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Landlord concessions diminish while sales increase July 15, 2011

Posted by Erik Swanson in Articles, Research/Data, Retail News.

Although it seems rents will remain soft for some time, vacancy rates are stabilizing and landlords for the most part have stopped having to give rent concessions.  The caveat is that this will vary widely by location and even down to the asset level. Grocery anchored centers and core assets are more likely to maintain and potentially even grow rents (barring another blow to the shaky economy). Older centers without a strong anchor in tertiary markets have more of an uphill battle.

According to Costar,the nationwide vacancy rate for all retail stood at 7.1%. Malls fared better with vacancy at 5.8% (see chart above).

As a result of improving market conditions, average cap rates on retail acquisitions fell to 7.5% in April, according to RCA, 20 basis points below the 7.7% recorded in January. – NREI Online

With the capital markets showing more interest in the secondary markets, investors are now beginning to acquire assets in non-core areas. April sales of retail properties valued over $2.5 million increased by 39% over last year. As we indicated before, competition for good retail has continued to push cap rates down.  According to Real Capital Analytics, caps have dropped nationally as much as 20 basis points from the start of the year.



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