2022: The year of the big deal?

The retail capital markets have seen an increase in average deal size and continued yield compression despite slower deal flow.

March 10, 2022

Grant Emery


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Deal flow slows down but deal size ticks up

After a lost year in 2020, retail capital markets saw an explosion in deal flow in 2021 and the ride doesn’t appear to be over yet. Retail transaction volume year to date is over $7.1 billion, up almost 56% compared to the same period last year. While transaction volume is up, only 302 deals closed in the first two months of the year, the lowest level since 2010. These two facts point mean that prices for retail assets are up significantly and demand for retail assets is outpacing supply.

Over the past decade, single-asset multi-tenant transactions have traded on average at $17.9 million, in 2022 that number is $24.6 million, a 37% increase. Even when looking at median deal size, closing prices are roughly $3 million higher than the median deal size of the past five years.

Inflation isn’t to blame for these high prices though, but larger property size and an aggressive buyer pool may be. Average square footage on multi-tenant transactions this year is just under 120,000 almost 25,000 more than the trailing ten-year average. If we look to comparable years, 2011 and 2017 for example, we saw that average square footage was on par with 2022 but the average closing price was almost $5 million less. A potential explanation for this could be a shortage of supply and thus a highly competitive buyer pool. Using JLL transactions as a proxy for the market, we’ve seen an average of 10.5 bids per deal and a bid-ask spread of 7.0%, a 14% and 9% increase over Q4 2021, respectively.

Transaction prices and property size hit decade high


REITs up retail acquisition volume, a sign of potential cap rate compression on the horizon

REITs have collectively purchased over $1.7 billion in retail assets YTD or 26% of total market share, a reversal in the trend of investor group reducing exposure to the sector over the past few years. While The Necessity Retail REIT’s acquisition of a 44-asset portfolio accounted for one-third of REIT activity, there has been 15 other purchases by REIT purchases worth nearly $1.2 billion. 

This increased activity from REITs is significant because large institutional players drive pricing and serve as a leading indicator of where the market is going. The average cap rate for an acquisition made by REITs in 2021 was 6.43%, roughly 50 BPS lower than the market average for the year. In 2022, the market average retail cap rate is 6.55%, a 12 BPS difference from the REIT average in the previous year.

Share of transaction volume by buyer type

Investors show renewed interest in urban retail

2021 saw investment volumes increase 36.9% year-over-year to $1.45 billion across 52 deals—one more than in 2019. However, total investment volume remains 14% lower than 2019, and the average sales price per square foot is also down almost 13% in the prime urban corridors. However, acquisitions of top-tier assets have shown that investors haven’t abandoned these corridors yet. With cap-rate compression among all other retail property types, investors looking for bigger returns may turn to prime urban retail for attractive deals in 2022.

  • Lincoln Center, Lincoln Road, Miami – Located in Miami Beach’s Lincoln Road corridor, the 127,000 sq. ft. Regal Cinemas-anchored property was foreclosed upon by the lenders, Credit Agricole and Société Générale, after the defaulting on the mortgage in April of 2021. The asset then sold to BH Properties on January 28th for $240 million.
  • M&M World, Times Square, NYC (1600 Broadway) – Situated in the heart of Times Square, the retail condo portion of this property sold in a joint venture deal between Paramount Group and BVK for $190 million. The iconic experiential retail property represents the largest retail transaction in Times Square in over four years.

Contact Grant Emery

Senior Analyst, Research - Retail Capital Markets