Preliminary Trends Announcement: National Retail Market
Retail Sector Trends
The Retail vacancy rate declined in the quarter to 10.1% from 10.2% in the second quarter. In the third quarter of 2018 it was also 10.2%. Overall vacancy has declined only 0.3% in last five years.
Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.3% in the third quarter. At $21.45 per square foot (asking) and $18.79 per square foot (effective), the average rents have increased 1.5% and 1.6%, respectively, from the third quarter of 2018.
The Mall vacancy rate increased to 9.4%, from 9.3% last quarter and a low of 7.8% in 2016. Rent growth was positive at 0.2% for the quarter and 0.6% for the year. Although retail store closures and bankruptcies still dominate the news, the overall retail property statistics have held steady as new users fill vacated space of large department stores.
Both new completions (supply growth) and net absorption (demand growth) decelerated in the third quarter as fewer developers build traditional neighborhood and community shopping center space. Still, tenants are leasing stores in what is getting built as shoppers prefer the new over the old in any market.
Neighborhood and Community Shopping Centers Vacancy and Rent Trends
Source: Moody’s Analytics REIS
Statistics by Metro
The gap between strong and weaker metros widened in the quarter as 30 metros saw higher vacancy brought on by negative net absorption. Metros with the highest vacancy rate increase include Long Island, Tucson, Charleston, Baltimore and Syracuse. Metros that saw the biggest decline in vacancy include Ventura County, Louisville, New Haven, Suburban Virginia and Tampa St. Petersburg. These rankings are only loosely tied to retail employment growth. A number of these metros incurred job losses in retail, yet strong job growth in restaurants.
Rent growth was weaker in most metros as only one metro, Suburban Maryland, saw an increase in effective rent of 1.0% or more. However, 20 metros suffered a decline in rent including Tacoma, Suburban Virginia, Albuquerque, Atlanta and Norfolk/Hampton Roads.
At $34.86 per SF, San Francisco has the highest effective rent followed closely by San Jose at $33.24. Metros that posted the highest effective rent growth for the year include Nashville (+3.8%), Raleigh-Durham (+3.0%), Houston (+2.9%), Orlando (+2.8%) and Greenville (+2.6%). Markets with the sharpest declines include Fairfield County (-0.7%), Cleveland (-0.4%), Suburban Virginia (0.0%), Pittsburgh (+0.1%) and Albuquerque (+0.1%).
Regional and Super Regional Malls Vacancy and Rent Trends
Source: Moody’s Analytics REIS
Similar to its sibling property types, the retail sector continued to shrug off bad news in the broader sector. Just this week, the news media seemed to yawn when retailing powerhouse Forever 21 declared bankruptcy. Reports said they would close 178 of their 600 stores. The retail sector has withstood numerous store closings, this latest one should not deliver a big blow. Retail spending remains healthy as consumer spending keeps climbing in step with job growth. In short, the retail sector is poised to continue to grow at the current slow but steady rate.
Note: Preliminary trends are subject to revision.
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