As a partner at S.J.
Collins Enterprises, a firm that
develops retail properties throughout the Mid-Atlantic and Southeast regions,
Jeff DeHart has an in-the-trenches perspective on the retail sector’s ongoing recovery
from the Great Recession. We recently got a chance to speak with him about the
sector’s improved performance, the latest retail development trends and his
expectations for his beloved Georgia Bulldogs’ upcoming football season.
(By the way, be sure
to follow Jeff on Twitter.)
HS: How has the
retail sector performed so far in S.J. Collins’ markets in 2012, and what types
of properties are especially thriving?
DeHart: Our
business is improving, as is the entire retail sector of commercial real
estate. Cap rates on prime properties have compressed, and many retailers are
looking again at expansion. We are seeing strength from grocers and restaurants
in particular.
Our work in the Mid-Atlantic still seems to outpace our work
here in Georgia. We like the fact that the vacancy rates of quality retail
locations are dropping. This bodes well for good real estate.
Properties with weaker fundamentals will, we think, continue
to struggle. We may even see another dip in values for these types of
properties as CMBS maturities start to escalate.
HS: What
development trends do you predict will be big in the coming months and years?
DeHart: Infill
sites will continue to be in high demand. Demographic trends point to an
increase in urban lifestyles, and consumers will always shop near home.
We also have a tremendous amount of functional obsolescence
in commercial real estate. Many older urban buildings are simply not useable
and can be replaced with new construction and better uses. The United States
has an estimated 44 billion square feet of functionally obsolete commercial
real estate. Technology, geography, buildings codes, etc., all contribute to
this trend. Amazon made hundreds of big-box Best Buy sites obsolete. What’s
next?
HS: Are tenants
at all reluctant to pull the trigger on leases because of the upcoming
presidential election?
DeHart: We have
not heard that yet. We have noticed that most retailers other than restaurants
are taking a lot of time to get leases done. I spoke to Tina Harris at Avison
Young about this just the other day. She believes that the length of the lease
cycle is more related to the staffing levels in many retailers’ real estate
departments.
HS: Most
important question of all: How will the Georgia Bulldogs fare this football
season?
DeHart: If UGA
doesn’t do well this year with such an easy schedule, then the Dawgs might as
well join the ACC so we can win some championships!