CB Richard Ellis Analysis Shows Demand Increasing but Rent Growth Limited Until 2013
Boston, MA – November 24, 2010 – (RealEstateRama) –The U.S. retail real estate sector’s availability1 rate is expected to drop to 12.7% by the end of 2011, according to new analysis from CBRE Econometric Advisors (CBRE-EA). CBRE-EA forecasts that the ongoing pick-up in retail sales combined with limited supply will slowly decrease the national availability rate for neighborhood and community centers.
According to CBRE-EA’s forthcoming Annual Trends 2011, retail demand for space in 2011 will be positive for the first time since 2007. However, the increase is expected to be modest and high availability will keep pressure on rents until 2012 when retail center owners should finally have enough momentum to increase rents. However, historic rent growth figures (above 3%) will not return until 2013. As of 3Q 2010 retail availability was 13.0%.
“Availability rates across retail types are so high that a full rent recovery is five years away on average,? said Abigail Rosenbaum, Economist, CBRE-EA.
However, the study also notes that because of low supply, the first sign of demand is already beginning to reduce shopping center availability. During the downturn, supply growth for malls and neighborhood and community centers was between 0.5% and 1.5%. The amount of new space expected to come online over the next two years is even lower. Beyond the next two years, annual supply growth for neighborhood and community centers is only expected to amount to 1%—well below its level between 2000 and 2008, before the downturn began.
“This anticipated low rate of supply growth underscores that developers did not over speculate and were forward-looking, which will be a long-term, positive contributor to retail real estate’s recovery,? adds Ms. Rosenbaum.
The CBRE-EA analysis finds that while retail sales are coming back, the online sales market presents a continuing challenge to the need for expanding brick-and-mortar. Electronic shopping has shown substantial strength during this consumer recovery and year-over-year sales growth in this category has been positive since late 2009 with monthly increases recorded in the double-digits in 2010. The report anticipates that the share of electronic shopping sales compared to core retail sales will continue to increase in the coming years.
“Core retail sales growth has remained flat over the past two quarters while electronic shopping sales have seen double-digit growth, indicating that the consumer recovery has not stalled but rather has been a bit uneven,? notes Ms. Rosenbaum. ?Going forward, we expect that the recovery will continue with positive growth, though continuing to be uneven.?
According to Annual Trends 2011 retail real estate trends expected in 2011 include increasing consolidation of grocery stores, retailer migration to urban areas versus suburban areas, and a merging of formats such as lifestyle and outlet centers.
To speak with Ms. Rosenbaum or another CBRE-EA expert, please contact Robert McGrath (212.984.8267 or ).
1 Availability is space that is actively being marketed and available for tenant build-out within 12 months.
About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 29,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.