Reis: Retail Sector Steady Despite Recent Store-Closure Announcements
Despite recent headlines about store closures across the country–Payless ShoeSource announced on Tuesday it will close 400 stores–overall retail real estate statistics show very little change, reported Reis, New York.
“Store closures are not significantly impacting overall statistics as new retailers fill space,” Reis Economist Barbara Byrne Denham said in the firm’s first quarter Retail Sector Trends report. She noted that the national mall vacancy rate increased slightly to 7.9 percent from 7.8 percent but said mall rents increased 0.4 percent in the quarter.
In addition, vacancy at neighborhood and community shopping centers held steady at 9.9 percent, Byrne Denham said, unchanged from year-end 2016 and from a year ago. The average national asking rent at neighborhood and community shopping centers increased 0.3 percent in the first quarter while effective rents including landlord concessions increased 0.4 percent.
“Vacancy stayed flat in the quarter due to very low new retail construction,” Byrne Denham said. She noted that retail construction stands at its lowest point since 2011–just 796,000 square feet.
At $20.55 per square foot, the average U.S. retail asking rent grew 0.3 percent in the quarter, Reis reported. Rents have increased 1.6 percent since first-quarter 2016. Effective rents grew 0.4 percent in the quarter and 1.7 percent over the year. The gap between asking rents and effective rent growth has fluctuated very little over the last two years as landlord concessions have not changed much despite the continued news about store closures, the report said.
“Many have lowered their expectations for the retail real estate industry given the one-two punch of the rise in e-commerce and the closing of stores,” Byrne Denham said. “But a number of retailers have expanded their presence in malls and other shopping centers. And in sharp contrast to the apartment market, developers are not building retail space like they had in previous expansions. This has kept a lid on rising vacancy rates.”
Byrne Denham stipulated that the full impact of announced store closures has yet to be felt because some stores that will close remain open at the moment. “Nevertheless, the demise of retail real estate has been somewhat overstated,” she said. “The industry has posted some employment losses over the last few months but the combined retail and restaurant industry has 383,600 more jobs than it did a year ago.” She noted that Reis has seen growth in two-thirds of the metropolitan areas it tracks.
