Vacancies in the retail sector of the U.S. fell to its lowest in four years in the wake of a rebounding economy and commercial property market. Average vacancy rates fell to 10.5 percent, the lowest in more than the past three years, according to The Wall Street Journal.
Vacancy rates fell 0.1 percent in the second quarter when compared to the rates of the first quarter of 2013. Average vacancy rates in malls were also down 0.6 percent on a year on year basis. On the whole, vacancy rates decreased 0.3 percent from a year ago.
The fall in vacancy rates is attributed to the improving commercial real estate market scenario of the country. According to a recent study conducted by Business Monitor International, the retail sector posted the strongest growth among the other segments in the commercial property sector.
The report says:
Retail activity is being buoyed by a shift in focus to second-tier shopping malls, as competition for top quality space has saturated that part of the market. International retailers are also pursuing expansion plans across the US, taking advantage of a recent move for some major retailers to close some of their stores.
However, retail landlords are still at a threat because of the rise in demand and popularity of online stores. Web space has almost killed demand for retail space. So how are the owners planning to stay on top of the game?
Apparently, they are dependent on tenants that sell services and goods that are not delivered online. Demand is high from restaurant owners, gym operators and clothing brands, reports the Journal.
Rents are also increasing as vacancy rates drop. On a quarter on quarter basis rents increased $0.6 per square feet. In a recent Jones Lang LaSalle report, it was estimated that retail rents will rise evenly in all parts of the country. The market will also see supply of new stores. Around 600 new retail outlets will open in the coming months of 2013. The rising population in Metropolitan areas will fuel the growth of retail sector too.
The report also highlights that San Francisco, New York City and Miami are some of the areas where retail growth will be strong. However, areas like Chicago, Atlanta and Washington D.C are "bottoming markets".
