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Retail Vacancy Rates Hit All-Time Lows

LOS ANGELES—The historically low vacancy rates in urban core markets are expected to boost retail development, and therefore absorption, which has lagged so far in the recovery.

By Kelsi Maree Borland | Updated on May 06, 2015

LOS ANGELES—The retail market experienced modest absorption growth in 1Q15, according to the retail quarter report from Lee & Associates. In fact, absorption was the lowest in the last eight quarters. However, vacancy rates in urban core markets are at an all-time low, illustrating the limited supply and increasing demand for retail product. These fundamentals could lead to retail development in these core markets, which we have yet to see in this sector out of the recovery.

“The vacancy rates are historically low, and I think they are strengthened by low vacancy rates in urban core markets,” Jeff Rinkov, CEO of Lee & Associates, tells GlobeSt.com. “We have seen retail construction kind of lag behind the demand. So, I believe that as construction picks up, we will start to see better absorption. Retail has kind of been the more methodical, slow growth sector on the rent side as well. We have seen what I would consider more moderate rent growth, but I expect to see improvement, especially as new class-A product is delivered.” Rinkov has seen developers with “strong resumes” begin to develop retail projects in core urban markets, but says that outside of those markets, development continues to lag.

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