NAI NBS Second Quarter Retail Report: Vacancy Rises, But Some Bright Spots

Overview

Retail vacancy rose slightly to 7.1% during Second Quarter, with 240,321 sf of newly vacant space. Central City vacancy increased by a percentage point to 9.2%, with a large portion of this area’s negative 30,000 sf of absorption in the Close-In NW area. The suburban submarkets saw significant absorption, both positive and negative, in larger spaces. Vacancy in the 122nd/Gresham submarket rose nearly a percentage point to 8.4%, partly due to Joe’s Sports & Outdoors vacating 55,120 sf at Gresham Town Fair. But, the good news is that Grocery Outlet opened a 20,020 sf store at Sandy Marketplace on Highway 26 in this submarket in May.

Southwest retail vacancy rose nearly one percentage point to 7.5% with 88,722 sf newly vacant, due in large part to the more than 20,000 sf Zupan’s at Appleway Corner closing, and the departure of Linens-N-Things from Cascade Plaza Shopping Center. Retail vacancy in Vancouver also increased to 8.7%, with 91,000 sf newly available at Vancouver Plaza.

Noteworthy News

Some recent indicators, such as May consumer confidence that reached a 9-month high, are suggesting that the retail slump may end soon. But national and local retailers alike continue to struggle. Joe’s Sports & Outdoors liquidated in early April after filing for bankruptcy. The closure of stores like Joe’s and other big-box retailers is injecting an excess of large retail spaces into the market, and not many big-box retailers are looking to expand and fill them. So retail brokers are getting creative in trying to fill this vacant space, including marketing to non traditional tenants like thrift stores, service retailers or call centers, and trying to attract tenants who are surviving the recession better than others, like discount retailers.

Retail tenants aren’t the only ones feeling the recession. General Growth Properties, which operates Pioneer Place and Clackamas Town Center and some community shopping centers in the Portland metro area, filed for bankruptcy in April. GGP, the second largest mall owner in the country, is expected to keep all of its malls open, but may sell some properties.

Construction of new retail properties has slowed considerably in recent months, but some projects are still in the works. During Second Quarter 2008, just one year ago, Vancouver alone had nearly 300,000 sf under construction, while today it has only 16,080 sf at Lacamas Square. Portland’s Eastside retail submarket has the largest amount of retail currently under construction at 193,919 sf, largely due to the 140,625 sf Cascade Station Target, which is expected to deliver this November.