Q1 2020 Retail First Glance

An Analysis by Barbara Byrne Denham

THE END OF RETAIL AS WE KNOW IT

The current Moody’s Analytics REIS protracted slump scenario, which represents a worst case situation in which GDP contracts by more than 30% (annualized) in the second quarter, forecasts negative net absorption of close to 67 million square feet in 2020 and another negative 24 million SF in 2021. This will push the vacancy rate to 14.6% at the end of 2021. Rent declines are forecasted to decline a total of 5.2% (asking) and 7.0% (effective) by the end of 2021.

 

Neighborhood and Community Shopping Center Net Absorption and Vacancy

Retail First Glance Report by Moody's Analytics REIS

Source: Moody’s Analytics REIS

 

Net absorption for the quarter was a weak but positive 612,000 SF as a number of metros had strong retail activity prior to the virus outbreak. The average quarterly absorption figure in 2019 was 1.5 million SF. Construction in neighborhood and community shopping center space was 403,000 SF, down from 1.3 million SF added in the fourth quarter. In the first quarter of 2019, construction was 1.5 million SF. These lower numbers reflect the caution from developers and lenders that most metros were over-retailed. Only 9 metros saw new construction in the quarter led by Houston, Dallas, Cleveland, San Antonio and Las Vegas.

 

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Barbara Byrne Denham is a Senior Economist in the research and economics department at REIS, the team responsible for the firm’s market forecasting, valuation, and portfolio analytics services. Throughout her 20-year career, Barbara has written a number of white papers on the commercial real estate market.

 

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