Retail Availability Tightens in Two Thirds of U.S. Markets
U.S. neighborhood, community and strip retail centers logged more progress in their recovery in the second quarter, with two thirds of 62 U.S. markets surveyed reporting tighter availability, according to a new report by CBRE Group, Inc. The latest availability rate is the lowest average for the 62 markets in the CBRE study since the third quarter of 2008. It has fallen by 230 basis points (bps) from its post-recession peak of 13.2 percent.
All told, 42 top U.S. markets registered a decline in availability of this class of retail space, up markedly from the 30 that posted gains in the first quarter. Across all 62 markets, availability averaged 10.9 percent in the second quarter, down 10 bps from the first and 30 bps lower than a year earlier.
“Retail sales appear to have picked up in the second quarter,” said Jeffrey Havsy, CBRE Chief Economist in the Americas. “We’re seeing the growth of omnichannel retailing continue to enhance the need for space in brick-and-mortar centers. Additionally, retailers are trying new concepts and continuing to experiment with different store formats, sizes and displays."
Mr. Havsy noted that retail-sales growth has been encouraging of late and the strong job-growth report for June bodes well for continued momentum in retail spending. According to the U.S. Commerce Department, retail and food-services sales for March through May were up 2.4 percent from the same period a year ago. For the year, the National Retail Federation sees retail sales logging a 3.1 percent gain from 2015.
The greatest year-over-year declines in availability rates came in Denver, Nashville, Atlanta, Salt Lake City and Austin. Meanwhile, those that posted gains from a year earlier include Louisville, Albuquerque and Orange County, Calif.
Retail lease rates are likely to continue on their trajectory of a slow, steady increase. Bolstering rates is the relatively restrained pace of retail construction in many U.S. markets. Tempering that advantage for property owners is the curtailed physical expansion rate in the U.S. for many retail categories.
“Successful centers continue to be able to raise rates at a pretty good clip,” Mr. Havsy said. “But those that are struggling can’t make much headway. Retal remains a bifurcated market.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
