Posts tagged retail

Class A Office space in the CBD, especially hard hit during the recession, saw leasing activity increase in 2010 as space users took advantage of a tenants’ market to lock in low rates or upgrade from lower-quality space. While not yet a cause for celebration, it was enough to shave a half-point off the national average vacancy rate for downtown Class A office space, which declined from 13.8% in 2009 to 13.3% in 2010 after rising almost 35% the previous year. The national average rental rate for Class A space in the CBD slipped 14.1% from $37.11 in 2009 to $32.51 in 2010, after falling more than 24% the previous year.

The nation’s retail markets also appear to have stabilized. While some markets still struggle to fill big boxes vacated by national chains, others have seen new entries and local retailers upgrading to better locations. The national average vacancy rate for downtown/CBD retail space stood at 8.2% in 2010, down from 8.9% in 2009, while rents slipped from $39.90 in 2009 to $39.79 in 2010.

Industrial markets appear to be on the mend. While demand for weak warehousing space continues to be weighed down by weak consumer demand, the market has benefitted from a diminishing pipeline of new construction. Vacancy rates for bulk warehouse space stood at 10.7% in 2010, down from 10.9% in 2009. Rental rates slipped from $4.60 in 2009 to $4.55 in 2010.

Atlanta: The office market has begun to gradually rebound. Leasing activity has increased, but this activity is dominated by consolidation and downsizing, so the activity does not translate to lower vacancy. There has been a noticeable increase in the total industrial leasing and sales activity and a decrease in the amount of negative net absorption over the last several years. The retail market will continue to adjust itself with some vacant centers that were ill-conceived. Vacancy rates are high in many areas and rent adjustments downward continue to press landlords.

Boston: Downward velocity in the office market appears to be slowing. Vacancy rates increased to 14.1% and Class A rents decreased to $32/SF. The industrial market has been slowed by the recession, but has not seen a dramatic rise in vacancy. The retail market did not experience much change in market conditions from 2009 to 2010.

Chicago: The office vacancy rate, on the rise for two years, leveled off at 17% in the second half of 2010. New construction and redevelopment projects will remain sidelined until some of the more than 22 million SF of vacant space begins to be steadily absorbed and demand returns. Industrial vacancy rates peaked at 12% but improved in the second half of the year.

Dallas-Fort Worth: Office supply exceeds current demand, making it a tenants market with a vacancy rate of 20%. There is a marked increase in absorption and occupancy rates should increase significantly in 2011. Dallas industrial vacancy stands at 12.5%, as tenants maintain the upper hand. Speculative industrial starts could be seen by the end of 2011. The Fort Worth retail market can expect to see stabilized vacancy by the first quarter of 2011.

Los Angeles: Vacancy rates for new office space remain above 30%. Rental rates are still declining for Class A and Class B space.  Industrial vacancy rates have fallen to 8.6% and rental rates continue to soften across the board. Malls and community centers experienced a small increase in rents, and discount retailers and quick-serve restaurants are the most active in the market. Outlet malls also experienced strong tenant interest; these centers maintain very low vacancy rates and strong rental rates.

Miami: The CBD and several submarkets are experiencing 20% vacancy rates in office space, as most large tenants have relocated or renegotiated favorable terms in premier buildings. The industrial market is improving with large blocks absorbed, including a 342,000 SF transaction. Retail demand is rebounding as consumer spending increases. Despite store closings, supply is in balance because of barriers to entry.

Washington, DC: The nation’s capital is its strongest office commercial real estate market. It continues its track to recovery propelled by federal government activity in 2010. New York-based restaurant operators saw opportunity in the market and targeted high-traffic venues around Verizon Center in Chinatown.

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