Vacancy in retail market goes up a bit
The county’s retail real estate market picked up a few more vacancies in the first quarter of this year compared to the third quarter of last year. CB Richard Ellis of Grand Rapids reported the vacancy rate rose slightly to 18.4 percent in March from 18.2 percent last September.
CBRE GR also reported that the highest percentage of empty space, 23.3 percent, was in the southeast retail sector. That sector also has the most square footage dedicated to retail — 4.5 million square feet — of the county’s four submarkets.
The county’s northwest sector had the smallest amount of empty storefronts; only 8.8 percent of its 1.8 million square feet was vacant. But the northwest sector is also the smallest of the four submarkets. There is nearly 11.2 million square feet of retail space in the county, and the market lost 28,257 square feet of occupied space over the last six months.
“Class A space vacancies in high-profile areas are declining in view of muted supply. However, landlords of vacated big-box sites and Class B/C space continue to face formidable challenges and are often forced to accept lower rents, shorter lease terms and other concessions to re-let vacancies and stabilize their tenant mix,” wrote Jill Langosch, CBRE GR vice president of research, in the firm’s report. “In some cases, property owners are forced to reinvent their retail centers to offset problems created by high vacancy rates and changing consumer tastes.”
Langosch used Lormax Stern as an example. The company owns CenterPointe Mall at 28th Street and the East Beltline. When the mall opened, it had 900,000 square feet of leaseable space. But Lormax Stern converted it into a retail “power center,” reduced the square footage to 550,000 and drew more than a half-dozen new tenants.
“The decision effectively breathed new life into a failing property, placing many existing tenants in new storefronts, expanding others and attracting a host of new tenants,” said Langosch.
Despite the high vacancy rates, Langosch said developers and tenants are optimistic about the market’s future. She named Kraft at 28th Shops, a 20,000-square-foot strip center in which Goodwill has leased 15,000 square feet, as an example.
Langosch also cited a project by CWD Real Estate Investment as further proof of the market’s optimism. The firm is building a 380,000-square-foot shopping center at 44th Street and Ivanrest Avenue SE, not far from RiverTown Mall in Grandville. The project’s key tenants are Cabela’s and Target. Cabela’s will take 88,000 square feet, while Target will occupy 135,000.
“Retailers are improving upon and expanding their online presence, targeting mobile, website and social media,” said Langosch. “Many are downsizing the footprint of brick-and-mortar stores and electing to remodel and improve existing locations, while limiting new development.”