IRVINE-Backed by an improving economy, a recent surge in jobs and ten consecutive months of rising retail sales, a broad range of retailers are poised to fill up empty retail spaces over the next 12 to 18 months, according to Seattle-based Colliers International. Continuing the momentum from the recent International Council of Shopping Centers annual convention in Las Vegas, retailers are actively discussing new store openings--including construction of new stores in select markets, says Colliers. In particular, luxury retail, restaurants and value and discount retailers—including discount apparel and dollar stores—are the sectors most likely to expand.
Locally-based Richard Walter, president of Irvine, CA-based Faris Lee Investments, tells GlobeSt.com’s Natalie Dolce that the ICSC feedback from tenants was overall positive. “Being in the investment sales sector, Faris Lee is talking to more retailers today about either buying or leasing big box properties that we are selling,” he says. “Activity is much higher than earlier in the year.”
Walter points out that middle market tenants are thriving as well in the gateway cities, whereas the outlying areas continue flat to slight improvement in activity and rents. “Employment is the key to retail sales and retail sales drive rent structures,” he says. “The availability of finance for both real estate and the tenants themselves opens up new opportunities to expand and in some cases the opportunity to start new development projects. Dense locations, not necessarily high end, seem to be driving most positive sales.”
Colliers International also suggests that if a perfect storm materializes this year—declining gas prices, stabilizing home prices and improving employment figures—the retail market could generate as much as a 4.5% increase in consumer sales for the 2011 winter holiday season, a rate that would signal a considerable return to market health, according to a prepared statement.
Further, Colliers International contends that while the retail recovery will likely be uneven across sectors and regions, an increasing number of retail real estate owners, operators and investors are returning to a more fundamentals-based approach, again basing financial decisions and expansion plans on the strength of the retail operations' core underlying business.
“Retailers across the country came to ICSC excited to do business,” says Mark Keschl, national director of retail for Colliers International. “Some sectors are stronger than others and we probably won't see growth universally, but for the first time in several years retailers unveiled expansion plans through a combination of leasing space and new construction.”
National retail vacancy now stands at roughly 11%, essentially flat on a year-over- year basis. And despite some improving leasing activity over the past several months, total absorption has remained under 2 million square feet nationally, as several big box retailers have put more than 65 million square feet of space back on the market, says Colliers. “But with several improving sectors and densely populated urban markets rebounding more quickly, the retail market is loaded with potential,” according to a prepared statement.
“The national retail market is poised for a return to sound fundamentals and good credit retailers,” says Ross Moore, chief economist in the US for Colliers International. “There is polarization in the sector, with the high-end market on one end and discount retailers on the other. Overall, mid-range retailers have yet to see the impact of an improving economy, but there is more strength in the retail market than is being reported.”
Colliers International also notes that the strongest retail markets are predominantly in gateway cities—New York, Boston, Washington, DC and West Los Angeles—while Dallas and Houston also boast vibrant retail sectors.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
