As ecommerce continues to grow, brick-and-mortar retailers are feeling the hit. Reports indicate store closings have hit the worst level since 2010, due in part to bankruptcy filings by major retailers, and an estimated 200 malls have closed down in the past two years. Bloomberg Intelligence reports there were only seven weeks from Q1-2015 to Q1-2016 where retail store traffic rose year-over-year. It is estimated that for retail stores in North America, per-square-foot sales have declined $35 per square foot from 2006 to 2015 ($200 to $165).
Northeast Private Client Group has reported throughout 2016 that assets in New York City and Boston are trading at record-high valuations for this cycle. In New York City, deal flow has slowed considerably since Q1-2016 and value-added investors are exploring opportunities in submarkets outside the City including Connecticut and the Hudson Valley. Similarly, in Boston, ranked as the third most expensive U.S. market for multifamily rents at the end of last year, valuations for income properties have hit historic highs for this cycle, as investors are increasingly less likely to bid down capitalization rates any further. Despite strong demand for multifamily and commercial assets in both markets, one is left to question if either or both of these markets may be “overvalued.”