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- May 1, 2015: Vol. 2, Number 5

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Retail Real Estate Still in Fashion: But a low cap-rate environment suggests it might not be in vogue for long

by Brad Berton

 

So some of your well-heeled clients are inquiring about the attractive returns various U.S. retail real estate investment vehicles have been generating the past few years. They keep hearing that investors targeting regional malls, smaller centers and freestanding properties are managing to defy the nation’s relatively anemic economic recovery, as well as the continuing onslaught of e-commerce in certain categories.

As observant investment advisers are well aware, evidence of rising retail property performance — and values — indeed abounds in early 2015. However, prudent financial planners should also express caution that a sector’s favorable fortunes can cut into going-in return rates for investors looking to deploy additional capital amid such an exuberant environment.

Therein lies something of a dilemma in selecting appropriate retail real estate investments these days. Although the strong value gains of late have pushed going-in acquisition yie

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