U.S. Retail Market Update

According to JLL’s recent retail report, the U.S. retail capital markets have experienced a complex landscape in the first half of 2024. While overall transaction volume has seen a slight dip, the retail sector remains a key area of focus for investors. Despite a 12% drop in year-over-year transaction activity, retail's share of the total commercial real estate market has risen, making up 21% of total transactions—an increase from last year. This reflects continued confidence in retail as a resilient asset class, particularly in essential retail categories like grocery-anchored centers.

National Trends:

• Transaction Volume: Total transactions in the first half of 2024 amounted to $26.8 billion, marking an 8% growth from 2023. However, the number of transactions declined by 21%, reflecting a shift towards fewer but larger deals.
• Cap Rates: Cap rates for multi-tenant retail properties have remained relatively stable, with grocery-anchored and unanchored strip centers seeing consistent demand. The slight compression in cap rates highlights investor appetite for reliable income streams.
• Investor Activity: Private investors continue to dominate the retail market, but REITs and foreign capital are increasingly active players in this space.

Southeast Region Focus: The Southeast remains one of the strongest regions for retail investment in 2024. While the overall transaction volume in the region declined by 12% from last year, the Southeast still accounted for $3.3 billion in retail transactions, underscoring its importance in the national landscape.

Key highlights include:

• Grocery-Anchored Centers Leading the Way: Grocery-anchored centers have been a primary target for investors, comprising 44% of the Southeast's retail transaction volume. Publix and other major grocery chains have driven much of this activity, particularly in states like Florida and Georgia.
• Rising Deal Sizes: The average transaction size for retail deals in the Southeast has climbed to $26 million, reflecting a significant 76% increase from the previous year. This trend suggests that larger, more valuable properties are attracting investor interest in the region.
• Notable Transactions: Several high-profile deals have taken place in the Southeast, including the sale of Casselberry Commons in Florida, a shopping center anchored by Publix and T.J. Maxx, for $40.3 million. Another significant transaction was Fayette Pavilion in Georgia, a large retail complex that includes Publix, Target, and Home Depot, which sold for $115.4 million.

Outlook: Looking ahead, the Southeast is expected to continue being a top market for retail investment. Factors such as population growth and a strong demand for essential retail services are likely to keep the region attractive to investors. Grocery-anchored centers, in particular, will remain a focal point for those seeking stable returns, while states like Florida and Georgia are positioned to see ongoing investment activity throughout the remainder of the year.