Terry Montesi sits down with Monica Mason to explore what is really driving the resurgence of retail real estate investment in the United States. Drawing on her work analyzing capital markets data and investor behavior, Monica explains why retail fundamentals have strengthened in recent years and why institutional investors are increasingly allocating capital to the sector. The conversation unpacks the supply constraints created by post pandemic construction costs, the demographic trends shaping retail demand, and how investors are adapting to a higher interest rate environment. Along the way, Monica shares the data signals that matter most for investors evaluating where retail opportunities are emerging.
They discuss:
• Why retail investment has grown from 7% of total real estate investment in 2021 to 14% today
• How pandemic era construction slowdowns and rising costs created a supply shortage that supports rent growth
• Why institutional investors increased retail allocations and what is driving the surge in capital flows
• The demographic shifts fueling retail investment across the Southeast and Southwest, including Texas and Arizona
• Misconceptions around grocery anchored centers and where investors are beginning to look beyond them
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Transcript
Monica Mason: Retail now holds a 14% share of all real estate investment in the us. If you go back to 2021, that share was only 7%. It’s been growing since 2021 and it’s actually has its largest hold that it’s had in, you know, over the past decade.
Terry Montesi: Hey Monica, great to have you on the show. You spend your time analyzing trends advising. Institutional capital interpreting what the data is, is telling you about retail, real estate and the capital markets. Before we jump into what’s going on and what you see, what the data’s telling you, uh, tell us a little about your role at JLL and how you think about the intersection of research capital markets in investing today.
Monica Mason: Great, thanks Terry. Happy to. So I, a little bit of background on myself and my role. I joined JLL Research in 2021. Working primarily in global capital markets, research as a generalist across all sectors. Uh, last year in 2025, I joined the retail capital markets team and since then, um, I’m still within research and my job is really to analyze economic indicators, third party data, JLL proprietary data, and then investor conversations and think across.
All those areas to generate thought leadership, actionable insights for investors and their investment strategies and different market scenarios. So I think that capital markets and research are, um, increasingly intertwined today because we have here like very layered questions that are being asked to inform different investment strategies.
Terry Montesi: Monica, big story in retail and, and therefore retail real estate. The last few years have been super strong fundamentals, limited new supply, very low vacancy rates leading to upward pressure on rents for the good properties. Give us your perspective on this and what you see for these data points over the next two to three years.
Monica Mason: I think first what we really wanna do is talk about why this is happening. And in order to do that we should, you know, backtrack a little bit and, and go back to 2020. And really in 2020, what we saw in the second quarter was, you know, we start 2020 with the pandemic in the second quarter, construction starts for retail.
Start to drop off due to sector volatility, people not coming to stores, a little e-commerce surge really, um, adds an effect of the pandemic. Fast forward one year to 2021 in the first and second quarter of 2021. If you look at the Federal Reserve economic datas Index for construction costs and materials, you start to see construction materials.
Jump drastically and then peak around May of 2022. So since then, instruction costs did slightly decrease throughout 2024, and then they start to peak back up to those 20, 22 levels in 2025. And we haven’t really seen them come down that much. So if you wanna come to us getting out of the pandemic a couple years later, consumers are really interested in.
Going back to the store, they wanna have the instant gratification of purchasing power. They wanna have an experience, they wanna get out and socialize. So retailers are expanding. There’s a lot of new retailers in the market, and there’s not a lot of space because all of a sudden those construction starts that stopped, never able to start again because construction costs increased so drastically.
So what we end up with today is, I believe it’s five-year rent growth for all national retail is at 3.2%, which is, you know, pretty, pretty big. And I think over the next 24 months. We’ll see rent growth start to slow down. That’s not because of weakening fundamentals. I think that’s really because the market has already experienced so much growth, so we’re gonna see a more stabilized rent growth rather than these drastic shifts up in rent.
I also think in the next 24, 36 months, six, we’re still gonna see vacancy remain at these, you know, record levels. Number one, because in the beginning of 2025. We already saw a lot of the bankruptcy businesses vacate space and retailers have already backfilled that space. So we saw those kind of like post COVID era of bankruptcies.
I don’t think we’re gonna see that level of bankruptcies in space vacated again. Uh, net absorption was positive in the second half of 2025. So that will maintain, and also I don’t see construction costs coming down. And until investors figure out that then vacancy will, will remain high and new supply will remain low.
