NREI – Retail’s Ruinous Run

Reis in the News

By David Bodamer
Source: National Real Estate Investor – Retail’s Ruinous Run

Retail real estate’s troubles in recent years have been well-documented. Online sales continue to eat away at brick-and-mortar activity. Many chains are struggling, forced to scale back on stores or go out of business entirely.

The results from NREI’s fourth retail real estate survey reveal that the outlook from retail operators, investors and developers continues to be bleak. Sentiments on cap rates, occupancies and retail rents all declined from past years. And respondents see retail as having the dimmest outlook of any of the major property sectors.

Investors remain bearish on buying retail properties. In all, 43.4 percent said they think now is the time to hold properties, while 35.2 percent think it is time to sell and 21.4 percent said it is time to buy. (Those numbers are consistent with sentiments in the previous three surveys).

In all, 45.8 percent said they expect occupancy rates nationally to fall (up from 37.9 percent in 2017, 23.8 percent in 2016 and 12.1 percent in 2015.) In addition, 27.1 percent expect no change in national occupancy rates, while another 27.1 percent expect occupancy rates to rise nationally in the next 12 months.

Retail vacancy levels stayed relatively flat for the first quarter of the year, according to preliminary data from real estate research firm Reis. For neighborhood and community shopping centers, the vacancy rate averaged 10.0 percent, the same as the quarter before. Meanwhile, the vacancy rate for regional malls rose 10 basis points from the fourth quarter to 8.4 percent.

This rate has remained relatively unchanged for several quarters, signaling that 2018 is not likely to see a major disruption to retail occupancies, says Barbara Byrne Denham, a senior economist at Reis. Denham points out the particularly rough start the retail sector saw in 2017. “It can’t get that much worse,” she says.

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