Texas is the hottest market for retail development, followed by shopping meccas of California and New York, says a top 10 list in “Economic Impacts of Commercial Real Estate, 2015 Edition,” published by the NAIOP Research Foundation.
The list rates the top states by construction value, based on data by Dodge Data & Analytics.
How does your state rank? Here’s the rundown and a snapshot of today’s activity:
- Texas – Retail in Houston hasn’t slowed in tandem with sinking oil prices, as a strong residential market – population in Houston is forecast to reach 11 million by 2045 – and a delayed retail construction cycle created pent-up demand, says CBRE’s Houston Retail Marketview. Today, 2.4 million square feet of retail is under construction, with 1 million anticipated to deliver in the first half of 2016.
- California – A tight job market and rising median incomes in San Francisco means retailers are expanding operations and opening new locations, says Marcus & Millichap. Their San Francisco Retail Research Report says that builders will complete just 53,800 square feet by year-end, surging demand for space and limited availability will push vacancy rates down 20 basis points, and the average asking rent will soar 12.4 percent to $33.75 per square foot.
- New York – The Real Estate Board of New York says Brooklyn is booming, with demand for ground floor retail space spurring its dynamic growth. In Manhattan, REBNY says ground floor asking rates for retail increased across the board, with notable jumps along Fifth Avenue between 42nd and 49th streets, where rents jumped 17 percent to $1,200 per square foot. The Meatpacking District corridor, along 14th Street between 9th and 10th avenues, also saw a healthy 10 percent increase with greater foot traffic from the High Line, Chelsea Market and the recent opening of the Whitney Museum of American Art.
- Florida – New retail development is picking up considerably from Orlando to Miami. Vacancy rates have hit an ultra-low 3.3 percent in Miami and 6.5 percent in Orlando, and major deliveries of new supply are coming, says JLL’s ICSC Retail Report. Retailers are starting to adapt their store formats for ever-popular town centers. Target and other retailers are shrinking their store formats and opening smaller, street-front locations that average around 20,000 square feet.
- Illinois – Restaurants and grocery stores are driving Chicago’s retail market, says CBRE, with Q3 showing positive activity with vacancy decreasing and rents climbing. Farm and sporting goods retailer Big R Stores occupied a 95,420 square foot space in McHenry in what was an underperforming Target store that closed last February.
- North Carolina – LoopNet says current Charlotte market trends data indicates an increase of 7.4 percent in the median asking price per square foot for retail, compared to the prior three months.
- Pennsylvania – Retailers are responding to Pittsburgh’s job growth in medicine, technology and energy industries, says Marcus & Millichap. Drugstores, grocery stores and discount retailers will push net absorption above 1 million square feet during 2015 for a third consecutive year. Vacancy will tighten further on strong net absorption this year, and quality space will become increasingly difficult to find as the pace of development slows.
- Ohio – Statewide, Power Centers – large (250,000 to 750,000 square feet) outdoor malls with a mix of big box and small retail – performed best with a positive net absorption of 18,703 feet and an overall vacancy rate of 7.7 percent, said a report by Columbus Realtors. Fifty-six leases totaling 251,020 square feet of retail space were leased in Q1.
- Georgia – JLL’s blog featured five signs of growth for Atlanta retail, highlighting 3.3 percent net absorption and dropping vacancy rates. New developments like Ponce City Market and the Braves Stadium are sparking new interest, and fresh-air grocers and big box outdoor stores are filling large spaces.
- Massachusetts – CBRE’s New England Market Outlook 2015 says that in most regional shipping areas, there is little vacancy and lots of demand, particularly from fast casual restaurants, grocery retailers, and big box tenants who are entering urban and upscale suburban areas with smaller footprints. In downtown Boston, retail rents are expected to exceed historical highs.
This is part of a series of informational posts on the NAIOP Research Foundation’s valuable report, “Economic Impacts of Commercial Real Estate, 2015 Edition.” Report data was provided by Dodge Data & Analytics; the report was written by Dr. Stephen S. Fuller and published by the NAIOP Research Foundation in June 2015. Download the full report and check back to Market Share for more analysis and excerpts.
Kathryn Hamilton is Vice President for Marketing and Communications at NAIOP Corporate.