The vacancy rate for retail space reached 22.1 percent at the end of the first quarter this year, up from 20.6 percent at the end of the third quarter in 2009 and from 12.9 percent at the end of the third quarter in 2008.
Those figures come from surveys of the retail real estate market conducted in Kent County by CB Richard Ellis of Grand Rapids.
“Despite the high vacancy rate, the forecast is not completely gloomy,” wrote Jill Langosch, CBRE/GR vice president of research, in the latest survey report. She continued:
“As the availability of retail space has risen, asking rental rates have declined. This has presented retailers with the opportunity to capitalize on reduced occupancy costs. Many have negotiated rent reductions or tenant improvements, while others have upgraded to superior locations.
“Furthermore, many entrepreneurs are looking to take advantage of the depressed rental rates as well, as they aggressively seek new locations. Unfortunately, their enthusiasm to start a new venture or expand may not be supported by local lenders. Constraints placed on financial institutions continue to make the lending environment difficult.”
The first quarter saw three major lease renewals, all in Rogers Plaza. The largest was MC Sports renewal of 14,770 square feet in the Wyoming shopping center. Loreal Salon signed a new lease for 5,000 square feet at 5312 Eastern Ave. SE. But overall, 128,000 square feet in the market became vacant over the six-month period between surveys.
Rental rates in the first quarter ranged from a low of $4 per square foot to a high of $18.
Langosch said the vacancy rates for local community centers, neighborhood centers and strip centers continue to go up. In the market’s four submarkets, she said the majority of retail centers that have lost large national tenants and local businesses due to bankruptcies and consolidations hadn’t regained any ground from those actions.
“It is important to note that Michigan gubernatorial candidates and business leaders continue to lobby for a more business-friendly tax structure, which could tremendously influence the local retail market,” Langosch added.
More retail space was vacated
The retail real estate market in Kent County lost 128,635 square feet of previously occupied space from the end of the third quarter 2009 through the completion of the first quarter 2010, which left the market with an overall vacancy rate of 22.1 percent. The northeast submarket was to only sector to have a positive net absorption of space over those six months, while the northwest submarket had the largest loss of occupied space during that time period.
Source: CB Richard Ellis/Grand Rapids, MarketView, June 2010