If 2013 was considered a year of great health in New England retail real estate, we’ll likely need to craft stronger superlatives to describe 2014. Exciting new projects circling metro Boston, rising retailer demand, and a flood of capital chasing retail centers were consistent stories throughout 2013 and will only amplify in 2014. Surprisingly quiet during the prior decade, grocers are now driving much of the activity and creating the lion’s share of the retail headlines. With Whole Foods inhaling five Food-master stores, opening in Lynnfield and exploring any other site that comes available and with Wegmans committed in the Fenway, set to open in Burlington and Chestnut Hill and construction finally underway in Westwood, stories of supermarket growth were ubiquitous throughout 2013. The recent announcement of a new Star Market at North Station provides evidence that the new entity behind the Shaw’s chain may have quickly turned around the grocery operator’s downward spiral while the team at Roche Bros. surprised many in the industry with a small store in Medfield and an urban store to join the Millennium Tower project at Downtown Crossing. And Market Basket? Here’s to hoping that 2014 provides a clearer path for the powerhouse local …
Retail
The biggest news about Delaware retail is the expansion of Christiana Mall in Newark, Del., and an equally ambitious redevelopment of The Colonnade at Christiana, which is adjacent to the mall. Everyone in the Mid-Atlantic knows that Delaware does not have retail sales tax, thus the driver of Christiana’s expansion and the new projects is simply shopping demand and a geographically dense population base that draws from more than 20 million people in nearby states including Pennsylvania, Maryland, New Jersey and even New York. It’s one thing to save $4 when you spend $50 but the money gets real when you can save $80 on a $1,000 shopping tab. (This example is based on 8 percent sales tax that you’d pay in Philadelphia, which is about 30 minutes from Wilmington and has more than 4 million people in its MSA). Christiana’s expansion to 1.1 million square feet and the adjacent 915,000-square-foot The Colonnade is made possible by construction improvements to the I-95 and Route 1 interchange that will give drivers and shoppers better access to the existing and refurbished retail centers. The Colonnade was previously called the Christiana Fashion Center and it is being redeveloped by Frank Acierno and his …
Is suburban retail dead? The short answer is “of course not.” While the recession was especially hard on many suburbs, recent activity indicates that conditions have improved greatly. To better understand where we are, we need to examine where we have been. During the real estate boom leading up to 2007-08, retail developments were sprouting up everywhere. Many developers expanded farther and farther away from Chicago, while incurring an additional risk through overleverage and speculative projects. The economy started to crash about the same time that many real estate projects came to market. Developers and landlords quickly discovered that there was a lack of consumer demand necessary to drive retailers to lease space in the newest suburban centers. Many retailers were attracted to the suburbs due to high household income levels. However, population density was often overlooked. Even the most affluent suburbs experienced difficulties as too many retailers were chasing a limited amount of customers. Tale of Two Markets As the economy and overall real estate market started to recover, many retailers focused their energies on opening stores in Chicago’s core metro areas. Neighborhoods such as the West Loop, Streeterville, River North and Wicker Park were on fire. For many …
Nashville’s commercial real estate market accelerated in 2013 as both lease and sales activity reached pre-recessionary levels. A number of new development projects were announced to account for the tightening vacancy as Nashville’s economy progressed with lower unemployment than the U.S. average. It was a big year all around in 2013 as Nashville was nationally praised for its fast-growing suburbs, new businesses and careers and the much hyped up-and-coming culinary scene. Furthermore, Nashville made a solid case for its newest accolade as one of the ‘Top Markets to Watch’, by the Urban Land Institute. The city’s economy proved to be resilient and competitive with low unemployment and new businesses entering the market. November 2013 recorded 5.8 percent unemployment in Davidson County, 1.2 percent less than the national average. Low Vacancy Nashville retail is currently experiencing its lowest vacancy in years. At the end of 2013, the overall vacancy rate dropped to 7.8 percent, down from last year’s year-end vacancy rate of 8.3 percent. At the peak of the recession in 2010, Nashville recorded a retail vacancy rate of 10 percent. The recent improvement trend over the past two years is a result of the city’s low unemployment numbers and business-friendly …
Amarillo’s market rarely experiences periods of rapid growth or rapid deceleration. The market cycle sustains solid performance. This stability is due to a well-rounded economy that has benefitted from strong commodity prices and job growth. Like many markets around the country, the last couple years have been fairly flat, but we did see some areas of economic strength. Retail sales were much higher in 2013 compared to the lower levels of 2012. The leasing of previously empty big box space, significant centers changing hands and the construction of new projects point to a promising 2014. According to the Amarillo Economic Forecast for 2014 published by Amarillo National Bank, 2013 saw retail sales up 8 percent from the previous year. While such aspects as gains in the stock market have been a factor, a hail storm and the subsequent claims contributed to the increase as well. After a lull, national and regional tenants are making their way back to Amarillo. The leasing of two previously vacant big box spaces are indications of this reality: A 40,000-square-foot space at The Summit Shopping Center was leased by Sears Outlet, and a 33,000-square-foot vacancy at the Shops on Soncy, previously occupied by Circuit City, …
