With shopping center vacancies, including those involving Philadelphia commercial properties, continuing to tighten as retailers with retail space in Philadelphia and other areas across the country slowly fill the remaining excess space, with both nationwide and Philadelphia commercial real estate listings are facing a dwindling number of high-quality locations.
The U.S. retail real estate vacancy rate, which includes Philadelphia retail space, drifted down another 10 basis points to 6.1% in the second quarter — the 12th consecutive quarter of vacancy decline. The retail vacancy rate – according to a report released by The CoStar Group and disseminated by Wolf Commercial Real Estate, one of the leading Philadelphia commercial real estate brokerage firm – has already dropped below pre-recession lows in major metros like Boston, New York, and Denver, and demand remains solid despite continued store closings by Sears, Kmart, The Gap, Office Depot, Staples, Macy’s and even grocer A&P.
As tight as the market feels with the vacancy rate of national and Philadelphia retail space just 10 basis points shy of its previous cyclical low in 2007, CoStar senior real estate economist Ryan McCullough argues it’s even tighter today with both national and Philadelphia commercial real estate listings than it was at the height of the boom eight years ago.
Today, only 60 million square feet of new retail space in Philadelphia and across the U.S. is under construction, compared with 150 million square feet that was under construction in 2007 when developers working with national and Philadelphia commercial properties were building or expanding power centers, malls and shopping centers in pursuit of population growth in the suburban fringes.
“You really have far fewer options if you’re a retail tenant in today’s market, and that’s really starting to wear on the demand numbers,” said McCullough, who prepared the report that was shared with Wolf Commercial Real Estate, a top Philadelphia commercial real estate brokerage firm. “What’s holding back a lot of tenants today is the scarcity of available supply in good locations with strong demographics.”
Tenants looking for retail space in Philadelphia and across the country absorbed about 32 million square feet at mid-year 2015, compared to 37 million square feet in first half of 2014. The declining absorption numbers in recent quarters are a logical consequence of the lack of available space for national and Philadelphia commercial properties, rather than declining tenant demand, McCullough said. Until more U.S. and Philadelphia retail space enters the market, demand is likely to be reflected in terms of higher rent growth rates, he added.
Despite the limited supply of available space, the market for Philadelphia commercial real estate listings as well as those from coast to coast is still experiencing a bit of opportunistic leasing and store openings by retailers like Wal-Mart, Dollar General and Dick’s Sporting Goods, which can be productive in somewhat less attractive locations. McCullough expects such activity will likely dominate retail expansion until new shopping center supply ramps up. This perspective was supported on the local level by Wolf Commercial Real Estate, a highly respected Philadelphia commercial real estate brokerage firm.
For more information about Philadelphia retail space or any Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (firstname.lastname@example.org) or Leor Hemo (email@example.com) at Wolf Commercial Real Estate, a premier Philadelphia commercial real estate broker that specializes in retail space in Philadelphia.
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