Economy Watch: Retail Continues Sluggish Growth

The U.S. retail sector continued to slowly improve in the first quarter of 2016, but not by much.

By Dees Stribling, Contributing Editor

retailThe U.S. retail sector remains commercial real estate’s the most sluggish property type, an unwanted distinction it’s had since the recession. That’s partly because robust building during the 2000s, which left a hangover of space, and partly because the U.S. recovery hasn’t meant robust wage gains. Thus the slow improvement for the property sector continued in early 2016, according to Reis Inc.‘s 1Q 2016 report on the sector.

Neighborhood and community center vacancy was unchanged during the first quarter at 10 percent even, according to Reis. Retail mall vacancy was also unchanged for the quarter, but at a lower level: 7.8 percent. For both subsectors, supply and demand were roughly equivalent during the first quarter.

Asking and effective rents for neighborhood and community shopping centers did manage some growth, up 0.5 percent and 0.6 percent, respectively, during the quarter. The growth rates for both types of rents have been more-or-less constant since Q4 2014. Over the last 12 months (as of the end of March), asking and effective rents grew by 2.1 percent and 2.2 percent, respectively, close to the year-over-year growth rates of the previous quarter.

New completions for neighborhood and community centers remain mired at low levels, the report added, with just about 1.6 million square feet coming online during the first quarter, the lowest quarterly figure since Q1 2014. Net absorption of 2.5 million square feet was slightly ahead of the figure from the fourth quarter, though demand for neighborhood and community center space remains limited.