Expanding retailers seeking top-notch space for new stores face a dearth of suitable space in the U.S. High development costs, equipment scarcity and a tight construction labor market have caused many retail tenants to renew leases. At the same time, growing chains are snapping up the spaces being vacated by shrinking chains, sometimes before they’re even vacated.
That helped drive the overall retail availability rate to a 17-year low of 5% for the third quarter, according to CBRE. The retail availability rate includes both existing vacancies and spaces that are currently occupied but also being marketed for lease. Average retail asking rent grew 2.5% year over year in the third quarter to $22.55 per square foot, according to CBRE’s latest figures. The 0.45% quarter-over-quarter growth was slower than in previous three quarters, due in part to a lack of prime space remaining on the market.
Leasing agents have been especially successful filling up power centers and other open-air properties. Among retail properties, power centers showed the biggest third-quarter year-over-year reduction in space available for lease, down by 1.3 percentage points. Neighborhood, community and strip center availability fell by 1.2 percentage points. The overall retail availability rate fell 90 basis points.
Developers delivered 6.3 million square feet of new retail space in the quarter, bringing the rolling 12-month total to a record-low 25.1 million square foot, according to CBRE. Completions of U.S. retail properties have remained low since 2010, which means the current supply is resistant to negative economic effects, according to the report.
Betting on Empty Banks
Investors are snapping up empty bank branches for redevelopment or re-leasing. Many bank branches are freestanding with drive-thrus. Madison Marquette’s Lemonade arm — which serves corporate owners by repositioning their vacant, standalone, single-tenant properties — acquired 144 BB&T and SunTrust branches that had closed after the banks merged to form Truist. “This transaction begins the process of transforming vacant properties back into useful assets for dozens of communities,” said Madison Marquette principal Josh Anderson, who oversees the program.
Truist has closed 822 branches related to the BB&T and SunTrust merger.
Empty banks represent a rare chance to grab space in prime locations where little new development is possible. Such spaces generally range from 900 to 30,000 square feet. Between September 2020 and September 2021, the banking industry closed 4,700 branches, according to S&P Capital IQ. The trend is slowing somewhat, as 3,619 branches closed from September 2021 to August 2022, but still has left a pool of empty properties.
Bank Branches That Have Found New Purposes
Brewery Opens in a Former Raleigh, North Carolina, Bank Branch
Buyer Will Use Baton Rouge, Louisiana, Chase as Office Space and Lease ATMs Back to Bank
Former Bank in Jacksonville, Florida, Becomes Self-Storage Complex
Macy’s Will Invest Millions in Minority-Owned Brands
Macy’s Inc. wants its merchandise to reflect the diversity of its customer base. To that end, it’s offering financial support to fund growth of small brands whose owners and operators are underrepresented in the retail industry. The department store chain plans to invest $30 million, for financing power of $200 million, over the next five years. Momentus Capital will oversee the fund, and money will be offered in the form of loans for working capital and commercial real estate, as well as growth equity capital. Macy’s executives want both the brands it stocks now and new ones to be involved.
First National Realty Partners Hires New Chief Investment Officer
Grocery-anchored real estate investment firm First National Realty Partners hired Michael Hazinski as chief investment officer. Jared Feldman has moved from that role to executive chair. Year to date, the company has closed on or has in contract more than $800 million of property investments, and it has set its sights on $1 billion in 2023. Hazinski previously served as senior vice president and director of investments for RPAI, which Kite has acquired. He also worked as an asset manager for closed-end funds invested in retail and multifamily. Feldman joined the firm in 2020 and now will focus on strategic initiatives, including creating an institutional equity program and developing educational content for investors.
Tom Porter Has Died
Atlanta-based architect J. Thomas Porter has died. ICSC honored Porter, an ICSC member for more than 40 years, with a Trustees’ Distinguished Service Award in 2012. He was only the second architect to receive the honor. Porter chaired the 1999 ICSC CenterBuild conference and served on the organization’s Certified Development, Design & Construction Professional designation committee, as a judge for several ICSC award programs and on the CenterBuild planning committee. Porter also won several ICSC Design & Development Awards through his work for architecture firm TVS. Noteworthy projects during his tenure there include King of Prussia mall outside Philadelphia and Phipps Plaza in Atlanta. Porter also designed retail and mixed-use projects in Asia, Europe and Latin America.
By Brannon Boswell
Executive Editor, Commerce + Communities Today