(For more retail coverage, click GlobeSt.com/RETAIL.)
DENVER-The metro-area retail market in 2005 remained Denver's most stellar performer, although there was some slight softening. Retail sales, through September, were up 5.7%, according to the latest report by the Denver office of the Trammell Crow Co., but there are signs that activity is slowing.
"Consumers have kept the economy afloat over the past five years, but fatigue may be setting in," the report notes. "Sharply increased energy costs and rising interest rates are starting to take a toll. In addition, federal tax cuts and mortgage refinancing may have run their course, and consumer debt remains at unprecedented levels. Unless job growth escalates rapidly and income accelerates significantly, there will be increasing pressure on disposable income in 2006 and less capacity for spending on non-necessities."
Of course, that is true nationwide, not just in Denver. At a local level, the overall retail vacancy rate rose 10 basis points to 6.9% in the fourth quarter of 2005, Trammell Crow notes. That represents an increase of 50 basis points during the year. The lowest vacancies were posted in the south and southeast submarket, at 2.7% and 4.5%, respectively.
And rental rates increased at a much slower pace in 2005 than in 2004. On average, rates rose by 6.7% in 2004, but the weighted average of $14.99 per sf in 2005 was only 1.8% above the previous year's level, the report shows.
And while net absorption in the fourth quarter of 2005 was 1.79 million sf, accounting for the lion's share of the total absorption of 2.3 million sf last year, new centers drove the market. Tenants gobbled up space in new centers, which opened at 93% occupancy, accounting for 1.9 million sf of the absorption.
"Without this space, the remaining market would have posted negative net absorption of 72,342 sf," according to Trammell Crow. Indeed, all of these elements could lead to slightly declining rates in 2006, something that has not been seen for a while. "The market has passed its cyclical peak and rates may start to come down in 2006, especially in older centers," Trammell crow notes.
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