Gradual Increase in Rent a Positive Sign for Retail?
While major chains face closing up shop, increasing rent suggests there is more than meets the eye.
Despite the publicized closings of once popular stores like Sears, Toys R Us, and Payless Shoes, retail rental rates are slowly increasing, signaling a healthy retail sector. With low rates of unemployment and increasing wages, consumers are spending more money.
CRE research group Reis Inc. found that both the national average asking rent (at $21.39 per sq. ft.) and effective rent (at $18.73 per sq. ft.), which omits rental concessions, grew 1.7 percent in the second quarter of 2019 compared to the previous year. Regional mall rental rates jumped 0.2 percent.
While mall department stores and mid-range clothing stores have been struggling, stores like Dick’s Sporting Goods, Ross, and Whole Foods have been filling vacancies, increasing customer traffic, and raising rent.
Non-traditional tenants, such as gyms and trampoline parks are also breathing new life into retail spaces once dominated by large department stores.
While stories of dying malls often make headlines, most malls are doing well, and fresh retailers and restaurants continue to drive traffic.