Economy Watch: Retail Market Makes Slow Progress in Q1

CBRE Group's latest U.S. retail report reveals improved demand for retail space in the first quarter of 2016, with better-positioned shopping centers achieving the highest performance.

By Dees Stribling, Contributing Editor

retailCBRE Group’s latest quarterly report released on Friday about the U.S. retail property market, offered a glimmer of better times for the long-beleaguered property type. According to the report, neighborhood, community and strip retail centers all continued their steady recovery in the first quarter of 2016, with nearly half of the 62 markets surveyed by the company reporting tighter availability.

The three retail center formats registered an average availability rate of 11.2 percent in the first quarter, down 10 basis points from the fourth quarter. That’s the latest in a steady decline from 11.4 percent a during Q1 2015, and from a peak of 13.3 percent in 2011.

Thirty of the 62 markets examined by CBRE posted declines in availability in Q1 2016. Among the markets enjoying quarter-over-quarter declines of 50 basis points or greater in their availability rates were Providence, R.I.; Trenton, N.J.; Raleigh, N.C.; and Bakersfield, Calif. By contrast, those suffering an increase in availability in the first quarter compared with the fourth were Pittsburgh, Indianapolis, Oakland, Calif. and Tulsa, Okla.

But those are just averages. CBRE expects the retail industry overall to remain bifurcated, with each market’s best-positioned shopping centers achieving the highest performance—and highest rents—as the rest have a tougher time boosting rents. That’s the case even as U.S. retail sales have been lackluster recently, with sales up an estimated 3.1 percent in February from a year ago but sliding slightly downward in this year’s first two months, according to the U.S. Department of Commerce.