Dive Brief:
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Overall retail rents in the U.S. could rise 4% this year, especially at class-A malls and urban centers, according to real estate firm CBRE cited by the National Real Estate Investor.
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Last year, asking rents grew 2% and effective rents rose 2.2%, according to Reis Inc., a New York City research firm.
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According to Reis, the average rental rate in U.S. cities is $20.09, with the vacancy rate at 10% in 80 metropolitan U.S. markets.
Dive Insight:
The National Real Estate Investor paints a picture of a slowly recovering retail real estate market, with pockets of high or low rents in the U.S. depending on variables like supply and demand and local economies. For example, cities like Denver and San Francisco are healthy markets for real estate owners, with growth for the year projected to be in the double digits. Both markets are seeing a influx of demand with a small amount of supply at the moment.
Rising rent is hardly good news for most retailers, which already contend with thin margins. But in some areas it is a sign of a healthy economy, which is key to sales.
Landlords are also getting the message that customer experience is key to retail success these days, and many are poised to help retailers in the effort to ensure that their locations attract shoppers. Successful landlords understand retailers' need to provide customers with a positive experience, even supplying space in malls for indoor or outdoor farmers markets to meet Americans’ increasing demand for locally grown and organic produce.
Of course, the needs vary by market, said Jeff Havsy, CBRE’s chief economist for Americas research and managing director of Econometrics Advisors, in an interview with National Real Estate Investor.
“There is a tremendous amount of spending power throughout the income distribution,” Havsy said. “All these people want to rush to the high end, but if that is not who lives around you, then it is a problem.”