(For more retail coverage, click GlobeSt.com/RETAIL.)
LAS VEGAS-The retail sector here continued to perform through the fourth quarter, according to a report from locally based Applied Analysis. Net Absorption of 787,000 sf during the quarter outpaced 713,000 sf of new development, pushing vacancy down by another 20 basis points to 2.5%. Breaking it down by sector, power centers had the lowest vacancy rate at 1.5% while neighborhood centers had the highest vacancy rate at 3.6%.
For the entire year, net absorption was 1.8 million sf while new additions totaled 1.9 million sf. Despite the stability in demand and supply, rental rates continued to climb. The average asking rate at the end of the year was $2.04 per sf per month, up from $1.99 at the end of the third quarter and $1.69 one year ago. Two years ago, the average asking rate was $1.46.
Going into 2007, total inventory is 44.3 million sf, with 5.2 million sf under construction, which is equal to 11.8% of existing inventory. An additional 13.7 million sf in the development pipeline, according to the report.
"The retail real estate sector continues to press forward with a stable balance between new supply and market demand," says Applied Analysis principal Brian Gordon. "Land pricing premiums have held development activity in check over the past two years as property owners have sought out elevated residential valuations for traditional retail-oriented locations.
"This trend may soften as the housing market cools and raw land pricing expectations are reconsidered. It is worth noting that a handful of projects located on leased land have been able to side-step this pricing dilemma, allowing them to move forward; a few examples include the Arroyo and McCarran Marketplace."
Going forward, Gordon's partner Jeremy Aguero says the company will be keeping an eye on population growth and consumer spending patterns. "Slower conditions are present [in the housing industry], but the pace of the decline thus far appears slow and steady." He says. "That having been said, discretionary spending levels have materially dropped off the record highs posted two years ago. Recent data suggests a downturn in the rate of spending per capita, a condition that may impact retailers accustomed to record-setting sales volumes and hoping for a favorable holiday season. While we may be experiencing a correction in the near term, longer-run stability will certainly prevail."
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