But consumer spending in the first quarter exceeded most analysts' expectations. This is true even though the potential for rising vacancies have lead to tighter lending requirements and underwriting.
But can this confidence support more construction? While a combination of stricter underwriting requirements, spiraling costs, dwindling prime sites and overbuilding fears have put the brakes on retail construction in most major metropolitan areas, Sacramento retail development has hit unprecedented levels and has approximately 2.5 million sf of new retail space on the market in 2000, with another 2.8 million sf expected to reach completion this year.
High levels of construction put upward pressure on vacancy last year, which increased from 7.1% to 8%. Rent growth averaged 2.4% last year but is forecast at just 1.8% in 2001, hindered by considerable new development and rising vacancy.
But vacancy fears may be alleviated by the area's popularity. "Companies are moving here because they want to improve their bottom line and improve on office rents and housing opportunities for employees," says Robert Hicks, first vice president and regional manager of Marcus & Millichap's Sacramento office. "With that comes a better standard of living and that puts an increased demand on retail."
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more inforrmation visit Asset & Logo Licensing.