Terry Montesi: One thing you and I talked about a little is that, uh, last several years, let’s just say since the pandemic retail have been, we, we’ve talked about Mark Gibson, who’s been, who’s been professing to institutions that they need to. Get ahead and, and be investing in retail. And what I’ve observed is, and have heard from folks at, uh, different capital markets, experts have said, okay, people were, institutions were retail curious, say a couple years ago last year, okay, we’re ready to invest, but you know what it like only if it’s a perfect.
Grocery anchor deal with the best grocer and limited shop space. I mean, you know, the kind of deals most mortals will never get ahold of. And then it seems like this year we might be loosening up to where investors are actually, and I saw some of it the the last half of last year, investing in things that aren’t all perfect grocery anchored.
You know, maybe just going up the risk curve. Hair even, even starting, ’cause we’ve got some new developments we’re working on, even starting to invest in new developments. Mostly if they have a grocer, but some even without. So give us your perspective on what’s been going on the last two, three years with the investor side and you know, kinda where it’s gone and, and was I generally right.
And, and why were they? Taking these positions and where do you see them? The invest institutional investors in 26 and 27?
Monica Mason: I would like to touch upon the point that, you know, retail, this, this hasn’t been just a dramatic shift to retail. I like that you say that investors were retail curious. I don’t think they’re retail curious anymore.
I think they’re like, oh my gosh, we gotta get into retail right now. So there’s not so much a panic, but like, we don’t wanna miss the mark. We have to invest in retail. That shift was, you know, and, and, and to Mark’s point, like that shift was slowly happening over the past couple of years. Last year we saw, or in 2025, we saw investment volumes grow 27% year over year within the us.
Again, I think the US is like really leading the charge around the retail story.
Terry Montesi: You, you, you’re saying re retail investment was up 27%?
Monica Mason: Yes.
Terry Montesi: Okay.
Monica Mason: Yep. So investment into, uh, US retail assets was up 27% to 60 billion in 2025. Yeah. What that looks like across the broader real estate spectrum is retail now holds a 14% share of all real estate investment in the us.
If you go back to 2021, that share was only 7%. It’s been growing since 2021 and it’s actually has its largest holds that it’s had. And you know, over the past decade, really what I think that is, is it’s not just, you know, people are running towards retail, number one, and very basically, real estate is a long-term investment.
I think these institutional investors are thinking about this long term. Secondly. I think this fundamental, rather than cyclical shift into real estate is part of, you know, a broader market strategy towards diversification across all sectors wherein real estate investment has diversified more evenly across all the sectors each year since 20 20, 22, and 2021.
And with that, you know, retail is gradually growing as well.
Terry Montesi: Monica from a capital markets perspective, what commercial real estate narratives in the retail sector do you think are, people aren’t getting right, they’re misunderstood right now. And is there a place that investor behavior differs from what the headlines suggest?
Monica Mason: Definitely there’s a few areas. I think we, you know, outside of headlines, we go into conversations with clients and. You know, the immediate ask is around grocery anchored assets, and the assumption is that interest in retail is not broad base across all retail subtypes. I really don’t think that that’s true.
Uh, for example, in in 2025, we saw a 4% year over year increase in power centers, high street retail, up 38% year over year on Anchorage strip centers. Up 47% year over year. And then those neighborhood and community centers without a grocery anchor up 61% year over year. So we do see interests already kind of flowing into different subtypes.
And then secondly, another misconception I wanna bring up is that since consumer sentiment is low, and we have, you know, we’ve had people say this since consumer sentiment is low, there’s going to be less investment into retail. I can’t stress enough that that’s really just like a piece of the pie. And although retail is an industry where the consumer is behind it, it’s driven by so much more and so many more elements like, you know, credit availability, stable cash flows, strong fundamentals.
Consumer spending, which is up right now. And you know, not just sentiment. So the idea that, uh, kind of like if one thing slips, it’s all gonna fall apart, is a misconception it’s worth talking about. It’s worth questioning. But I think, you know, the headlines can be overblown.
Terry Montesi: Yeah. Are there some trends, demographic, economic, social, socioeconomic that you see that retail investors, operators, developers should be paying attention to.
