Jennifer Pattison, Pyramid Brokerage, a member of the Cushman & Wakefield Alliance
Christopher Giunta, Pyramid Brokerage, a member of the Cushman & Wakefield Alliance
The total retail inventory in the Rochester market amounts to 62.5 million square feet. Over the past year, the market has seen an overall decrease in the vacancy rate. The vacancy rate went from 8.0 percent in first quarter 2015 to 7.9 percent in the current quarter. Overall net absorption was positive 182,160 square feet.
The general retail sector of the market, which includes all freestanding retail buildings except those contained within a center, reported a vacancy of 4.3 percent at the end of the second quarter 2015. The general retail space in Rochester is 34.3 million square feet. Average rental rates are currently at $12.26 per square foot. The shopping center sector — which consists of 19 million square feet and comprises community centers, neighborhood centers and strip centers — posted 10.9 percent total vacancy and average asking rates of $10.28 in second quarter 2015. Power center space is currently reported to be nearly 4 million square feet with a vacancy rate of 7.5 percent, and a slight decrease in rental rates to $13.46 per square foot. Malls in the Rochester market consist of lifestyle centers, regional malls and super-regional malls. The vacancy rate was 21.2 percent at the end of the second quarter 2015, and the average rental rate is currently at $16 per square foot.
Market Activity
West Elm opened its first 10,000-square-foot store at the Culver Road Armory in the City of Rochester. Costco recently opened a 150,000-square-foot location in City Gate (Brighton/City border). The Henrietta market has added Altitude Trampoline Park, which occupies 48,613 square feet in South Town Plaza. Markson’s Furniture moved into 11,322 square feet and Tilted Kilt opened its first Rochester location, both on Jefferson Road. In addition, Dave & Buster’s will be entering into the Henrietta market in 2016, occupying 33,000 square feet of space next to Pole Position Raceway at Marketplace Mall. OfficeMax vacated 37,745 square feet in Cobblestone Court in Victor, while Benderson is under construction for a new 16,627-square-foot addition to Eastgate Square. The Webster market has also seen quite a bit of activity including a new LA Fitness and several restaurants: Wendy’s, Dairy Queen, Buffalo Wild Wings, and Chipotle. Just outside of Rochester, Tops Friendly Markets continues to expand and has added two new stores, a ground-up store in Walworth and a repositioned local grocer in Lyons.
Since the beginning of the third quarter 2005, the metro as a whole has recorded an annual average increase of 0.2 percent in asking rents. The asking rent growth rate of the metro’s four underlying submarkets over the past four quarters has been mixed, with cumulative change rates ranging from 3.4 percent (Brighton/Henrietta) to -0.9 percent (Irondequoit/Webster).
The Rochester retail market suggests that the dominant concentrations of speculative retail space are located in the Brighton/Henrietta submarket, amounting to 3.2 million square feet and 29.2 percent of the metropolitan inventory, followed by Greece/Gates, with a 27.5 percent share, and Southeast Monroe (21.7 percent).
Outlook
During 2016 and 2017, it is expected that developers will deliver a total of 161,000 square feet. Total employment growth during this time is projected to average 1.6 percent annually, and household formations are anticipated to average an increase of 0.9 percent per year.
Over this same period, the metro absorption rate is expected to average 125,000 square feet per year. The market vacancy rate is expected to finish 2016 at 11.9 percent and is projected to fall 0.4 percentage points to 11.5 percent by year-end of 2017. On an annual basis throughout 2016 and 2017, asking and effective rents are expected to climb by 1.9 percent and 1.8 percent, finishing out 2017 at $13.78 and $12.22.
— By Christopher Giunta, Director of Sales, and Jennifer Pattison, Manager, Marketing Support & Research, with Pyramid Brokerage, a member of the Cushman & Wakefield Alliance. This article originally appeared in the October 2015 issue of Northeast Real Estate Business magazine.