CBRE: Retail Availability Tightens

U.S. neighborhood, community and strip retail centers continued their recovery in the second quarter, with two-thirds of 62 U.S. markets surveyed reporting tighter availability, said CBRE Group, Los Angeles. 

The latest availability rate represents the lowest average since third-quarter 2008, said CBRE Chief Americas Economist Jeffrey Havsy. The rate has fallen by 230 basis points from its 13.2 percent post-recession peak.

All told, 42 top U.S. markets registered a decline in retail space availability, up from 30 that improved similarly in the first quarter, CBRE said. Across all 62 markets surveyed, availability averaged 10.9 percent, down 10 basis points from the first quarter and 30 basis points lower than a year earlier.

“Retail sales appear to have picked up in the second quarter,” Havsy said. “We’re seeing the growth of omnichannel retailing continue to enhance the need for space in brick-and-mortar centers.” 

Additionally, retailers are trying new concepts and continuing to experiment with different store formats, sizes and displays, Havsy said.

Rising space demand and minimal completions continue to sustain a low vacancy rate at retail properties, Marcus & Millichap’s Summer Retail Outlook said. “Tight vacancy and limited competition from new supply are exerting upward pressure on rents,” M&M noted. “Nearly seven years after the end of the recession, only a trickle of new retail properties are coming out of the construction pipeline.”

The greatest year-over-year declines in availability rates came in Denver, Nashville, Atlanta, Salt Lake City and Austin, CBRE said. Those that posted gains from a year earlier included Louisville, Albuquerque and Orange County, Calif.

Havsy called retail sales growth “encouraging of late” and said June’s strong job-growth report bodes well for continued retail spending momentum. The Commerce Department reported that retail and food-services sales for March through May were up 2.4 percent year-over-year and the National Retail Federation said retail sales could increase 3.1 percent from last year. The Conference Board, New York, said its Consumer Confidence Index posted a solid increase in June following stumbles in April and May, rising to 98.0 from 92.4 the month before. 

“Successful centers continue to be able to raise rates at a pretty good clip,” Havsy said. “But those that are struggling can’t make much headway. Retail remains a bifurcated market.”