Though retail vacancies will stabilize in many markets, new retail construction has virtually disappeared, and lease rates have dropped 25% to 40% from their peak levels, Colliers International says in its 2010 Retail Trends & Opportunities report.
Dubbing 2010 the year in which ‘not as bad is the new good,’ Colliers says more retail space-users are making moves in the market today than a year ago, and the firm predicts these numbers will only increase going forward.
‘It appears that retailers will likely face a period of years during which wave after wave of troubled assets will gradually be returned to the marketplace,’ says Garrick Brown, Colliers International's U.S. retail research director and compiler of 2010 Retail Trends & Opportunities. ‘This will result in further pricing drops, but retail space values have already taken the lion's share of the declines that can be expected. Retail real estate is entering into what's best described as a 'not so fast recovery.'’
One of the bright spots in retail has been the emergence of pop-up or temporary retail space, Colliers says, explaining that the entry of trendier retailers into the pop-up game has bolstered landlords' willingness to do very short-term leases.
Urban storefront rents have dropped across the board, and consequently, many retailers previously priced out of such markets are uncovering opportunities, the firm adds in its report. Street-front rents in New York, for example, have dropped as much as 40%.
Colliers' report also notes that the collapse of big-box retailers such as Circuit City and Mervyn's has left these spaces empty, and that creative re-use of empty big-box spaces, including conversions into theaters, libraries and indoor go-kart facilities, are becoming more prevalent.
SOURCE: Colliers International