Monica Mason: Totally. I think more and more we’re getting clients saying that they are heavily into demographics. They wanna lead their decisions by looking at demographics. One of the biggest ones right now is obviously gonna be population growth. Two areas where we saw the most retail investment and also the most population growth was firstly in the Southeast.
So your states like Florida, Georgia, North Carolina, South Carolina. Secondly, in the southwest, Texas was number one in 2025 for population growth. Arizona not far behind at, I believe it’s number eight. For year over year population growth. Those areas in 2025 and moving forward really should be the focus areas based on demographic trends for investors into retail.
And they’re gonna play a big, a big part in retail investment.
Monica Mason: The Southeast and the Southwest do make up the Sunbelt. I think one more if, if we have time for one more demographic trend.
Sure. Please. We did, like we have recently come out with some research where we’ve been paying attention to wealth trends and what we’re seeing is pretty interestingly, so from the early two thousands, call it, you know, 2006. Households in the top 20% income bracket have been gaining their share of wealth whilst other households in the broader middle classes.
So 20 to 80% saw their share decline and you know, with wealth more concentrated at the top, consumers in the highest income brackets, or having a disproportionate purchasing power. But retail stands well positioned to serve those affluent consumers, and we’re gonna see that within luxury malls, premium lifestyle centers, you know, uh, your great quality, high-end urban assets, urban storefronts, excuse me.
They’re gonna see stronger rank, growth and occupancy rates. But also interestingly, if you think of it as like a, a khap economy and you have higher income, luxury goods at one end of the spectrum, and then your kind of more affordable ends of the other spectrum, your lower and middle income consumers have felt really like strained.
From inflation and their income not growing as much. So what that is leading retailers to do is focus on value essentials, price transparency, which is gonna be critical in like ways to serve a broader consumer base over the next couple of years. So it’s kind of like two ends of the spectrum.
Terry Montesi: Yeah.
Monica Mason: Luxury discount, which, which is interesting to see.
Terry Montesi: What about inflation interest rates? How, and, and, and level of uncertainty, how is all that impacting investors and their mindset, their sentiment and their, and, and the actions they take?
Monica Mason: I mean, not to be cliche, we’ve heard this a bunch of times, but I definitely think investors over the past.
Two years have gotten used to a little bit used to the environment and, and use this term uncertainty as the new normal to express how they’ve adjusted to the environment. I think we’ve actually seen investors ex, you know, accept this new normal and of the current interest rates and inflation environment.
And actually, I guess a, a good anecdote would be the 10 year treasury move index. Which is really a, a key gauge of expected market volatility for the 10 year treasury market.
Terry Montesi: Mm-hmm.
Monica Mason: And right now it’s reached a four year low, so that decreased volatility has made it easier for investors to underwrite assets.
I would also say at the end of
Terry Montesi: that means there’s actually more certainty
Monica Mason: Yeah.
Terry Montesi: Um, around the tenure.
Monica Mason: Yeah. So interest rates are, there’s. Inflation exists, there’s higher interest rates, but because those, it’s not as volatile as it once was.
Terry Montesi: Yeah.
Monica Mason: There’s, you know, you can still operate in this high interest rate environment.
You just need to know that there’s not as much volatility.
Terry Montesi: You know, it’s interesting, Monica, ’cause you’re a good bit younger than I am and you say you call this a high interest rate environment.
Monica Mason: I know what you’re gonna point to,
Terry Montesi: you know. This is not really a high interest rate environment, whether it’s the tenure, whether it’s, you know, prime, uh, whatever you look at.
And, you know, it historically we’re, I think dang close to, dang close to the trend line, but we got really spoiled, God, I guess it’s the last 20 years, 20, 25 years with dang near, uh, interest, at least short rates. Staying near zero. And uh, so we feel this is a high interest rate environment and the fact that you mentioned, which I think is a great stat, that this treasury move index or we call the, the volatility index around the 10 year is, is at a four year low.
And investors seem to be, that is definitely, um, seems to be leading investors to be more comfortable taking action. But it’s, it, it, any investor that’s got any age to them is gonna, is gonna see that really where rates are, is they’re kind of stabilizing around pretty close to the long-term trends. It’s kind of interesting.
Monica Mason: Yeah, yeah, for sure. And, and again, like it’s, it’s, it’s the new normal. Yeah. We were spoiled and now we have, we have our normal
Terry Montesi: Yeah, no, and, and so much of what I heard from, uh, the institutional investors that. We have been talking to the last few years is, is the uncertainty. They were sort of waiting even though fun.
