by Brianna Crandall — December 2, 2016 — Demand for retail space in U.S. neighborhood, community and strip retail centers continues to grow as new construction remains relatively muted and retailers meld their online and bricks-and-mortar operations, according to the latest analysis of national retail availability by global real estate advisor CBRE Group.
More than two-thirds of the 62 markets tracked by CBRE posted less availability of retail space in the third quarter (Q3) than in the second. Nationally, average retail availability registered 10.4 percent in Q3, down 20 basis points (bps) from Q2 and down 50 bps from a year earlier.
According to the report, those figures mark a continuation of a gradual five-year recovery in the U.S. retail-property market. The latest retail availability rate marks a 280-bps improvement from the market’s peak availability of 13.2 percent in 2011. “Availability” as referenced by CBRE encompasses all space available for lease, including space currently occupied but otherwise listed for use by other tenants.
All told, 43 of the markets tracked logged a sequential decline in the availability of retail space in Q3 from Q2. On a year-over-year basis, 48 markets registered tighter availability.
Jeffrey Havsy, CBRE chief economist in the Americas, pointed out:
Consumers like to shop from home, but they also enjoy the social aspect of shopping, dining or entertaining themselves with friends and family in various retail settings. We will continue to see slow yet steady demand for space as retailers work to entice shoppers of all ages into their environment.
Retail sales have benefited of late from healthy growth in U.S. employment and income. Meanwhile, even as mature retailers have slowed their expansions, additional demand is being driven by new concepts and online retailers looking to expand their exposure with brick-and-mortar storefronts. Outlooks for the holiday season are generally upbeat, with the National Retail Federation forecasting a solid 3.6 percent sales gain for November and December from a year earlier.
A relative lack of new supply still is benefiting the market. CBRE forecasts that developers will deliver roughly 16.6 million square feet of new neighborhood, community and strip retail centers in the United States this year and 16.3 million next year. In comparison, the peak for deliveries was 72.6 million square feet in 2005.
In Q3, the greatest year-over-year declines in retail availability came in Denver, Nashville, Providence, Tampa and Minneapolis. Those that posted the largest availability increases from a year ago include Long Island, Birmingham and Wilmington, DE.
The full report is available upon request from CBRE. See CBRE’s U.S. Research Reports page for more related reports.