Demand for U.S. Retail Space Improves in Q1 2016 But Gap Between Haves, Have-Nots Persists
| April 8, 2016
Steady Retail Sales, Minimal New Construction Bolstering Sector
U.S. neighborhood, community and strip retail centers continued their steady recovery in the first quarter, with nearly half of 62 markets surveyed reporting tighter availability, according to figures released today by CBRE Group, Inc.
Those retail-center formats registered an average availability rate of 11.2 percent in the first quarter, down 10 basis points from the fourth quarter. That continues a steady decline from roughly 11.4 percent a year ago and from the peak of 13.3 percent in 2011.
CBRE expects the retail industry to remain bifurcated, with each market’s best-positioned shopping centers achieving the highest performance – and highest rents -- as the rest strive to adapt to the evolving retail market and have a tougher time boosting rents.
That’s the case even as U.S. retail sales have been steady but lackluster of late, with sales up an estimated 3.1 percent in February from a year ago but taking a slightly downward sequential trajectory in this year’s first two months, according to the U.S. Commerce Department. The National Retail Federation predicts that retail sales for 2016 as a whole will amount to a moderate 3.1 percent gain from last year.
“It’s a marathon pace, not a sprint,” said Jeff Havsy, CBRE’s Chief Economist of Americas Research and Managing Director of Econometric Advisors. “That is evident in the absorption trends. We’re taking up some space, vacancy keeps coming down and we don’t have a lot of new supply built. It’s just taking a while to get back to equilibrium.”
All told, 30 of the 62 markets examined by CBRE posted declines in availability in the first quarter.
Among those notching quarter-to-quarter declines in their availability rates of 50 basis points or greater were Providence, R.I.; Trenton, N.J.; Raleigh, N.C.; and Bakersfield, Calif. Those that recorded the largest declines in availability on a year-over-year basis include Atlanta, Salt Lake City, Providence, Raleigh and Austin.
Conversely, those registering an increase in availability in the first quarter from the fourth were Pittsburgh, Indianapolis, Oakland and Tulsa, Okla.
“Broadly, we anticipate that retail rents will grow this year in the face of declining availability in many markets,” said Anthony Buono, Executive Managing Director of Retail Services and Chairman of CBRE’s Global Retail Executive Committee. “However, certain gateway markets will see flat or declining values due to global consumers resisting a stronger dollar.”
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.