Shopping center vacancy in Q4 reached its lowest level dating back to 2007, a recent research highlight echoed by industry leaders, including Coreland’s Matt Hammond.
By Paul Bergeron | January 19, 2023 | As published by GlobeSt.com
Retail appears to be replacing multifamily when it comes to commercial real estate darlings.
Shopping center vacancy in Q4 reached its lowest level dating back to 2007 – just one among the sparkling highlights according to Cushman & Wakefield research.
Asking rents for shopping centers rose broadly nationwide by 0.8% quarter-over-quarter (QoQ) to an average of $22.99 per square foot (psf), while the vacancy rate declined 20 basis points (bps) to 5.7%.
Net absorption accelerated to a pace of 10.9 million square feet (msf), up from the mid-year lull where absorption averaged 9.4 msf over the second and third quarters, but down from 12.9 msf in Q4 2021.
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Opportunities that Didn’t Exist in the Past
Matt Hammond, Partner, Coreland Companies, tells GlobeSt.com that demand for second-generation retail in grocery store-anchored shopping centers is as strong as ever.
“Despite the closures, we had to navigate during the pandemic, retailers who were well capitalized adapted and positioned themselves for growth,” Hammond said. “During the past 24 months, we have seen tremendous opportunities for these retailers to lease spaces that weren’t available in the past.
“We’re also dealing with limited inventory today given that ground-up development of traditional shopping centers has declined due to rising land, construction, and capital costs.
Limited inventory drives vacancy rates down and rents up. The increased cost of construction has also been a key factor driving rents. Amortized into a deal is a landlord’s tenant improvement allowance, directly affected by the increases in construction.”
He said that physical, service retail is a necessity and that even many strictly digital brands eventually come to realize that a physical store is part of the shopping experience.
“We expect to see continued positive rent growth and low vacancy into the new year as newcomers remain eager to enter the market and existing retailers take advantage of key opportunities,” Hammond said.
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