US Retail Market Forecast May 2009
The retail rent declines will be triggered by a rapidly rising vacancy rate. In particular, the US retail vacancy rate is expected to increase in 2009 by 2.4 percentage points, from 9.7% to 12.1%, and by 3.7 percentage points in 2010, from 12.1% to 15.8%. Following the trends in 2008, the decrease in the national occupancy rate in 2009 and 2010 will be driven by negative absorption of retail space, as 38.6 million and 44.2 million square feet (a total of over 82 million square feet) are expected to be vacated, respectively, during these two years.
The NAR/TWR retail market forecast May 2009 certainly does not present a healthy picture for the US retail market in 2010, which, as indicated, will be marked by very high negative absorption, a 15% vacancy rate and declining rents. However, it should be noted that retail market behavior varies widely across local markets and, within this context, many local markets are likely to deviate significantly from average national performance. Furthermore, retail market behavior varies considerably across different retail format types (regional centers, community centers, neighborhood centers, power centers, etc.). For some format types, like neighborhood and community centers, retail property performance is highly localized. Thus, the national outlook presented by NAR/TWR can not be applied to any particular locality. Investors need to evaluate carefully the prospects of the market as they pertain to the particular locality and retail format type under consideration.
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