Yeah, I, fundamentals are great. Too much uncertainty, you know, Washington and what Washington does causes a lot of uncertainty in the 10 year and interest rates. Are they gonna come down? Is inflation gonna calm, tariffs? All this stuff. And it does seem like the investment community seems to be a, a, a adapting to this.
New normal and, and it appears that then your research showed that that is leading to the investors to be more willing to, to get in the market and not stay on the sidelines.
Monica Mason: Yeah. I also think too, um, I guess I’ll just say lastly, that there’s a lot of, to, to your point, there’s a lot of credit availability from banks for retail right now.
And what one thing investors have adapted to and are doing is they’re taking shorter loan terms mm-hmm. Ranging in the three to five year range, which indicates they feel the current en environment could change, could cool, but they wanna give themselves options and they can give themselves options because there’s.
A lot of interest from banks around credit availability and at a later date they can refinance under different terms.
Terry Montesi: Yeah. We’re finding that we’re in the market for several construction loans and then one takeout on a stabilized project. And there is, there’s a lot of, A lot of options, a lot of interest from the lending community.
Real estate lending for retail. Good retail appears to be wide open.
Monica Mason: Yeah. And also too, we’ve seen that spreads have really come in. What, what we’re seeing is that fixed spreads on loans are within, I believe it’s 17 basis points of living and multi-housing and five basis points of industrial towards the end of the year.
So that’s pretty impressive. We haven’t seen that since 2019. And it puts retail in a, in a really competitive space.
Terry Montesi: Wow. That’s that, that’s a great stat. That’s why you’re on here. Is that,
Monica Mason: I hope so. I hope, I hope I could say one useful thing.
Terry Montesi: Yeah. Oh, you’ve already done that. Yeah. And, and help us understand how JLL your team uses data and analytics to forecast retail performance, investment performance, and guide your clients.
And, and, and where does the research add the most value? All the capital markets, uh, activities and conversations.
Monica Mason: Yeah. I’ll try to simplify this one because I know, I know big data and technology can can be confusing at times. I think I wanna,
Terry Montesi: my, my listeners are crazy smart, so don’t be afraid.
Monica Mason: Got it. I, I think, you know, I wanna stress that JLL is really like a full service provider and in research we get to benefit a lot from that.
Just within. And, you know, we get to benefit just from taking data from all different departments and services throughout, uh, the broader JLL And within research, what we do is we, so we draw upon three types of models to use data. Firstly, we help clients understand trends across city clusters, location, clusters, and industries and assets using clustering algorithms.
Secondly, we help clients make decisions about their portfolio strategies using gradient boosting algorithms, and then we also help our clients navigate complex markets using simulation models. So those three approaches to modeling within research, um, they all include JLL proprietary data enriched and validated third party data and new data sets created by our data science and innovation team, which sits within the research organization.
And I guess to the second part of your question, where, you know. Research can add the most value to a capital markets conversation. Um, I think the best area is when investors are trying to define their go forward strategy, or when an investor is looking for a thesis around capital formation, we can help by utilizing our, you know, massive amounts of proprietary JLL data and then lead the way within the company on how to interpret.
That into an actual insight. So not just, not just a theoretical insight. We wanna interpret something and say, Hey, this is where you should buy your next asset. This is where you should hold, this is where we can validate your investment thesis or invalidate your investment thesis.
Terry Montesi: Are there areas where you see people misinterpreting market data and when, when you see that happening?
Do you, what do you, do you guys do anything? Is that, is that a a good question or not?
Monica Mason: No, I think it’s a good question. We certainly try not to let people run with misusing the data.
Terry Montesi: Yeah.
Monica Mason: Because I, you know, I think the biggest, and this is a, you know, maybe a cop out, but the biggest mistakes when you misinterpret data is a missed opportunity.
When I like, think of instances where data is interpreted incorrectly, it’s typically either because you know the proper time. I was not taken to digest it and ask the correct questions, and therefore a simplified inference was drawn. I wanna stress that research takes time and it also takes, you know, thoughtfulness to, even though you’ve answered a question, kind of question yourself again and say, you know, how could I layer on more data here?
