June 12, 2013—Retail demand driven by population growth has eaten away at the supply of available store space in the markets that have been slowest to recover from the downturn, says a new JLL study. It has been a long row to hoe, but vacancy rates are reaching a point that will give at least some landlords in every market the clout to demand slightly higher rents, according to JLL Retail, a division of professional services and investment management firm Jones Lang LaSalle that offers an array of retail services for investors and occupiers of real estate.
“We’re not quite there yet, but by the end of this year virtually all markets should see rent growth,” said Greg Maloney, president and CEO of JLL Retail. “Quite a few markets are already posting year-over-year growth, including Miami, Fort Lauderdale, Dallas, New York, Tampa, San Francisco, Hawaii, Los Angeles and Boston.”
Per JLL Retail’s spring retail forecast on the U.S. retail market, most of those rent-growth metros are enjoying robust local economies, many driven by energy or high-tech employment. Houston will soon join the list, although it has yet to achieve year-over-year rent growth.
The United States Retail Outlook – Q1 2013 forecast notes that increased consumer interest in value retail has already fueled sales and growing store counts for many retailers that specialize in do-it-yourself home or automotive repairs and low-cost consumer goods. The same fervor for value has also pushed outlet centers to the forefront of retail real estate performance, researchers found.
Per the forecast, strip and neighborhood shopping centers have the highest vacancy rate among property types at 10.4 percent, but are finally starting to see a turnaround, with vacancies dropping some 11 percent year-over-year for the first time since 2009. Power centers posted the largest vacancy decline, falling 60 basis points year-over-year to 5.9 percent.
