Retail Cap Rates In May 2009The lowest retail cap rates, averaging 6.3%, were registered in the West. The region with the second lowest retail cap rate was the Northeast, where an average of 6.8% was reported by RCA. Retail capitalization rates in the Southwest averaged 7.0%. Retail property cap rates, at the national level, are unlikely to reverse their rising trend in the second half of 2009. NAR/TWR predict worsening of the US retail real estate market until at least the first quarter of 2010. Such developments will most likely maintain upward pressures on capitalization rates. In particular, NAR/TWR predict for the second half of 2009 declining retail space demand and negative absorption of about 18 million square feet. This, in combination with the addition of about 4.3 million square feet of new retail space, is expected to push the national retail vacancy rate from 12% in the second quarter of 2009 to 13.3% by the end of the year. With declining retail space demand and rising vacancy rates retail rents are predicted to continue their slow decline registering a drop of about 1% in the second half of 2009. In May 2009, there were significant variations in average retail property prices across US regions, according to data provided also by RCA. In particular, the highest retail property prices were recorded in the Northeast and the West, where they averaged $316 and $256 per square foot, respectively. The lowest retail space prices were recorded in the Midwest, where they averaged about $110 per square foot. Retail space prices in the Southwest and Southeast were about the same at $153 and $156 per square foot respectively.
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