How can I make this more thoughtful and insightful? Am I really considering. Everything in the piece of the pie, just one example. We have gotten a, a, a statement from someone before saying, you know, lower population areas are hit harder by recessions. Therefore, why would I invest in a secondary market? My response to that would be like, yes, lower population is hit harder or lower.
Population areas are hit harder by recessions. But that doesn’t necessarily mean you shouldn’t invest in it because if you layer on more research there, and if you go to like the Uscas economic research, for example, you could see that during a recession in these suburban and secondary markets at home, food spend increases incrementally and.
Consumers are spending more time at grocery stores, more money at grocery stores and in neighborhood centers, rather than spending their money away from the home. So there are assets that you still can invest in under this scenario, and you know, there’s no sense in kind of like taking yourself out of that market.
I would say like the best way to correct a misinterpretation like that. Provide more data.
Terry Montesi: Yeah.
Monica Mason: Provide, you know, more context. And more often than not, investors like they, they wanna see a way forward,
Terry Montesi: dig deeper.
Monica Mason: Yeah.
Terry Montesi: Something I didn’t ask you earlier. Are there, were there a couple of pieces of data from 2025, whether it’s economic data or.
Capital markets data or retail fundamentals, data that jumped out at you that you think our listeners ought to be paying attention to, that you think are sort of indicative of, of a new trend,
Monica Mason: you know, whether this is new or not. I think two pieces of data, one that in 2025 institutional investors were 20% of all retail investment that jumped from 9% in 2024.
Oh really? And yeah.
Terry Montesi: Oh,
Monica Mason: it, it’s, it’s big. Um, if you go,
Terry Montesi: do you have a guess what that’s gonna be this year?
Monica Mason: I definitely think it’s the, the competition’s only gonna increase. I wouldn’t be surprised if it’s between 25 and 30 and 2026
Terry Montesi: gonna continue to go up.
Monica Mason: Yeah. Yeah. We actually, you know, we expected it to be even higher than 20%.
I think there’s some difficulty around deploying scale right now. That’s the only reason that you didn’t see a higher percentage of institutional investors taking up that share of retail investment. One more data point that I definitely wanna call out is interest around scalable assets. So investors right now are super interested in deploying at scale.
So think in deal sizes above 100 million. That’s a little bit difficult in retail because you typically have smaller ticket size deals. But what we’re seeing is when you have a larger asset or a portfolio that’s above a hundred million, we’re getting bids on these deals. Increase, or the amount of bids, excuse me, number of bid is increasing over 50%.
Terry Montesi: Yeah. And that, you know, we are, that’s our, our sweet spot is sort of. 80 to one 50, if you will. And, um, and we we’re seeing a lot more, a lot more interest from institutions in that zone.
Monica Mason: Yeah, that’s great. Yeah. You’re, you’re, you’re in a good spot.
Terry Montesi: It used to just two, three years ago, big was bad.
Monica Mason: Yeah.
Terry Montesi: Yeah.
So big, big is back, huh?
Monica Mason: Vegas back for sure.
Terry Montesi: We talked, we talked a little about grocery anchored earlier, and they, they continue to dominate the conversation. You know, but there’s only so many, so, so, you know, why are they so sought after? Is, is there some data that you know of that says, Hey, that might be cooling, might be changing.
There’s another sector that investors ought to be looking at. Should they be looking somewhere else? Are there overlooked strategies that people hadn’t dug into the data deep enough that, that your data shows should be of interest?
Monica Mason: I think grocery anchored assets are so sought after, number one, because they’re a necessity and therefore they’re gonna create constant foot traffic for themselves and for in like a neighborhood or community center that’s anchored by a grocery store, it’s gonna create foot traffic for the stores around them.
They’re also, and this might be a, you know, I don’t wanna be too hard on this statement, but they’re quote unquote, e-commerce resistant. So what does that mean? There’s still some e-commerce for grocery, but mainly it’s due to quality control and that, uh, customers really like to pick out their own produce.
Yeah. And, you know, select what they’re getting rather than opening it up at home and being like, oh my gosh, this is the ugliest pepper ever.
Terry Montesi: I have a question. Do you happen to know the, the amount of groceries bought via e-commerce, say the trend of, you know, 22, 23, 24, then in 25, is it, is it growing?
Quickly has it flattened out? Do you know that data point?
