In 2002, about 600,000 sf of retail space came on line, down from about one million sf in 2001, according to Scott Freid, executive vice president in charge of the Austin office of the Dallas-based Weitzman Group. Developers are stepping up the building pace this year and next and plan to add about two million sf, Freid says.
Not to worry, says Lance Morris, Weitzman's senior vice president and broker in charge in Austin. Most of the space coming on line is spoken for--or else it wouldn't be built, he tells GlobeSt.com. Retailers such as Target and Ross Dress for Less have committed to occupy space coming on line.
Retailers of all stripes, led by Wal-Mart and Target superstores, are filling the space. Those large retailers are bringing smaller stores in their wake. Grocers such as Albertsons and H-E-B also are adding Austin-area locations.
Vacancies last year came mostly from companies with problems that were company-wide in nature rather than local. Kmart, which is in bankruptcy, closed two stores in 2002 and is in the process of closing its third and last Austin store. Burlington Coat Factory snapped up the two that closed last year.
The Kmart vacancies and those of Weiner's, which also closed stores last year, and the onset of new retail centers, has helped provide tenants with a wider selection of locations, Freid says. "For the first time in years, tenants have options, which makes negotiations a little more equitable," he says. That has helped keep rental rates stable instead of rising, he says.
Rates for small tenants in class A in-line space in centers with good locations ranged from $26 per sf to $36 per sf per year. Class B rates ranged from $18 per sf to $24 per sf and class C rates ranged from $12 per sf up to $18 per sf. Rates this year should remain steady for in-line space in good locations. Projects in less convenient locations, however, might show decreases when compared to asking rates.
Cencor Realty Corp., Weitzman's affiliate, manages 2.5 million sf of retail space in Austin. Weitzman holds leasing assignments for five million sf in the region.
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