LOS ANGELES-Although retail's availability rate has yet to decline as much as it predicted a year ago, CBRE Group nonetheless predicts that the sector will continue a slow, steady recovery in 2014, finishing out the year with availabilities in neighborhood and community shopping centers at 10.6%. A year ago, the firm predicted a decline to 10.9% by next year.
“Consumers remain cautious, as the economic recovery has not provided enough confidence for them to spend at an above-average pace,” says Abigail Rosenbaum, economist with CBRE Econometric Advisors. “This caution has kept retailers from rapidly expanding, and the demand recovery at retail centers remains muted.”
At the end of the third quarter, the retail availability rate stood at 12.3% down from 12.7% at the end of 2012 and off 600 basis points from a year ago. It's still well above the previous availability peak of 11.3% set in Q1 1992, according to CBRE, as well as the 11.7% rate that the firm forecast a year ago. The availability rate will continue improving into 2015, when CBRE projects that it will drop to 9.7%.
Helping the cause is limited development. CBRE projects that new construction will add just 8.1 million square feet to the national tally. The improving supply/demand picture will enable landlords to achieve rent growth averaging 2.5% in '14. That compares to less than 1% across the board this year, albeit with stronger growth in some individual markets.
“Availability rates will trend down in the coming quarters, but it will take some time before significant rent increases can be justified,” Rosenbaum says. San Francisco will lead the way with retail rent growth over the next years, according to CBRE. Other candidates for strong demand growth, and thus rent increases, include Denver, Nashville, Austin, Dallas and Charlotte.
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