He said the buyers succeeding in retail today are pricing in a cushion to cover any future disruptions to the market.
“There’s enough juice in there,” Muller said. “You never know what to expect next year. We’ve seen what happened with the pharmaceutical industry and Amazon, and online shopping can continue to put stress on the overall market.
“Experienced owners of retail are continuing to buy at these caps because they have built in enough juice that if my tenant is going to give me notice in a year or two, or my tenant’s business plan changes, there’s enough built in. The successful people now in retail know that it’s an ever-evolving market.”
Muller said that same willingness to rethink a property has shown up before in retail assets that could no longer compete as originally built.
“We had old indoor shopping centers turn inside out, where the exterior became retail, and the rear became industrial,” he said. “The perimeter became retail, the inside became industrial or flex space. Guys, depending on location and size, are trying to be creative instead of just knocking down the building.”
