By the end of 2012, vacancies in the retail sector reached their lowest level since the first quarter of 2009. The vacancy rate ended the year at 9.9 percent, down 0.3 percentage points when compared to last quarter (Q3 2012). Compared to a year ago (Q4 2011) the rate is down an even greater 0.7 percentage points. The latest market activity suggests the retail sector is moving in a positive direction.
The retail sector witnessed three quarters of positive net absorption during 2012, with approximately 188,700 square feet of net move-ins in the fourth quarter. For the year, net absorption totaled positive 551,600 square feet.
With little retail space actively under construction in the Las Vegas Valley in recent quarters, the amount of new space entering the market has been limited. During 2012, a total of 201,000 square feet completed construction, with no completions taking place in the fourth quarter. The majority of the new space (190,000 square feet) completed in the first quarter, when the two 95,000-square-foot WinCo Foods opened to the public. Approximately 304,000 square feet remained under construction by the end of 2012, with 300,000 square feet sourced to the second phase of Tivoli Village at Queensridge. The remaining 4,000 square feet is comprised of the third-phase addition to the WinCo Foods Center. Planned space at the end of the year totaled 4.6 million square feet.
The retail sector continues to outperform the Las Vegas office and industrial sectors. During the fourth quarter, the latest activity in some of these larger spaces drove the vacancy rate down to below 10 percent for the first time in over three years. While the pace of recovery remains slow, it appears increased stability is likely to prevail in the anchored retail market.
The Reno/Sparks retail market showed additional weakness during the 4th quarter of 2012. During the quarter, the vacancy rate increased slightly, and the area had a net absorption of -39,552 square feet. With this negative net absorption, the market slipped in the wrong direction again. However, the vacancy rates did not exceed the 2nd quarter, which may have been the peak in the market.
The negative net absorption during the quarter can be attributed to four medium to large size tenants moving out and only two medium size tenants moving in. During the quarter, there were 36 businesses moving into shopping centers consisting of 122,048 square feet while during the same period, 40 businesses moved out consisting of 165,993 square feet. The number of new businesses moving in has been fewer than those moving out in two of the last four quarters.
Several new tenants opened during the quarter including 99 Cent Only Stores, TJ Maxx and Rue 21 and Red Hut Café. During the quarter, tenants that vacated their space included Scolari’s Warehouse Markets, Office Max, Ben Franklin Crafts and Sparks Justice Court.
The line shop vacancy rate has increased slightly from 22.43% last quarter to 23.07% this quarter. The anchor vacancy rate is holding virtually steady just below the record high with 15.41%. The overall vacancy rate is 18.52%, which is slightly off the record high from two quarters ago. The continuation of these high vacancy rates are causing financial pressures for some landlords even leading to receivership and foreclosure in some circumstances. However, on the flip side, it is creating opportunities for new businesses as landlords aggressively compete for the few tenants looking for space.
Southern Nevada analysis and statistics compiled by Applied Analysis, Northern Nevada analysis and statistics compiled by NAI Alliance Reno.
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