Urban Market Experiences Net Growth

By Jonathan Hipp, President & CEO, Calkain Cos., Inc.

There’s a lot of buzz around the upward trend in urban investments, one of today’s most attractive markets due to its close proximity to large populations.

From a triple-net lease investment perspective, urban properties such as a typical strip center benefit from a strong anchor or even shadow-anchor presence. One unique aspect of urban properties is that the anchor can be a dense concentration of office space or even a subway station because the flow of trains, buses, cars, taxis and pedestrians is the engine that drives the street scene. As a result, triple-net urban properties are experiencing increased demand, having remained successful in the face of the recession.

A few examples: Walgreens purchased Duane Reade and their 258 New York metro area locations for $1 billion. German group GLL Real Estate Partners entered the urban market by purchasing 14,000 square feet of New York retail condominiums from Hines for $41.9 million. JC Penney moved into a two-level, 153,000 sq ft store in Manhattan, breaking a longstanding self-imposed exile from that metro area.

The urban boom coincides with the changing tastes of many investors from high risk/reward properties to those which are more stable and offer alternative uses. In today’s market, suitable triple-net investment property is hard to find – and quality triple-net investment property is harder still. Perhaps hardest of all are the $1 million to $5 million transactions, which are the focus of the average investor and 1031 Exchange buyers. Urban investments fit this niche and triple net investors have demonstrated a willingness to acquire these assets, often at premium prices.

Interestingly, the size of urban properties fluctuates greatly, ranging from 500-square-foot retail condos to the 153,000-square-foot JC Penney. Investors can take advantage of this naturally diverse portfolio by choosing from a variety of properties to fit their specific needs, ensuring that, like its corresponding surroundings, the future of the urban market will be bright and vibrant.