US retail space availability expected to tighten further next year
U.S. retail real estate will continue a slow, steady recovery in 2013, with the availability rate for neighborhood and community shopping centers declining to 11.7%, according to a new forecast from CBRE Group, Inc.
The market improvement will continue, as the retail availability rate slips to 10.9% in 2014.
In Q3 2012 the retail availability rate stood at 12.9% down from 13.1% at the end of 2011, but well above the previous availability peak of 11.3% set in Q1 1992.
“The consumer rebound has emboldened retailers to resume expansion plans, but they remain cautious. With limited retail development underway, we have had five consecutive quarters of healthy, positive absorption,” said Abigail Rosenbaum, Economist, CBRE Econometric Advisors. “Absorption should stay on a positive trend over the next few years, bolstered by continued economic recovery.”
CBRE projects that new construction will remain historically low next year, with total deliveries of 6.3 million sq. ft. nationally. The improving supply/demand picture will enable landlords to achieve modest rent increases in 2013, averaging 0.7%.
“Tenants continue to have the upper hand in negotiations. Rents, at their current trough, are 14% below their pre-recession high and won’t climb back to 2008 levels for another five years,” added Ms. Rosenbaum.
CBRE projects the growth in rents over the next two years will be led by in Denver, Austin, Nashville, Pittsburgh, New York and San Francisco driven by healthy demand growth.