US Retail Property Market Trends, Q2 2009Despite deteriorating demand, completions of retail space increased from 2.9 million square feet in the first quarter of 2009 to 3 million square feet in the second quarter. However, second quarter completions were considerably lower compared to completions in the fourth quarter of 2008, when they reached 8.7 million square feet. With rising supply and shrinking demand the national vacancy rate in the US retail property market increased by 60 basis points, from 11.1% in the first quarter of 2009 to 11.7% in the second quarter. Note that the average retail vacancy rate in 2008 was 9.7%. With rising vacancy rates and negative net absorption retail rents continued to decline but at very slow pace as was the case in the previous quarter. In particular, according to the NAR/TWR data, retail rents in the US dropped 0.5% in the three moths to June 2009 compared to a 0.6% drop in the previous quarter. It should be noted that retail rents dropped 4.2% in the fourth quarter of 2008, but rent decline for the whole 2008 averaged 2%. In sum, we can detect deceleration of the rate of decline of demand for retail space, while retail rent declines were very small. The big question for retail property investors is what is going to happen in the US retail market in the months ahead.
|
