Investors searching for distressed big-box deals are facing competition from an unlikely source — retailers. Large tenants including Wal-Mart, Target, Kohls Department Stores and others have become aggressive bidders in the market for vacant big boxes. The retailers are buying distressed space from owners or banks, often at prices that are 20% to 30% higher than real estate investors are willing to pay.

As a result, retailers have become large players in the single-tenant market. For example, Matthew Sullivan, managing director with Los Angeles-based investment brokerage firm Lee & Associates Investment Services Group, says about 50% of the vacant boxes in California are being acquired by retailers.

For tenants, the incentive is that they can acquire an empty site today at a steep discount to what the asset would have traded for three or four years ago. In the process, they can lock in lower occupancy costs than if they were to lease that same space from a developer. What’s more, they have greater control over their real estate

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