My group invests/manages retail, multi-tenant plazas in FL, so my visibility is very specific and somewhat narrow.
While we did acquire assets over past few years, we were regularly edged out by liquidity buyers that had no interest in 'ROI fundamentals', especially with regards to income degradation risks. Basically, CAPs went to ****!
My biggest concern now is that the tenant demand side has ebbed greatly in the past few months and even existing tenanted units are looking to lower their 'monthly nut' based on retail sales. Tenants, national and local, are telling me they are not making their numbers and if my location isn't net positive for their business then they will either shut it down or demand meaningful occupancy cost reduction with a view to revisit the new norm within a year or two!
My real worry is that, at least in my asset class, capacity far outweighs demand and it feels like I'm merely delaying the inevitable. Moreover, most tenants I deal with are retrenching. Worst still, entire industry models' are getting decimated in mass, cinemas is one example.
At this point, only saving grace for people like me and 'others' I talk to on an honest basis is our low leverage. Which is why you see behemoth REIT's like Westfield forced to hand over trophy assets like Countryside Mall in Clearwater to note holders.
In order to make money in this environment, we need to focus on what we have, not just what we can buy at bargain basement numbers.
Honestly, I feel we ain't seen the half of it yet. And I'm the optimistic one in our group!