With an economy that’s normalizing with improving fundamentals, the Atlanta retail market is on the right track for sustained growth. Throughout 2013, Atlanta experienced a drop in vacancy rates along with the unemployment rate. In addition, retail sales rose nearly 3.5 percent over last year, provoking a rise in consumer confidence. The unemployment rate in Georgia fell from 9 percent in 2012 to 8.3 percent in 2013. This is still a full point below the national average. For 2014, the unemployment rate in Georgia is expected to reach well under 8 percent. During the last 12 months, Atlanta has experienced job growth of 2.5 percent. Retail payrolls are also expected to continue improving in 2014, pushing a near 3 percent gain as a result of both increasing existing stores sales as well as modest new store opening growth. Vacancy Rates, Rent Growth Since the beginning of the year, overall metro retail vacancy rates have dropped below 11 percent, which is a 50 basis point decrease over last year. Neighborhood and community retail centers still maintain the highest vacancy of just under 15 percent. Power centers have experienced a strong year-over-year recovery, averaging a 7.5 percent vacancy across the region. Tenant …
While economic uncertainty still abounds, the Los Angeles County retail market remains on the road to recovery. Several significant leases were signed during 2013, representing an expansion of both value retailers and luxury brands. Also contributing to positive market momentum was the lack of massive closures by big box retailers, such as Borders and Blockbuster, which were seen in previous years. Los Angeles also maintained its status as a primary market for investors. Cap rates trended in the low- to mid-5 percent range for core grocery/drugstore-anchored product and around the 6 percent range for power/promotional shopping centers. Investor demand was strong for high-profile and street-front retail in Hollywood and Beverly Hills, resulting in aggressive acquisition terms and cap rates falling into the four percent range and below. Los Angeles’ retail market overall experienced moderate leasing activity in 2013. CoStar reported a positive net absorption of 850,112 square feet in the third quarter. However, one submarket that saw significant activity—retail and otherwise—was Downtown LA with the FIGat7th open-air shopping center leading the renaissance. In addition to CityTarget, which opened here in 2012, FIGat7th recently signed a 27,000-square-foot lease with Spanish clothier Zara for a flagship location and a 32,000-square-foot lease with …
The Corpus Christi regional economy has been pushed into overdrive with the South Texas oil boom, which is resulting mainly from the Eagle Ford Shale play. The main area of Eagle Ford is located about 90 miles to the north, but the impact to the Corpus Christi economy is tremendous. The Port of Corpus Christi is at the center of this growth, with billions of dollars foreign and domestic being spent on projects throughout the Port and the area. China-based Tianjin Pipe Corporation (TPCO) is under construction on their $1.3 billion plan that will manufacture oil and gas pipes. Switzerland-based Trafigura AG is spending around $500 million to build crude oil and natural gas storage docks, and Cheniere Energy is planning a $10 billion plant that liquefies natural gas to sell it abroad. All of the above and several other projects are bringing workers and money into our economy. The refineries (Valero, Citgo, Lyondell and more) are operating at capacity with continual upgrade projects on their board. Of course, with the industrial growth, you can expect retail growth, and 2013 was indeed been a strong year for Corpus Christi. To list just a few of the national and regional tenants …
Strong recent job growth in Orange County has led to a major pickup in demand for quality retail space. The county’s low development profile has resulted in correspondingly high long-term occupancy levels. Thus, the recent recession with its negative absorption drove the local community neighborhood shopping center rate no higher than the 7 percent peak it reached in the first quarter of 2010. Descent has been the trend ever since. The rate has dropped to 5.5 percent by the end of the second quarter, down 40 basis points year-over-year amid modest additions to supply. The second quarter National Community neighborhood sector rates, by comparison, were notably higher at 10.5 percent. Orange County power centers’ vacancy rates are also lower than the national rate. There have been no power center projects completed in the county since 2007. The vacancy rate for power centers in Orange County is 3.9 percent, compared to 5.7 percent nationally. Orange County’s typically strong economy, positive population growth and high levels of affluence bode well for local retailing and the local retail real estate market. All of Orange County’s cores will see new retail development delivered in 2014 and beyond. Some of the new development will be …
The boom times of retail development in Metro Phoenix, which started in the mid-‘90s, have long been considered the “good ol’days.” The market peak of 2007, when 11.2 million square feet of new retail was delivered, was followed by development plummet. Between 2010 and 2012, the region averaged less than 1 million square feet per year. Phoenix’s retail recovery began in 2011, and has experienced a steadily increasing demand for existing space. Though few are singing “Happy Days are Here Again,” times are looking up. Retail and restaurant sales are increasing in Phoenix. This, combined with an availability of quality retail locations at attractive rents, has inspired national and regional retailers and restaurants to increasingly think about Phoenix when they’re looking to expand. Much of the demand for new retail and restaurant space has occurred in mature areas since the start of the recovery. As reports of new home sales increase in the outlying areas, however, some of the troubled retail centers that were built between 2006 and 2008 are experiencing an increase of activity. Retail vacancy rates dropped in the past nine months by almost 1 percent, settling at 10.5 percent for the third quarter of this year. The …