Occupancy stood at 95%, up slightly from 94.47% at the end of 2001 and rents were flat. Rents dropped one cent to $1.38 at centers with 50,000 sf to 100,000 sf while rents rose between a penny and $1.63 at centers with more than 100,000 sf.
There is, however, some softness on rents, Eric DeJernett, a retail specialist with NAI/CIP, tells GlobeSt.com. While asking rents are about the same as six months ago, a good tenant can negotiate a lower rate. "There's more room than there has been in the past," he says. "There's no question about that."
He says national retailers such as Wal-Mart, Target, Kohl's, Walgreen's, Home Depot and Lowe's continue to develop in the Austin area. Home Depot, for example, is building a new store in Sunset Valley and will turn its existing store there into an Expo Design Center. Lowe's plans to develop a former industrial site in north Austin into a store.
Grocers such as H-E-B, Randall's and Albertsons also are expanding, adding stores to fill in gaps of the market coverage, DeJernett says. Albertsons earlier this month said it would spend more than $100 million in Austin in the next few years to build new stores and remodel existing ones.
Unlike office and industrial space developers, retail developers have not overbuilt even as demand for land for shopping center sites continues. However, it's got to be a prime location, DeJernett says. "If you've got a secondary site or a secondary retail location, the demand is pretty weak right now," he says. "But if you've got a good site or a good shopping center, the demand is still reasonably good."
Joyce Jane Weedman, an NAI/CIP land specialist, says developers and investors are looking to future road projects such as Texas 130 and Texas 45 for retail sites. "Developers believe that the market will be extremely strong three to four years out, and they are positioning themselves for that time frame," she said.
A retail drop-off might have been expected if you look at upcoming municipal budgets. Austin-area governments pared their 2002-2003 budgets because of shortfalls in sales tax revenue. The proposed City of Austin budget, presented to the city council Tuesday, has $177.9 million in sales tax revenue, about $10 million less than the current budget.
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