Green Street’s Sullivan Questions Pricing Declines in Retail Real Estate
04/11/2017

Jim Sullivan, president of advisory and consulting at Green Street Advisors, joined REIT.com for a video interview at REITWise 2017: NAREIT’s Law, Accounting & Finance Conference in La Quinta, California.

Sullivan discussed some of the key trends impacting the retail real estate segment. Green Street’s advisory group currently spends about half its time working with retailers, retail real estate owners and investors in commercial mortgage-backed securities bonds that are typically collateralized by malls, Sullivan said.

Sullivan stressed that although retail has always been a competitive business, today’s pace of change is much more rapid than ever before. The abundance of news stories focusing on the sector reflects e-commerce’s impact on retailers that haven’t been able to adjust their business models to compete effectively, he said.

Meanwhile, Sullivan pointed out that despite the headwinds facing retail at this time, a number of tailwinds do exist. He pointed to record-high occupancy rates in the mall segment and occupancies in strip centers that are near record highs.

“The occupancy story is attractive,” Sullivan said. The lack of new supply is another positive factor for the sector, he noted.

Sullivan also highlighted that fewer stores closed in 2016 than in 2015.

Sullivan said he has some questions about public market valuations for the retail real estate segment. With “great mall companies” trading at up to a 25 percent discount to the private market value of their assets, “you have to wonder if the public market is appropriately valuing the headwinds and the tailwinds,” Sullivan said. It’s possible that negative headlines have pushed down pricing too far, he said.