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RETAIL SNAPSHOT
UNITED STATES
A Cushman & Wakefield Research Publication
Q3 2013
ECONOMIC OVERVIEW
As the recovery hit the 4-year mark, the U.S. economy continued to improve throughout the third quarter despite the recent rise in interest rates and lingering uncertainty surrounding regulation and upcoming U.S. policy decisions. Gross Domestic Product (GDP) rose at an annualized rate of 2.0% in the third quarter, 50 basis points off the previous quarters pace, while slow but steady employment growth pushed the unemployment rate down to 7.3%, a drop of more than 70 basis points year-over-year. Employment growth, coupled with improving business and consumer confidence, had a positive impact on retail sales.
ECONOMIC INDICATORS
NATIONAL GDP Growth CPI Growth Consumer Spending Growth Retail Sales Growth Median Household Income Population Growth Unemployment
Source: Moodys Analytics
YTD NET ABSORPTION (SF) 25,032,717 4,454,583 4,060,765 17,851,236 1,662,956 53,062,257
80 60 40 20 0
CONSUMER CONFIDENCE
Cushman & Wakefield, Inc. 1290 Avenue of the Americas New York, NY 10019-6178 www.cushmanwakefield.com/knowledge
For more information, contact: Ronnie Davis, Managing Director, Research 404 853 5249 ronnie.davis@cushwake.com
The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.
With U.S. consumer confidence at its highest level since 2007 and U.S. retailers cautiously optimistic, retail real estate fundamentals steadily improved through third quarter. Overall retail vacancy dropped 10 basis points from the previous quarter to 6.8%, returning to 2008 levels. Overall rents have improved as well, increasing 1.2% year-to-date to an average of $15.17 per square foot (psf). Notably, average rents are on track to record their first full-year increase since 2008. Well-established urban high street corridors continued to lead in rental rate gains, yet their pace of rent growth has slowed since 2012. Nationally, new retail construction deliveries remained at historical lows. Some of the largest year-to-date deliveries included the 538,000-sf Fashion Outlets of Chicago and the 350,000-sf St. Louis Premium Outlets. As of third quarter, nearly 37.0 million square feet (msf) of retail space remained under construction, with the 1.5 msf Shops at Summerlin Centre in Las Vegas and the 880,000-sf Mall at University Town Center in Tampa/St. Petersburg among the largest and most notable projects.
Notable retail transactions during the third quarter included Hines purchases of the 750,800-sf Avenue Murfreesboro in Murfreesboro, TN for $163.0 million and the 317,000-sf Markets at Town Center in Jacksonville, FL for $135.0 million.
OUTLOOK
Both supply and demand fundamentals within the U.S. retail market are expected to continue to improve, albeit slowly. As economic conditions improve and uncertainty remains in check, business and consumer confidence will continue to strengthen and lead to increased momentum in retail spending. Supply-side characteristics should continue to improve, thanks in part to the restrained construction pipeline over the past 5-year period. High-end and discount-oriented retailers will continue to lead in retail gains, while mid-market retailers will continue to face the greatest challenges as the middle class remains cautious in its spending decisions. In the short term, U.S. retailers will continue to focus their expansion plans on major U.S markets with strong consumer demand. Established retail corridors in New York, Boston, Chicago, San Francisco and other top-tier urban markets will continue to perform well, while second-tier markets will finally begin to catch up. Overall, market conditions for the retail sector will reflect the moderate improvement expected throughout the U.S. economy.
TENANT Bass Pro Shops Hobby Lobby H&M BUYER Hines Humboldt Alexander & Baldwin Hines BUYER DDR QIC DEVELOPER AWE Talisman Simon Property Group/Woodmont Outlets DEVELOPER General Growth Properties Benderson Development Company Jamestown Properties
TRANSACTION DATE Q3 2013 Q3 2013 Q3 2013 PURCHASE PRICE / $PSF $163,000,000 / $217 N/A / N/A $141,500,000 / $343 $135,000,000 / $426 PURCHASE PRICE / $PSF $1,460,000,000 / $183 $917,400,000 / $261 COMPLETION DATE Q3 2013 Q3 2013 COMPLETION DATE Q3 2014 Q4 2014 Q1 2014
SQUARE FEET 105,062 77,822 62,923 SQUARE FEET 750,772 513,506 411,945 317,000 SQUARE FEET 8,404,740 7,844,460 SQUARE FEET 538,000 350,000 SQUARE FEET 1,500,000 880,000 300,000
Source: CoStar Group, Real Capital Analytics, Cushman & Wakefield Research
Cushman & Wakefield, Inc. 1290 Avenue of the Americas New York, NY 10019-6178 www.cushmanwakefield.com/knowledge
For more information, contact: Ronnie Davis, Managing Director, Research 404 853 5249 ronnie.davis@cushwake.com
The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.
