The retail market continued to improve in the first half of 2013 thanks to increased leasing activity in community and neighborhood centers. Vacancy decreased from 8.3% at the end 2012 to 7.8%, a new five-year low. This was mainly due to the 434,000 square feet (sf) of positive absorption. Community Centers accounted for most of the absorption with more than 600,000 sf of positive absorption. Rental rates increased nearly $1.00 per square foot (psf) to an average of $27.73 psf. The Twin Cities market is now seeing rates that have not been achieved since 2008.
Part of this story is that big-box and junior-box spaces are now being filled by specialty grocers, like Trader Joes and Whole Foods, and fitness users, like LA Fitness and Planet Fitness. Other larger retailers that expanded into the market in first-half 2013 include Big Thrill Factory, Fleet Farm, Gander Mountain, HOM Furniture, HomeGoods, Savers and TJ Maxx. In addition, Walmart continues to be a major player as it prepares for a summer opening of its new store in Blaine and has broken ground on new supercenters in Andover, Cottage Grove and Roseville.
The Twin Cities enjoyed a very strong first half. While there is continued optimism due to the number of development projects that are currently under construction or slated to begin this summer, a slower second half of approximately 285,000 sf of positive absorption is expected. Much of this activity will be focused on the Regional Centers, which typically welcome new tenants in the late fall in anticipation of the holiday season.
The vacancy rate should hold and rental rates are expected to remain flat, though pricing will likely continue to be driven upward in the best assets.
In 2014, three new Walmart locations will open in Andover, Cottage Grove and Roseville, respectively. New housing projects will be completed in downtown Minneapolis, downtown St. Paul, downtown Wayzata and Uptown, which should attract new retail activity. And competition is expected to heat up among the outlet centers and the Mall of America as the new 409,000-sf outlet mall in Eagan developed by Paragon is slated to open in late 2014.
To read more, visit the July 2013 edition of Cushman & Wakefield/NorthMarq’s Compass report, now available online. Visit the web site: www.northmarqcompass.com