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NREI: “If You Blink, You Might Miss the Retail Turnaround” November 9, 2010

Posted by Sean Tufts in Articles, Development, Research/Data, Retail News.
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Unfortunately, the title of this article posted by the National Real Estate Investor is about the most optimistic statement in the article.  The retail sector appears to be stabilizing, if not improving, on a national level but I’m not sure calling it a “turnaround” you might miss if you blink exactly sums up reality.

It seems that the brightest spot is that construction of new product has slowed significantly.

On the supply side, developers have scaled back significantly. It feels like a lifetime ago, but at the end of 2007 Reis was projecting over 27 million sq. ft. of neighborhood and community center space scheduled to come on line in 2010…What actually happened? With absorption turning negative in the first quarter of 2008, developers began cancelling and postponing project deadlines. Less than 3 million sq. ft. have come on line through the end of the third quarter of 2010.”

On a local level, things appear to reflect the national trend.  According to Costar’s 3rd quarter only 262,272 square feet has been built in the last four quarters.  The historical average annual delivery of new retail space is approximately 2.6 million square feet, nearly ten times that amount.  Shopping center vacancy in the Puget Sound remains at 9.9% leaving roughly 5.5 million square feet sitting vacant in retail shopping centers.

Things are improving but any thought of a rapid turnaround is silly.

Despite the slowdown in completions over the last 24 months, retail is the one sector in commercial real estate that is relatively overbuilt. With GDP growth and aggregate demand expected to remain in the doldrums, we should expect retail fundamentals to meander, or even show signs of deterioration, through 2011.”

The full article is here.



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