INVENTORY (SF) 349,589,099 134,298,494 310,378,032 149,709,690 500,917,062 121,417,253 196,209,899 374,543,184 189,059,570 239,479,976 126,655,862 144,280,020 55,114,342 340,074,985 117,916,657 184,195,683 89,116,195 104,896,728 106,066,122 450,495,866 81,629,553 121,801,419 136,235,222 198,419,690 97,241,785 73,663,848 56,828,480 351,667,825 83,618,744 137,009,438 157,498,396 76,374,418 487,038,544 214,815,085 132,857,268 104,421,151 91,347,268 78,589,899 117,045,457 124,585,748 121,726,970 134,321,096 80,231,251 173,633,228 214,010,425 220,068,118 9,966,488,398
VACANCY (SF) 33,587,183 7,162,022 13,554,567 11,941,231 41,149,399 9,815,449 16,858,795 28,485,380 11,803,964 23,027,353 6,017,863 8,084,812 1,435,899 22,002,710 8,754,941 16,090,141 7,036,864 9,255,134 10,650,809 23,864,716 7,917,522 5,041,958 9,176,482 10,097,726 7,185,133 4,890,159 1,467,662 22,382,830 5,846,301 7,409,525 12,166,750 5,675,992 31,120,407 22,602,033 5,763,378 5,825,689 5,422,639 5,311,593 10,718,329 5,492,442 6,996,241 6,144,701 2,090,138 9,115,304 15,708,783 10,053,153 675,551,653
VACANCY RATE 9.6% 5.3% 4.4% 8.0% 8.2% 8.1% 8.6% 7.6% 6.2% 9.6% 4.8% 5.6% 2.6% 6.5% 7.4% 8.7% 7.9% 8.8% 10.0% 5.3% 9.7% 4.1% 6.7% 5.1% 7.4% 6.6% 2.6% 6.4% 7.0% 5.4% 7.7% 7.4% 6.4% 10.5% 4.3% 5.6% 5.9% 6.8% 9.2% 4.4% 5.7% 4.6% 2.6% 5.2% 7.3% 4.6% 6.8%
YTD NET ABSORPTION 1,998,284 562,199 1,458,389 805,586 3,348,118 894,662 487,316 3,411,436 2,082,227 1,623,813 812,248 685,553 266,610 2,263,543 182,873 987,780 398,274 899,968 737,929 1,554,244 364,115 213,728 850,694 531,267 800,549 779,871 (73,737) 1,974,027 409,262 632,807 714,089 401,196 619,150 2,873,337 1,093,786 252,948 746,291 340,308 1,063,332 251,572 1,003,016 611,676 262,508 630,394 34,595 1,205,363 53,062,257
YTD DELIVERIES (SF) 730,790 186,965 965,147 779,751 1,951,876 167,026 365,449 1,877,493 1,004,194 898,686 213,486 234,934 90,151 1,636,250 114,707 522,823 249,848 506,126 119,543 667,020 135,830 288,661 672,673 374,656 232,940 259,280 176,718 327,523 227,110 106,977 531,419 298,076 704,971 1,233,390 608,823 182,225 719,078 123,354 253,388 182,421 707,920 403,048 80,412 339,347 455,047 974,544 29,037,475
UNDER CONSTRUCTION (SF) AVERAGE ASKING RENT (US$/PSF/YR) 729,853 356,802 2,197,822 485,137 1,211,223 211,520 399,060 3,315,202 455,996 411,048 295,962 290,836 163,638 943,966 175,258 669,547 41,327 549,043 1,748,938 631,469 69,752 913,775 570,050 843,659 251,325 0 670,558 4,241,241 286,551 745,507 108,435 565,425 452,361 208,397 290,975 108,024 255,898 416,834 736,989 211,249 604,714 196,495 375,240 660,502 930,123 2,107,937 36,997,862 $12.88 $19.15 $17.56 $12.44 $15.84 $9.92 $10.42 $13.49 $14.89 $11.97 $20.67 $12.03 $30.20 $14.35 $12.13 $15.72 $12.68 $12.39 $15.25 $24.29 $9.70 $27.43 $10.66 $13.00 $13.83 $14.50 $89.91 $19.37 $10.58 $22.36 $14.44 $17.66 $13.76 $14.05 $12.20 $16.06 $14.60 $13.61 $15.70 $12.81 $13.91 $21.69 $30.38 $17.32 $13.68 $23.78 $15.17
*Select U.S. markets
Cushman & Wakefield, Inc. 1290 Avenue of the Americas New York, NY 10019-6178 www.cushmanwakefield.com/knowledge
For more information, contact: Ronnie Davis, Managing Director, Research 404 853 5249 ronnie.davis@cushwake.com
The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2012 Cushman & Wakefield, Inc. All rights reserved.