Retail real estate levels
For the retail real estate market, the good news is that the bad news isn’t all that bad. The vacancy rate at the end of the third quarter remained well above the national average, but it fell by a sliver of a point from the first quarter.
According to CB Richard Ellis of Grand Rapids, the vacancy rate at the end of September was 22.2 percent. It was 22.3 percent at the end of March.
Vacancy rates of three of the four retail real estate submarkets declined over the past six months, though; only the southeast sector added unoccupied space. Still, with 11.3 million square feet of retail space in the county, 2.5 million square feet was vacant.
The southeast submarket, which includes much of the retail along 28th, 36th and 44th streets, is the largest sector with 4.4 million square feet. And with a vacancy rate of 28.5 percent at the end of the third quarter, that district had roughly half of the market’s total vacant space with 1.26 million square feet without retail tenants.
The northwest submarket had the lowest vacancy rate at 12.5 percent. The northeast sector was at 18.5 percent. The southwest district, the county’s second largest with almost 2.7 million square feet of space, recorded a 22.4 percent vacancy rate.
Jill Langosch, CBRE/GR vice president of research for the commercial real estate firm, pointed out in the company’s MarketView report that she didn’t think the rate would change much in 2011.
“Michigan’s above-average unemployment and lingering economic downturn will slow our overall recovery, and for the remainder of the year and throughout 2011, we will likely see activity remain relatively flat, with minimal absorption,” she said.
Langosch added that strong tenants still remain in the driver’s seat when it comes time to negotiate lease rates.
“Additionally, landlords have had to be flexible due to bankruptcy filings, which require renegotiation of lease terms. The lengthy bankruptcy proceedings have slowed the landlords’ ability to regain control of their space, forcing them to accept what payment they can in the meantime.
“The bottom line? Landlords are becoming more and more willing to give concessions in order to get retailers to commit today, and open in empty spaces,” she said.
CBRE/GR reported there wasn’t any new retail construction the past six months due to a lack of available capital and consumer spending. The firm’s report indicated that the likelihood of any new starts over the next few years appears to be minimal.
The vacancy rate in strip centers across the country was 13.1 percent at the end of the third quarter, which was up from 12.4 percent at the end of the first quarter.