Negative Net Absorption in 1Q retail
The Columbus retail market recorded 183,623 square feet of negative net absorption during the first quarter of 2017, according to the first quarter retail report from the Central Ohio Commercial Information Exchange (COCIE), which uses Xceligent as its vendor. Compared to the same quarter a year ago, absorption was down from 60,917 square feet of positive net absorption.
Director of Analytics for Xceligent Kim Begley said the negative net absorption during the first quarter is the result of stores closing during the quarter. Specifically, Carnival Foods vacated over 78,000 square feet at the Plaza Shopping Center, Burlington Coat Factory downsized to 35,700 square feet at 3575 W Dublin Granville Rd, and Giant Eagle at Thurber Village vacated 37,000 square feet.
“It’s not normal activity for this time of year,” Begley said. “There have been several articles written about the increased brick and mortar stores closings. Some have blamed Amazon with their online success as the culprit and others have thought that the cause for the ‘dead malls’ is a result of the newer malls being built. It could be a combination of both.
Columbus REALTORS® 2017 Secretary Andy Mills said the first quarter is often is slower for retail activity and will level out over the year.
The total vacancy rate has decreased from 5.8 percent at the close of 1Q2016 to 5.6 percent at the close of 1Q2017.
Begley said the vacancy rate has continued to fluctuate in the range of 5.3 percent to 5.8 percent over the past 5 quarters.
“New construction activity with the space being leased has helped to offset the recent store closings to manage a small fluctuation in the vacancy rate,” Begley said.
Mills commented that the Columbus market is active not only with national retail groups, but also with local restaurant and service-based entrepreneurs based in Columbus.
Weighted average asking rents in all specific uses increased from $10.79 per square foot at the close of the first quarter of 2016 compared to $11.89 per square foot at the end of the first quarter of 2017. The weighted average asking rent is the weighted average quoted as monthly triple net lease (NNN) rent per square foot.
Begley said the increase in weighted average asking rents can be attributed to the demand for new space by tenants that attract customers.
Announcements of recent store closings, such as Kmart, Sears, JCPenney, and Giant Eagle will have a negative impact on the regional retail market during 2017.
Begley said in terms of filling these spaces she potentially sees a possibility of the spaces being repurposed as call centers in the larger blocks of space or possibly training or education type of businesses.
“The smaller spaces and buildings like the Rue 21, Payless Shoes, etc. could possibly be filled with smaller local businesses or health clinics,” Begley said.
Mills said this is the million-dollar question in commercial real estate right now and there are lots of different opinions.
“The box spaces like Kmart have already seen adaptive reuses to other retailers, indoor self-storage, medical, and sports facilities to name a few,” Mills said. “The anchors in the malls are a completely different story. While some have been converted to office and medical offices, my opinion is that the mall properties will most likely have to be fully or partially scraped and redeveloped fully over time.”
Currently, the Columbus retail market has over 942,000 square feet under construction.
IKEA is the largest project with 354,000 square feet under-construction which is slated to open June 7, 2017. After IKEA, other large construction projects that are currently underway include the Dublin Bridge Park Project has over 80,000 square feet under construction currently, the Hamilton Quarter mixed use project which currently has 20,000 square feet of retail under construction, and the Two25 mixed use building which will have 350,000 square feet in the CBD has broken ground.
Mills said current trends in commercial real estate include craft beer, local food, and online retail groups having small retail presence.
During the first quarter of 2017 over 96,000 square feet was delivered to the market. Almost 49,000 square feet was delivered in the Dublin submarket in the Bridge Park Development project. Additionally, Value City Furniture delivered their new 37,5000 square foot store in the Polaris submarket.
Over 100 leases and over 300,000 square feet of retail space were leased in the tracked data set in the third quarter. The Columbus tracked data set consists of buildings considered to be competitive within the brokerage community.
Begley indicated that demand for inventory still looks stable with the under construction pipeline having almost 950,000 square feet under construction.
Mills agreed that the outlook for the remainder of 2017 is strong.
“Some of our largest pockets of inventory are along the High Street corridor and the Polaris area,” Mills said. “Both seem to have plenty of demand.”
1st Quarter 2017 Retail Overview
1st Quarter 2016 Retail Overview
4th Quarter 2016 Retail Overview
For vacancy and absorption purposes, COCIE tracks 1,469 existing regional, community, convenience/strip center, neighborhood, grocery anchored strip and Freestanding with a minimum of 10,000 SF in the Franklin, Delaware, Union, Licking, Fairfield, Pickaway and Madison counties with a total inventory of almost 76 million square feet.
The entire database includes 6,383 retail records totaling over 115 million square feet.
To view commercial properties for sale or lease in central Ohio, visit www.COCIE.org.
To view residential properties for sale, visit www.Realtor.com.
To view residential housing reports, visit www.ColumbusRealtors.com/stats.