Like digging a ditch with a spoon, 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. 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.
“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 Chief Executive Officer, Jones Lang LaSalle Retail Group. “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.”
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.
Maloney added, “It’s important to note that many of the markets that are experiencing robust growth are also the ones that had the steepest decline.”
National averages show rents still on the decline, falling a scant 0.2 percent from a year ago, according to Jones Lang LaSalle’s United States Spring Retail Forecast, published today. Yet rents overall were up 0.3 percent from the previous quarter, providing an early glimmer of a more widespread turnaround.
Outlets are in
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.
“Outlet center performance has been outstanding in recent years, with developers racing to bring more centers to market to meet growing demand,” said Kristin Mueller, Chief Operating Officer, Jones Lang LaSalle.
“The quality of retailers tenanting outlets is becoming more sophisticated and upscale as well,” Mueller said. “Success has enabled outlet landlords to be more picky, and they have more retailers to choose from because even some luxury brands and department stores are dipping their feet into the outlet concept.”
Other highlights from the Spring Retail Forecast:
- The slow improvement in retail real estate fundamentals reflects the glacial progress of the economic recovery; annualized gross domestic product growth averaged just 1.8 percent over the past four quarters, while the jobless rate stands at a disheartening 7.6 percent.
- Vacancy inched down 10 basis points to 6.7 percent in the first quarter, down 80 basis points from the cyclical peak in the first half of 2010 but well above its 10-year average.
- 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.
JLL Retail offers comprehensive retail services to meet the expanding needs of investors and occupiers of real estate. As the leading retail service provider, Jones Lang LaSalle manages a portfolio of 94 million square feet of retail centers within the United States and delivers service offerings to 80+ retailers – locally and nationally. For more information on JLL Retail, visit www.jllretail.com.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management. For further information, visit www.jll.com.
Related Stories
| Dec 28, 2014
7 fresh retail design strategies
Generic ‘boxes’ and indifferent service won’t cut it with today’s savvy shoppers. Retailers are seeking a technology-rich-but-handmade vibe, plus greater speed to market and adaptability.
| Dec 28, 2014
Workplace design trends: Make way for the Millennials
Driven by changing work styles, mobile technology, and the growing presence of Millennials, today’s workplaces are changing, mostly for the better. We examine the top office design trends.
| Dec 28, 2014
AIA: Commercial glass façade and door systems
When it comes to selecting fenestration systems—particularly glass facades and door systems—a number of factors come into play, requiring a thorough evaluation of a project’s individual requirements.
| Dec 28, 2014
10 essential habits of successful architects
Want to take the next step as a design processional? John Gresko, Senior Project Architect with HDR, explores the traits that many great architects possess.
| Dec 28, 2014
10 unglamorous things architects do
An acquaintance recently asked me about the kinds of things I did on a day-to-day basis at work, anticipating a response loaded with enviable activities. She was wrong, writes HDR's John Gresko.
| Dec 28, 2014
New trends in ceiling designs and materials [AIA course]
A broad array of new and improved ceiling products offers designers everything from superior acoustics and closed-loop, recycled content to eased integration with lighting systems, HVAC diffusers, fire sprinkler heads, and other overhead problems. This course describes how Building Teams are exploring ways to go beyond the treatment of ceilings as white, monolithic planes.
| Dec 27, 2014
7 ways to enhance workplace mobility
The open work environment has allowed owners to house more employees in smaller spaces, minimizing the required real estate and capital costs. But, what about all of their wireless devices?
| Dec 27, 2014
'Core-first' construction technique cuts costs, saves time on NYC high-rise project
When Plaza Construction first introduced the concept of "core first" in managing the construction of a major office building, the procedure of pouring concrete prior to erecting a steel frame had never been done in New York City.
| Dec 23, 2014
5 tech trends transforming BIM/VDC
From energy modeling on the fly to prefabrication of building systems, these advancements are potential game changers for AEC firms that are serious about building information modeling.
| Dec 22, 2014
What Building Teams can learn from home builders' travails
Commercial and residential construction can be as different as night and day. But as one who covered the housing industry for nearly a decade, I firmly believe AEC firms can learn some valuable lessons from the trials and tribulations that home builders experienced during the Great Recession, writes BD+C's John Caulfield.
