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Costar: Rising Occupancy Should Bring Growth In Retail Rents By Year-End May 13, 2011

Posted by Sean Tufts in Articles, Blogs, Research/Data, Retail News.
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Costar provided the rosiest outlook for retail rents we have seen in a very long time with their latest article, “Rising Occupancy Should Bring Growth In Retail Rents By Year-End”. The title alone provides a warm and fuzzy feeling for any owner or broker that deals in retail real estate. With rents falling an average of 35% from their peak this is very welcome news and provides some hope for a future recovery.

The recovery is obviously further along in specific areas, especially the Northeast, where “Retail sales have already returned to 2007 levels, with year-over-year growth in the 6% range for the last couple quarters — well above the historical range of 4.5% to 5%”. That may be true out East, but we have yet to feel the rebound. Below is a chart of taxable retail sales in the state of Washington. It does appears to have leveled off and based on the sales reports of the area’s major retailers (Costco, Nordstrom, etc) we expect the Q1 numbers to show further signs of improvement.

Year Total Taxable Units
2010 Annual $100,808,236,059 186,652
2009 Annual $100,879,383,855 185,254
2008 Annual $114,007,928,210 188,124
2007 Annual $118,957,667,480 190,003
2006 Annual $111,442,431,996 187,340
2005 Annual $102,154,111,438 185,348
2004 Annual $93,440,674,067 180,206
2003 Annual $87,664,282,658 174,629
2002 Annual $85,368,356,296 169,471
2001 Annual $84,913,896,471 165,756
2000 Annual $85,344,751,728 166,217

Activity on the leasing side has picked up since the beginning of the year, led primarily by national tenants that have realized that the window is likely closing on sweetheart deals at the bottom of the market. With basically zero in the construction pipeline we expect that it will not be long until the vacancy rate starts to inch down and we finally see some upward pressure on rental rates. We will still lag behind the East Coast and rent growth is unlikely to occur any time before next year but we absolutely appreciate the optimism!

Here is the full article for your weekend reading pleasure!

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