U.S. Retail Availability Rate Expected to Start to Decline in Early 2011

The U.S. retail real estate sector’s availability rate should begin to decline in the first half of 2011, according to analysis from CBRE Econometric Advisors (CBRE-EA). Availability is space that is actively being marketed and is available for tenant build-out within 12 months. CBRE-EA forecasts that the national availability rate for neighborhood and community centers will remain close to its 13.2 percent peak during the fourth quarter of 2010. CBRE-EA then expects absorption to swing into positive territory in 2011 following three years of negative absorption.

“Although the economic recovery remains tenuous, consumers are slowly opening their wallets again,” said CBRE-EA economist Abigail Marks. “The continued positive year-over-year growth in retail necessities sales points to improved consumer sentiment. However, we remain cautious about a solid consumer recovery due to the fact that we are comparing to some of the lowest points in retail sales history. A steady recovery is still a couple of months off,” she warned, “but stabilizing retail center availability rates are certainly a good sign.”

Marks noted that the markets that contributed most to the second quarter’s slight rise in overall availability to 13.1 percent included San Francisco, Newark (N.J.), Jacksonville, Cincinnati, and Trenton. At the same time, Austin, Boston, Baltimore, Denver, and New York recorded declines in availability rates compared to a year ago.

Though neighborhood and community centers and regional malls have continued to experience an uptick in availability, rates at power centers (unenclosed shopping centers with 250,000 sq. ft. to 750,000 sq. ft. of gross leasable area that usually contain three or more big box retailers and with a common parking area) have remained flat or declined during the last several quarters.