At the end of 2009, the Southeastern Wisconsin retail market showed a vacancy rate of 11.6 percent, according to the CB Richard Ellis Fourth Quarter MarketView. In 2009, the market witnessed a dramatic increase in vacancy rates, compared with a 9.3 percent rate in the fourth quarter of 2008. Most of this change occurred in the first and second quarters, and we are now seeing the market bottom out, as the vacancy rate continues to climb at a much less dramatic pace. Average asking rents fell from approximately $19.50 per square foot triple net at the end of 2008 to approximately $16.50 per square foot triple net at the end of 2009. Several mid-box retailer bankruptcies led to this rapid increase in the vacancy rate. Other store closures also played a significant role in rising vacancy rates.
One bright spot in 2009 was the activity that occurred in the grocery category. Active retailers in this category include Aldi, Piggly Wiggly, Woodman's and Roundy's dba Pick ‘n Save. Aldi opened stores in Brookfield, Grafton and Wauwatosa, Wisconsin. Piggly Wiggly announced plans to open additional locations by taking over three former grocery store boxes. These sites include a former Supersaver in Kenosha and two former Jewel stores on Capitol Drive in Milwaukee. Additionally, Woodman's broke ground on a new 238,000-square-foot store in the Menomonee Falls market.
Pick ‘n Save continues to be the most active grocer in the market. In 2009 and the first quarter of 2010, new stores opened in Burlington, Franklin, Grafton, Milwaukee, Waukesha, Wauwatosa and West Bend, Wisconsin. One of these new locations opened in a former The Home Depot site at the southeast corner of 76th Street and Good Hope Road on Milwaukee's northwest side. The existing building was renovated to accommodate a new 100,000-square-foot Super Pick ‘n Save store, which is significantly larger than the company's typical 60,000- to 70,000-square-foot format. Plans have been announced for new stores in the Menomonee Falls, Mequon and West Bend markets in 2010.
With the changes that have occurred in the auto industry, the market is starting to see several former car dealership sites redeveloped. Pick ‘n Save entered the Mayfair Road corridor in Wauwatosa through the redevelopment of the former Renner Auto Dealership site. Mayfair Road has historically been a very difficult area in which to find a large site to accommodate a major retailer. Dave & Busters will open its first Wisconsin location in 2010 a few blocks north of the new Pick ‘n Save on another former auto dealership site. Both of these sites are located just south of Mayfair Mall.
As 2010 continues, experts expect to see the market begin a recovery phase. With the lack of new shopping center construction, retailers will look more to existing space including vacant retail boxes, to accommodate expansion requirements. As retailers deal with slower sales growth, existing space has also become a more economical option to pursue.
— Peter Glaser is a first vice president in the retail properties group in CB Richard Ellis' Milwaukee office.