by Brianna Crandall — April 27, 2016 — U.S. neighborhood, community and strip retail centers continued their steady recovery in the first quarter (Q1) of 2016, with nearly half of 62 markets surveyed reporting tighter availability, according to figures released earlier this month by global commercial real estate services and investment firm CBRE Group.
Those retail-center formats registered an average availability rate of 11.2 percent in the Q1, down 10 basis points from Q4 2015. That continues a steady decline from roughly 11.4 percent a year ago and from the peak of 13.3 percent in 2011.
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 have a tougher time boosting rents.
That is the case even as U.S. retail sales have been steady but lackluster of late, with sales up an estimated 3.1 percent in February from a year ago but taking a slightly downward sequential trajectory in this year’s first two months, according to the U.S. Commerce Department. The National Retail Federation predicts that retail sales for 2016 as a whole will amount to a moderate 3.1 percent gain from last year, notes CBRE.
Jeff Havsy, CBRE’s chief economist of Americas Research and managing director of Econometric Advisors, explains:
It’s a marathon pace, not a sprint. 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.
All told, 30 of the 62 markets examined by CBRE posted retail space declines in availability in Q1.
Among those notching quarter-to-quarter declines in their availability rates of 50 basis points or greater were Providence, RI; Trenton, NJ; Raleigh, NC; and Bakersfield, CA. Those that recorded the largest declines in availability on a year-over-year basis include Atlanta, SC; Salt Lake City, UT; Providence, RI; Raleigh, NC; and Austin, TX.
Conversely, those registering an increase in retail space availability in Q1 from Q4 were Pittsburgh, Indianapolis, Oakland and Tulsa, Okla.
Anthony Buono, executive managing director of Retail Services and chairman of CBRE’s Global Retail Executive Committee, points out:
Broadly, we anticipate that retail rents will grow this year in the face of declining availability in many markets. However, certain gateway markets will see flat or declining values due to global consumers resisting a stronger dollar.
