Retail Rents Set To Rise In 2016

After years of slow growth brought on by the financial crisis, retail rents are recovering and are on the rise. That serves as good news for landlords and developers, but not great news for shop owners.

The upward trend was notable in 2015, when asking and effective rents grew by 2 percent and 2.2 percent, respectively, according to New York City-based research firm Reis Inc. As of Q1 2016, vacancy rates were hovering around 10 percent in 80 major U.S. markets. The question, according to retail analysts, is if this trend will be sustainable, especially as consumer-facing retail is becoming an increasingly digital endeavor.

“Retail is a nuanced story of the haves and the have nots,” said Ryan Severino, senior economist and director of research at Reis, according to National Real Estate Investor.

All in, however, there’s a 4 percent increase in rents in 2016, according to estimates from commercial real estate services firm CBRE. That is slower than the growth forecasted for hotels and industrial rents, though market volatility is a factor. San Francisco and Denver, for example, are both expected to post rent increases in excess of 10 percent.

“In San Francisco, it is hard to build, so you don’t have a lot of supply coming at the moment,” said Jeff Havsy, CBRE’s chief economist for Americas research/managing director of Econometrics Advisors. “Supply is also an issue in Denver. There is supply in the pipeline, but it is not online just yet.”