MIAMI—Pent up demand. Those are the words used to describe retail markets in many metros. That said, it’s still difficult to get lease deals done. caught up with Jason Baker, principal at Baker Katz, to get his take on these and other retail leasing issues in part one of this two-part exclusive interview. Be sure to come back this afternoon to read part the second installment. What is the state of retail leasing and how has it changed over the past 12 months?

Baker: There is pent up demand for new retail space and the supply seems to be picking back up but not nearly as quickly as retailers or brokers would like to see. The state of retail leasing remains challenging and, based on the amount of new construction slated for the upcoming year, not much will change on that front in the near future. Is it easier or more difficult to get retail leases done? How creative do you have to get these days?

Baker: With so little new retail space being added and occupancy levels at all time highs, it has never been so difficult turning up excellent space for retailers that are looking to expand. This has been forcing brokers to get extremely creative with uncovering and closing on available quality space for their tenants.

Some are pressing landlords about space that’s set to roll over or asking which tenants may be willing to relocate. Tenants and retailers are also more open than ever before to accepting a sublease/assignment and paying “key money” to displace current tenants. When saying key money, I’m referring to making a deal with current tenants to get control of their lease. What trends are you seeing in retail leasing? 

Baker: For the most part, the hottest categories of retail continue to be grocery and restaurants. Within the Houston market, competition is especially prevalent for spaces within the range of 1,500 to 3,500 square feet.

A year ago it was a tenant market, but unquestionably, the shift has moved towards the landlord. As an example, in late 2012, I was quoted a rent of $30 per square foot by a Houston landlord. I just heard from them and was quoted $50 per square foot for the exact same space occupied by the same tenant.