BPM Real Estate Insights: Spring 2018 Volume 01 | Page 10

10 BPM Real Estate Insights case for many years now, there is a tremendous amount of capital chasing fewer deals than it can satisfy capital needs. This has helped hold values up, particularly in stable coastal markets. Capital is getting a bit more skittish about secondary and tertiary markets and cap rates are, appropriately, reflecting this. Is There Anything Else You Are Particularly Following at the Moment? Yes, two things are of great interest to me right now. One is the cage match between Amazon and Walmart. Walmart is aggressively expanding its e-commerce business having acquired Jet.com last year for $3 billion and announcing a capital commitment of some $11 billion over the next two years to its e-commerce strategy. Walmart thinks it will grow with that strategy in sales by an astounding 40% in fiscal 2019. And Walmart is partnering with Google to scale the lucrative voice business and compete with Amazon’s Echo. Meantime, and ironically, Amazon has made a major push into the bricks and mortar business with its acquisition of Whole Foods. Now there is talk—and it is only talk and not coming from either company—that Amazon may want to acquire Target. I actually think that tie up would be tremendous for both companies, bolstering Amazon’s physical footprint and helping Target to re-find its way. The other trend we watch closely, and that I also find fascinating to watch, are the grocery store wars. We are heavily invested in grocery anchored properties so clearly we have a keen interest in what is happening in this sector. Over the past few years, the market has bifurcated with more specialization and niche operators on one end, such as Trader Joe’s, Sprouts and Natural Grocers, and more generalization/ mass merchandising, such as Walmart and Costco, on the other end. The conventional grocers such as Safeway and Kroger are the ones being squeezed in the middle (although, parenthetically, Kroger is managing to fare pretty well). Some of the conventionals are being squeezed out or swallowed up in consolidations. I see this continuing and accelerating. The grocery business is fluid and changing rapidly. We pay very close attention to it. As a side note, Costco is an interesting story. I am a Costco addict and there are many others like me. My wife won’t let me shop there anymore without supervision, ever since the time I was sent to get some groceries and came back with a TV. Costco thrives from people like me, treasure hunters and impulse shoppers. TJ Maxx is another retailer with a similar approach. Neither has much presence on the internet proving that with a fresh approach, a retailer that is responsive to consumers’ wants and needs, bricks and mortar retailers can thrive. n Jackie Matsumura is a partner and the real estate industry group co-leader at BPM. Jackie has represented Loja Real Estate for over 7 years. Contact Jackie at [email protected] or 925-296-1035.