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
| Oct 31, 2013
CBRE's bold experiment: 200-person office with no assigned desks [slideshow]
In an effort to reduce rent costs, real estate brokerage firm CBRE created its first completely "untethered" office in Los Angeles, where assigned desks and offices are replaced with flexible workspaces.
| Oct 30, 2013
15 stellar historic preservation, adaptive reuse, and renovation projects
The winners of the 2013 Reconstruction Awards showcase the best work of distinguished Building Teams, encompassing historic preservation, adaptive reuse, and renovations and additions.
| Oct 30, 2013
11 hot BIM/VDC topics for 2013
If you like to geek out on building information modeling and virtual design and construction, you should enjoy this overview of the top BIM/VDC topics.
| Oct 29, 2013
Increased backlogs, margins lead to renewed optimism in global construction
After prolonged economic uncertainty, a majority of executives in the global engineering and construction sector have fresh confidence in the growth prospects for the industry, according to KPMG International's 2013 Global Construction Survey. A general increase in backlogs and margins is giving cause for optimism across the industry, with further growth anticipated.
| Oct 29, 2013
BIG opens subterranean Danish National Maritime Museum [slideshow]
BIG (Bjarke Ingels Group) has completed the Danish National Maritime Museum in Helsingør. By marrying the crucial historic elements with an innovative concept of galleries and way-finding, BIG’s renovation scheme reflects Denmark's historical and contemporary role as one of the world's leading maritime nations.
| Oct 28, 2013
Urban growth doesn’t have to destroy nature—it can work with it
Our collective desire to live in cities has never been stronger. According to the World Health Organization, 60% of the world’s population will live in a city by 2030. As urban populations swell, what people demand from their cities is evolving.
| Oct 28, 2013
Metal roofs are topping more urban dwellings
Given their durability and ease of use, metal roofs have been a common feature on rural houses for decades. Now they’re becoming an increasingly popular choice on urban dwellings as well.
| Oct 25, 2013
Hoffmann Architects announces launch of U.S. Capitol Dome restoration
The Architect of the Capitol will undertake comprehensive restoration of the 150-year-old cast iron Dome, which has not undergone a complete restoration since 1959-1960.
| Oct 23, 2013
AIA: Crowd-funding shows promise for financing real estate projects
The American Institute of Architects issued a statement on the SEC's recent 5-0 vote to propose rules aimed at letting startups tap large numbers of ordinary investors for small amounts of capital.
| Oct 23, 2013
Gehry, Foster join Battersea Power Station redevelopment
Norman Foster and Frank Gehry have been selected to design a retail section within the £8 billion redevelopment of Battersea Power Station in London.