Monica Mason: I don’t know that data point. I do know that Kroger had a partnership with a European based technology company, I forget the name right
now, um, in Florida wherein a couple years ago they were gonna roll out these like only like e-commerce centers so you could order your groceries online.
It was essentially gonna be like a completely technology driven warehouse.
Terry Montesi: I heard about that.
Monica Mason: Yep. And they completely pulled away from that plan. Actually, I was just. Connecting with our, uh, leasing research team and, and, and learned this the other day, and really kind of like what that is, is that this, you know, the margins on groceries are so, um, right.
They’re, yeah, they’re very tight technology. New technology right now is expensive and you have to try out a lot of things. So it’s a very tight kind of industry to be pouring a lot of technology into at the moment.
Terry Montesi: Yeah. You sure don’t hear. A lot of talk about, you know, any sort of voracious growth in groceries acquired via e-commerce.
I think, you know, it’s, it, it’s a lot like general e-commerce versus brick and mortar, period. The, the growth that voracious growth has really slowed.
Monica Mason: Yeah.
Terry Montesi: And it seems that we’re, we’re finding something close to equilibrium. You know, I anticipate e-commerce growth. We’ll probably still outpace brick and mortar, but brick and mortar, the base is so much bigger that it feels like we found real close to equilibrium there.
Monica Mason: I agree. I think e-commerce is always gonna be something that’s around. But there was a narrative, again, an extreme narrative a couple years ago where it was gonna completely replace the retail industry. I think that, you know, retail, again, it has a customer base. People have a natural inclination to wanna go places, want to use their senses, wanna have an experience.
And that’s what like retail does.
Terry Montesi: Yeah. Re, re, the retail apocalypse didn’t actually happen, but boy did it disrupt. No capital markets
Monica Mason: E Exactly.
Terry Montesi: It sure did. Yeah. Where else, based on your, what, you know, your gut, your and, and data, when you put that together, what, where else should investors be looking?
Product types, you know, which product types in our industry? Is it, is it a a, a geographic location? Is it a specific. Non grocery anchored type. Do you have any? Does your dad want you anywhere?
Monica Mason: I think earlier I touched on that the southwest and southeast markets are, you know, have grown in the past couple of years and I see that they were, are gonna continue to grow probably for the next couple of years.
Outside of that, I think investors should prioritize assets where there’s strong. Policing demand. So I think shadow anchored centers and then, you know, dare I say it like a power center that’s well located with a newer vintage, not the newest, but a newer vintage, good credit tenants. So think centers where the tenants are a healthy mix of value, everyday needs, experience, fitness, uh, because these are the areas where tenants are still aggressively expanding.
I also think too, again, if you have that like larger ticket investor, you can selectively invest in lifestyle center or lifestyle centers with those good credit tenants and healthy mix of everyday experience brands.
Terry Montesi: Yep. We’re working on one of those right now.
Monica Mason: Yep.
Terry Montesi: And it’s, it’s over a hundred.
Monica Mason: That’s what people like to see.
Terry Montesi: Yeah. What does, what does your data say about the investment performance? Of grocery anchored centers compared to power, lifestyle, non anchored, uh, et cetera.
Monica Mason: So in terms of investment volumes, grocery anchored centers made up 25% of all investment volumes last year. That’s about like what you see every year, even going like 15 years back.
There’s been a
Terry Montesi: percent of the retail investment.
Monica Mason: Yes, correct. It’s, it’s come down a little bit, maybe from like 28% a couple years ago down to 25. That’s just really that, again, diversification across the sub-sectors, power centers. I believe was 11% of retail investment and then lifestyle centers was 8% of retail investment.
So there’s room for some more movement into those subtypes. And how we’re seeing pricing move right now is interesting because there’s really compression across the bulk of retail as again, capital flows through retail interest rate environment approves. Improves and we’re seeing cap rates range, and this is for all retail, not just your best of best assets.
The cap rate range is around, uh, six seven to seven six, and if you go back in time two years ago, so second half of 2023 spreads in between grocery anchored centers and power centers were nearing 170 basis points. Fast forward to today, that spread is 82 basis points, and within that 82 basis points spread for cap rates sits all the other retail subtypes.
So the pricing is, is really compressing. We, we, we think that we’re gonna see more cap rate compression and kind of diversification across the subtypes.
