Retail Rents and Pad Sales Prices - May 11, 2009

Weekly Market Insight

The current recession, already the longest of the 11 post-war downturns, is also among the unkindest to consumers and, by extension, retail tenants and shopping center landlords. Consumer spending has been clipped by the evaporation of trillions of dollars in stock market and home equity wealth and by the loss of 5.7 million payroll jobs, of which 2.7 million were eliminated in the first four months of 2009. Average asking rental rates fell by 11 percent for in-line shop space and by almost 14 percent for upscale urban retail space in 2008. For a one-acre pad site near a mall, the average sales price slipped by 15 percent. Fortunately, the recession appears to be nearing a bottom, and a slow recovery may take root as early as the fourth quarter. Expect rental rates and pad site prices to fall further in 2009 but at a diminishing pace. Many observers have referred to this period as a “reset,” by which they seem to mean a recalibration of personal, corporate and civic values. Part of this recalibration is an increase in the personal saving rate, which adds to the evidence that retail sales and demand for retail space may be slow to mount a sustained recovery.

Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.
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Robert Bach
Senior Vice President, Chief Economist
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