Retail Top & Bottom Markets: Effective Rent Growth
The national aggregate YoY effective revenue growth for the retail sector came in at 1.4 percent this quarter, the same aggregate growth figure seen last quarter. The top five markets had a fairly wide range of performance from Dayton at 3.8 percent to Tacoma at 5.8 percent. Similarly, the bottom five markets ranged from -0.8 percent (Ventura County) to -2.3 percent (Louisville). A handful of the same markets appeared on the chart last quarter as well. Orlando and Tacoma are among the top five markets again, and Fairfield County is among the bottom five again.
Effective Revenue Per Square Foot, Percent Change 2018Q1 – 2019Q1
Source: Reis, Real Estate Solutions by Moody’s Analytics
The chart above ranks markets by their year-over-year effective revenue growth, which is calculated as the annual change of effective rent multiplied by the occupancy rate. On the left side of the chart, we have the five markets with the highest effective revenue growth, and on the right side, we have the five markets with the lowest effective revenue growth. The navy blue bars represent the metro-level growth rates, and the gray and teal bars represent the submarkets with the highest and lowest growth rates in the metro, respectively.
As we have come to expect, the retail sector has a wider range of property performance, compared to the apartment sector. Knoxville demonstrates this trend; it contains properties that are competitive with top markets, but also some that performed quite poorly. The best performing property in Knoxville (in our sample, which excludes the top and bottom 10th percentiles of properties) had a very competitive YoY effective revenue growth rate of 16 percent this quarter, while the worst had a growth rate of -12 percent. For comparison, the best performing property on the chart overall was in Tacoma, and it had a growth rate of 21 percent.
Analysis by Victor Calanog, PhD CRE®. Calanog is the Chief Economist & Senior Vice President at Reis. He and his team of economists and analysts are responsible for the firm’s market forecasting, valuation, and real estate portfolio analytics services. He holds a PhD in Applied Economics and Management Science, trained by a dissertation committee composed of faculty from the Wharton School of the University of Pennsylvania and Harvard Business School.
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