Terry Montesi: Yeah. So look, let’s look forward When you look, when you look. Your, your data informed crystal ball, which I’ve heard you have when you use it. What do you see for the retail capital markets?
Where’s, where’s retail capital going? What’s gonna be different Maybe next, this later this year. Next year than it was say last year. Yeah. And, and where do you see the greatest opportunity for retail investments? And then we’ll talk about development.
Monica Mason: Okay, cool. I think capital, you know, over this year and over the next few years.
Capital into retail is gonna continue to gain momentum. Kind of like you were saying before, people were retail curious and now they’re like, gosh, we gotta, we gotta get here. So that’s really due to its strong property and strong capital markets fundamentals. It’s been a couple years in the making and really what we’re seeing right now within retail is a great opportunity to monetize assets and a very competitive acquisition market.
So in terms of. Where that capital is gonna flow. Um, I think, you know, one, we’re gonna see more acquisitions from institutional investors. Uh, I think there’s gonna be diversification across those sub-sectors. And it’s gonna be concentration, uh, concentration in high population growth areas. That might not mean, you know, gateway markets.
It’s, what I actually mean by that is areas where there’s population booms.
Terry Montesi: You mentioned population growth, you don’t talk about job growth.
Monica Mason: So a lot of times population growth is spurred by job growth. And then increasingly to that, it’s also spurred by housing growth. So areas where you see that there’s gonna be an influx of housing built and an influx of job growth and that in increase in population, that’s kind of like the,
Terry Montesi: yeah,
Monica Mason: three golden tiers of like, Hmm, where should we be investing today?
Got it.
Terry Montesi: It’s, it’s, it’s all got the, the word growth behind it.
Monica Mason: Oh, it
Terry Montesi: does. Jobs and population.
Monica Mason: Yeah.
Terry Montesi: And what about, you mentioned earlier retail development, uh, investors and their attitude towards retail development. What do you see going forward and what are the why’s? What is Yeah. Around it?
Monica Mason: Yeah, totally.
I think that we, we kind of touched on this, but uh, the development sphere for retail is a little bit difficult right now, and really that just relates to construction costs that I mentioned earlier and press already compressed cap rates. However,
you know, there is new development, but it’s really gonna be retail, or excuse me, driven by like the retailer itself.
I guess on a more optimistic note, if you believe in the sector long term, which most investors do at this point, then there’s really kind of further cap rate compression that’s gonna happen, and investors that are willing to hold onto new developments for slightly longer will be able to, number one, able capitalize on an income stream and eventual asset valuation.
Where do I think that’s gonna be? I still do think for new development, that’s going to be within your grocery anchored centers, those neighborhood and community centers, and a lot of times backed by the grocer, which is the retailer.
Terry Montesi: That’s a pretty positive story for an investor. You’ve said a couple of things.
You think there’ll be further cap rate compression and there’s been an average of three plus percent rent growth, and that’s in all products. And that’s the good stuff. And the not so good stuff and the good stuff. It’s been better than that, that that’s what we’ve seen in our portfolio. So when you have rent growth and an indication of further cap rate compression and limited supply growth, that, that, all those, those are all good fundamentals for for owning retail.
For sure. Yeah. So just last, as we close, just zoom out. What are the things that give you confidence? Why? Why you would advise investors to, to be invested in retail, real estate going forward?
Monica Mason: Well, outside of my own shopping addiction, which isn’t a good example,
Terry Montesi: we’re not alone, fortunately, and we we’re very happy about that.
Monica Mason: Yeah, yeah, exactly. So I would say. I mean the look, look at history. Uh, I would say my confidence lies in, in the challenges that retail has already endured big, big challenges. So the rise of e-commerce, which dates back to the early two thousands, the GFC in 2008, and then more recently the COVID-19 pandemic.
And as you referred to later, like the retail apocalypse. You know, basically retail has come back from the dead and if anything can come back from the
dead and be seen with very strong demand rate fundamentals, increased consumer spending, that’s where my confidence lies. Yeah. Yeah.
Terry Montesi: Well, we’re right there with you.
That’s encouraging. ’cause we, we feel the very same way. Well Monica, thank you very much for your time. It’s been delightful and I wish you all the best in your career.
Monica Mason: Thanks Terry. Likewise. Thank you for having me.
Terry Montesi: Take care. Thanks.