Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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AVERAGE RETAIL PRICE PER SQUARE FOOT $50 $100 $150 $200 $- '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 2010 and 2011 was a combined 119.9 mil- lion sf — nearly triple the amount of new construction that came online during the same period. T at absorption has helped to reduce vacancy rates 50 basis points to 9.7 percent at year-end 2011 and vacancies are forecast to improve further to 9.2 percent by the end of 2012, according to Marcus & Millichap. T e retail picture is improving, but those similar conversion opportunities through- out the Southeast, notes Lindsey. Other empty big-box stores are being carved up to create multitenant space. For example in Jasper, Ala., a former 48,000-sf Food World store has been re-confi gured to house ten- ants that include a new Goody's, Hibbett Sports, and a thriſt store. Big boxes aren't the only empty spaces seeing creative re-use. "Many offi ce users are still using retail space for their general offi ce requirements — mainly due to the lack of available offi ce space, or the cost associated with fi nishing out new offi ces," adds Hopkins. Finish-out costs for offi ce buildings outweigh the cost for retail space in the Rio Grande Valley. Recession Rebound T e retail real estate sector was hard hit by the economic downturn, leaving hundreds of store closings and major bankruptcies in its wake. But current industry data is pointing to a market that has stabilized and is on a tentative cours e for recovery. The net absorption of retail space for gains are not even across the board. Markets vary widely depending on the specifi c econo- mies and dynamics within local markets. T ere continues to be a big divide between the A locations and older B and C properties. Top malls, luxury retail stores, and well-located grocery-anchored shopping centers, as well as wholesale clubs and off -price outlets have outperformed the general retail market. All 44 markets tracked in Marcus & Mil- lichap's National Retail Index are expected to post job growth, vacancy declines, and effective rent growth in 2012. However, certain geographic markets are bouncing back faster than others. San Francisco, San Jose, Calif., and Seattle ranked as the top three cities in the index. T ose top cities are bolstered by technology, a strong out- look for job and population gains, as well as tourism growth. At the bottom of the index are markets that are still struggling such as Jacksonville, Fla., Cleveland, and Detroit. "Retailer activity is not nearly at the YEAR-OVER-YEAR CHANGE IN RETAIL DEAL VOLUME (%) 300 100 00% 100% -10 % 1 0% '011 0 '02 '03 '0 '04 04 '05 '0 06 '07 '08 '09 '10 '11 pace that existed in 2006 and 2007, and in many ways, that is good," Lindsey says. T e aggressive expansion that was occur- ring during the peak of the market led to overbuilding and poor decision-making for many retailers and developers. T e retail activity that has emerged today is driven by a more-conservative, strategic approach. Retailers that are in expansion mode are highly focused on strategic growth that makes sense, which is why there is height- ened competition for top locations, he adds. "T e constant rule of location, location, location is valued even more." e Beth Mattson-Teig is a business writer based in Minneapolis. B 30 May | June | 2012 Commercial Investment Real Estate