First look at Retail
United States | Q4 2016
Houston topped the markets in net absorption for the
fourth quarter, with over 1.1 million square feet of
space. For all of 2016, Dallas had the greatest demand
for space with 7.2 million square feet absorbed, while
Houston took the second spot with over 5.5 million
square feet absorbed over the year.
Developers
pull reins
on supply
Developers remain cautious when adding new space.
Total retail deliveries in 2016 were 67.3 million square
feet – almost 10 percent below their 2015 level.
Construction levels are also somewhat muted from
year-ago numbers, with 68.4 million square feet
currently under construction – a 9.1 percent decline.
Demand
stays hot
in the
Sun Belt
The greatest compression in markets has been
concentrated in SunBelt markets such as San Diego,
Dallas, Los Angeles, Tampa and Atlanta (as well as
New York and Boston), all of which saw vacancy fall 50
or more basis points in the last year.
Chicago, Dallas and Houston account for one-third of major
market absorption this quarter.
Q4 2016 Absorption (major markets)
40%
-3.4%
-30.3%
-30.8%
-64.2%
General Retail
Shopping
Center
Mall
Power Center
Specialty
Center
Everything’s bigger in Texas, including development activity. Dallas
has over 5 million s.f. under construction.
DALLAS
5.2M s.f.
NEW YORK
3.7M s.f.
ATLANTA
3.5M s.f.
HOUSTON
3.1M s.f.
5.0%
+2.8%
VACANCY:
RENTS:
The US vacancy rate fell 20 basis
points in the third quarter, and
demand has comfortably exceeded
supply in the past four quarters,
pushing vacancy down 60 bps in the
last year.
Rents continue to gradually inch
up, with Los Angeles, San Diego
and Washington, D.C. seeing
the strongest growth over the
last year.
Malls
21.2 m.s.f. 68.4 m.s.f.
Power Center
NET ABSORPTION:
Shopping Center
2% 13%
-2.3%
General Retail
2%
43%
Y/Y chg in retail space delivered
Retail delivered
Texas
markets nab
top spot for
retail
absorption
Delivery of new retail space decreased in 2016, with specialty centers
showing the largest decline
Retail under construction
Limited supply additions will
keep fundamentals up, at least
for this year
Specialty Center
Net absorption for the quarter
totaled approximately 33.4 million
square feet – more than twice the
14.9 million square feet delivered
during the same time period.
CONSTRUCTION:
While construction is ramping up
from its lows in the recession,
development activity is still
relatively modest, which is pulling
up rents.
Source: CoStar, JLL
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