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BOSTON-Pent-up demand for retail space in Greater Boston is sending rents skyrocketing, creating a boom for landlords and investors but pricing smaller businesses out of the area’s thriving retail market, experts in the field say.

“It’s crazy,” Edward Highers, managing director of brokerage operations for GVA Thompson Doyle Hennessey & Stevens’ Boston office, tells GlobeSt.com. “It’s so crazy that retail REITs and long-term owners are entering into forward purchase agreements with developers if there is even a hope that a piece of property is going to be a shopping center.”

James M. Koury, a retail specialist with Spaulding & Slye in Boston, tells GlobeSt.com that demand for retail space in Greater Boston is so strong he has amassed a database of 1,200 developers and investors who want to buy in the region. “The demand for development here is huge,” he says, noting that the region’s strong barriers to entry, including high land values and restrictive zoning, has made it difficult to site and build retail projects, creating a tight market for retail businesses.

At last summer’s the International Conference of Shopping Center Idea Exchange in Boston, at least 10 retailers ranging from national chains like Kohls and convenience store giant 7-Eleven to little known firms such as grocery cooperative Wakefern and start-up children’s hair salon, Snip It, said they were looking for retail space in the area.

“Almost every retail developer in business is looking for active product,” Highers says. “There’s such a demand for retail goods and services but such a lack for retail zoned land that we’re never going to catch up.” That’s good news for investors who are reaping the rewards of fully occupied shopping centers but bad news for retailers, who are facing steep rent increases, he says.

On Boston’s trendy Newbury Street, rents are up to $130 per sf to $140 per sf, about $100 more per sf than they were 10 years ago, pricing some smaller boutiques out of the market. Along Washington Street in what was once Boston’s red light district, rents are in the $100 per sf to $130 per sf price range. Boston’s suburban market is less expensive but even there, retail rents have nearly doubled in the past five years, jumping from $15 per sf to $25 and $30 per sf, Highers notes.

With vacancy rates on retail space running at less than 5 %, there is little room for relocation. “Stores are either hanging onto their space or expanding into space next door and paying more money,” he says. “They don’t dare give up the space they already have.”

But there is some relief in site. Several major development projects in Westwood, Burlington and Boston will add several million sf to the retail mix when they come on line in the next few years. But don’t expect a vacancy sign to be up in any of them for long. Smart retailers, Highers and Koury say, are signing on as tenants long before the first shovel full of dirt is even turned.

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