CBRE: Demand for U.S. Retail Space Improves
U.S. neighborhood, community and strip retail centers continued their steady recovery in the first quarter, with nearly half of markets surveyed reporting tighter availability, reported CBRE Group, Los Angeles.
Those retail center formats registered an average availability rate of 11.2 percent, down 10 basis points from fourth quarter 2015, said CBRE Chief Economist of Americas Research Jeff Havsy. That trend continues a steady decline from roughly 11.4 percent a year ago and from the peak of 13.3 percent in 2011.
“It’s a marathon pace, not a sprint,” Havsy said. “That is evident in the absorption trends. We’re taking up some space, vacancy keeps coming down and we don’t have a lot of new supply built. It’s just taking a while to get back to equilibrium.”
Havsy said CBRE expects the retail industry to remain bifurcated, with each market’s best-positioned shopping centers achieving the highest performance and highest rents as the rest strive to adapt to the evolving retail market and struggle to boost rents.
U.S. retail sales have been steady but lackluster, with sales up an estimated 3.1 percent in February from a year ago but following a slightly downward trajectory in early 2016, the Commerce Department reported. The National Retail Federation predicted that retail sales for 2016 as a whole will amount to a moderate 3.1 percent gain from last year.
All told, 30 of the 62 markets that CBRE examined posted tighter availability. Among those notching 50 basis points or greater quarter-to-quarter availability-rate improvements were Providence, R.I., Trenton, N.J., Raleigh, N.C. and Bakersfield, Calif.
Markets showing the largest year-over-year declines in availability included Atlanta, Salt Lake City, Providence, Raleigh and Austin. Markets that reported increased availability include Pittsburgh, Indianapolis, Oakland, Calif. and Tulsa, Okla.
“Broadly, we anticipate that retail rents will grow this year in the face of declining availability in many markets,” said CBRE Executive Managing Director of Retail Services Anthony Buono. “However, certain gateway markets will see flat or declining values due to global consumers resisting a stronger dollar.”