Stronger Retail Demand, Rent Growth Seen Shifting to Second-Tier Markets

Much to absorb here in this recent article from Costar! The long-and-short of it is that retail rental rates are seen rising - in particular in secondary and tertiary markets, and in particular the Carolinas are looking very well positioned.

Almost all of the increased construction activity is focused on the big City - metro areas such as New York and Miami, and that means that the overhang of current inventory is steadily - and rapidly - declining in our neck of the woods.

On a first hand basis, we are seeing this with our recently completed Hope Valley Pointe investment - the phone is ringing off the hook for the vacancies we are marketing, and our leasing agents claim to be much busier than normal for this time of year.

From the article:

The national vacancy rate for retail real estate in the U.S. edged down to 5.9% in the fourth quarter of 2015 after logging a healthy 20 million square feet of net absorption and setting the stage for rent growth in a growing number of shopping districts in the coming year. Meanwhile only 12 million square feet of new retail space came online in the final quarter of 2015, culminating a moderated pace of shopping center construction last year that continues into 2016, according to data presented during the CoStar's 2015 State of the U.S. Retail Market Review and Forecast. ...

Meanwhile, other former high-growth retail markets that are not as supply constrained, such as Raleigh, Nashville, Houston and Charlotte, are seeing considerably less construction than the 2006-2008 cycle. ...

Year-over-year demand growth in 2015 was strongest in such markets as Dallas, Raleigh, Fort Lauderdale and Orlando, FL; and Austin, markets that have now shed their overhang of vacant store space from the last cycle. ...

Later recovering Southern markets like Atlanta, which are now experiencing solid population and demand growth, are positioned to reap rent growth that has remained elusive so far due to the glut of vacant space from the last cycle. "We’re going to see these markets start moving up on the rent growth spectrum this year," McCullough said, adding that markets like with Nashville, Austin and even Houston are already seeing growth in the high single digits.

Full Article Here:

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Prudent Growth Partners, LLC  (2020)    1829 E. Franklin St, Suite 800-F, Chapel Hill, NC 27514  (919) 590-4119