones, moving further on the risk spectrum and adding retail assets to their portfolios. This shift has increased the price per square foot for retail transactions higher than any other asset class this year, creating stiff competition for trophy assets and an uptick in interest for grocery-anchored strip centers," said Margaret Caldwell, Managing Director of JLL's Capital Markets.
Caldwell says global funds are increasingly eyeing secondary markets to support their long-term hold strategies. Markets that have a growing middle-class, lower barriers to entry and slim competitive set, such as New Jersey, Tampa and Cincinnati, witnessed that injection of foreign capital already this year.
International retailers land on U.S. soil
Beyond cross-border capital flows, international retail brands continue to land on U.S. soil for expansion and are targeting top-tier core markets for their storefronts. A diverse consumer base, buoyant income growth and a resilient economy has currently lured 175 international brands to take root in 19 top retail markets coast to coast, according to JLL's latest report, The New World of Retail. European retailers have expanded most extensively into the United States with Italian, French, British, Swiss and German retailers crossing the pond most frequently.
"Nearly one in five international retailers with U.S. operations has a storefront in New York City because it's the perfect incubator for building brand awareness and testing the waters with a broad consumer base," said Bob Gibson, Vice Chairman of JLL in New York City. "We are starting to see leasing traction pick up steam in markets with lower barriers to entry like Dallas, Houston and Boston. These cities are benefitting from population booms from corporate relocations and the energy and technology sectors' evolution and success."
While there are challenges facing retailers and investors operating internationally, the benefits far outweigh the risks, according to the JLL report. "Borders are becoming irrelevant and in the coming decade, owners and occupiers of real estate will have a laser-focused approach on investment and expansion, creating portfolios with varied markets, risk and maturity," concludes Caldwell.
JLL's The New World of Retail report ranks the top U.S. retail markets based on a combination of short-term variables and sustainable long-term characteristics including household income growth, the number of total retailers, rental rates, vacancy levels, gross leasable area, and the balance of supply and demand. To learn more about each city ranking, download the full report.
JLL's Retail Group serves as the industry's leader in retail real estate services. The firm's more than 800 dedicated retail experts in the Americas partner with investors and occupiers around the globe to support and shape investment and site selection strategies. Its retail specialists provide independent and expert advice to clients, backed by industry-leading research that delivers maximum value throughout the entire lifecycle of an asset or lease. The firm has more than 90 retail brokerage experts spanning more than 25 major markets, representing more than 440 retail clients. As the largest third party retail property manager in the United States, JLL's retail portfolio has 350 centers, totaling 67 million square feet under management in regional malls, lifestyle centers, grocery-anchored centers, power centers, central business districts, transportation facilities and mixed-use projects. For further information, visit www.jllretail.com
For more news, videos and research from JLL's Retail Group, please visit: www.jllretail.com
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