Store closings, new retail space drive vacancy upward

By Brian Wargo (contact), In Business reporter

Fri, Apr 17, 2009 (2 a.m.)

Retail vacancy reached a record level in the first quarter as many stores closed their doors and new space came on line, research firm Applied Analysis reported.

The firm said the vacancy rate reached 9.3 percent at the end of the first quarter, up from 5.6 percent a year ago. The retail space has increased by 1.7 million square feet over the past year to 51.3 million square feet, and 221,000 square feet of space emptied out in the first quarter, Applied Analysis Principal Brian Gordon said. More than 800,000 square feet of retail space was added in the first quarter, the firm reported. Another 2.5 million square feet had been under construction, but 1.7 million square feet of that was halted, it said.

The vacancy rate is well above the 10-year average of 3.3 percent and should remain high for a while, Gordon said.

The vacancy rate increased with the closure of Circuit City stores, Great Indoors in Boca Park and two Sportsman’s Warehouses, Gordon said. Several grocery stores closed as well.

The pace of increases in vacancy is accelerating and that’s putting pressure on landlords who have become susceptible to foreclosures, Gordon said.

“A downward cycle not unlike the residential sector could be in full bloom by year-end.”

Jake Joyce, a project manager at Applied Analysis, said it’s likely that older space will discount lease rates even more to spur demand.

The lowest vacancy rate was power centers or regional shopping center at 6.8 percent, while the highest vacancy rate was neighborhood shopping centers at 11.3 percent.

The average rent was $2.07 per square foot, which was a 5.9 percent decrease from the $2.20 reported during the same period a year ago.

Some of the projects completed during the first quarter were the Deer Springs Town Center at the southeast corner of Interstate 215 and North Fifth Street. The second phase of Lake Mead Crossing in Henderson opened with a Target as its anchor. Other openings included the second phase of Centennial Gateway in the northwest valley and portions of Blue Diamond Ranch Center.

Restrepo Consulting

The consulting firm reported a vacancy rate of 7.6 percent and 8.2 percent when sublease space is included. A year ago, the vacancy rate was 3.4 percent and 3.7 percent, respectively. The nonsublease vacancy rate was 5.8 percent at the end of 2008.

The firm reported 376,000 square feet of space vacated in the first quarter.

Principal John Restrepo said that until the job market improves for at least six months and the credit market stabilizes, the demand for retail space will remain soft and vacancies will rise.

The firm reported the northeast valley had the lowest vacancy rate at 5.7 percent, followed by the southwest valley at 5.9 percent.

Downtown Las Vegas had the highest vacancy rate at 12 percent. That was followed by west central, 11 percent; North Las Vegas, 8.4 percent; and Henderson, 8.2 percent.

Of the 2 million square feet under construction, 51 percent is in North Las Vegas, 20 percent in the northwest, 15 percent in the southwest and 14 percent in Henderson, Restrepo said.

CB Richard Ellis

The brokerage firm reported an even higher vacancy rate of 12.4 percent, more than double the year-ago rate of more than 5 percent.

The average lease rates have fallen 13 cents in the first quarter to $2.01 per square foot. The rates in the central east area fell the most, 28 cents, compared with the fourth quarter, the firm reported.

The central west area, Summerlin and North Las Vegas saw lease rate decreases of 20 cents.

The firm reported that 585,000 square feet of retail space were vacated in the quarter with Summerlin leading the way at 279,856 square feet with the closure of Linen n’ Things in addition to the Great Indoors.

The central west area had retailers vacate space at the Sahara Pavilion South, Lake Mead Market Plaza and Decatur Crossing, the firm reported.

Colliers International

The brokerage firm reported a vacancy rate of 7.5 percent, up from 5.8 percent at the end of 2008. It reported rents have fallen 8 cents since then to $1.96 per square foot.

The number of vacant units that are 10,000 square feet and larger increased dramatically and are now 42 percent of that space, the firm reported.

Retailers that have left that space include Rite-Aid, Pier 1, Smith’s, Wickes Furniture, Raley’s, Thomasville, Sav-on, Walgreens, Sports Authority, Lucky’s, Albertsons, Longs Drugs, Sportsman’s Warehouse and Office Max.