New retail development slows in Sacramento.

by admin

The prominent trend in retail development thus far in 2009 has been its absence. Developers are either completing projects already underway or remodeling existing properties to maximize marketability. Only 15 new buildings were delivered in first quarter, totaling approximately 156,000 square feet (another 856,000 is slated for delivery later in the year).

The overall vacancy rate for retail space in the first quarter was 9.2 percent, with negative net absorption of nearly 850,000 square feet. Rental rates climbed to $21.06 per square foot per year (approximately $1.75 per monthly). That represents a 1.9 percent increase in rental rates in the current quarter, and a 6.13 percent decrease from first quarter 2008. Asking rents do not reflect market activity, which is being affected by tenants demanding and owners making major concessions in order to close transactions.

As for hot spots, everyone is watching Sacramento’s K Street redevelopment with a hopeful eye toward an emerging downtown entertainment district. The city has redevelopment funds to draw the attention of potential tenants and it could be successful, even if it means buying the tenants.

Newly delivered retail projects include 5065 Quinn Rd., a 37,914-square-foot general freestanding building occupied by Camping World; a 20,000-square-foot building at 6985 65th S developed by Stonehenge Property Group and now occupied by FAMSA, a Mexican retail chain selling home furnishings; and the largest project (also from Stonehenge Property Group) is at 6117 Florin Rd., a 213,316-square-foot building in Florin Towne Centre with 100 percent of its space pre-leased by Wal-Mart. In one other big move for 2009, upscale retailer William Glen took 35,000 square feet in The Collection at Town & Country Village.

— Fred Springer is a retail and investment specialist at TRI Commercial/CORFAC International
in Roseville, California.

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