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Monday, November 2, 2009

Are Retail Lease Rates Finally Coming Down?

A lot of folks have been asking me lately “are retail lease rates coming down?”

Well the real answer to that is: Yes, No, and it depends.

According to a recent report from CoStar (www.CoStar.com the number 1 commercial real estate information company), the 2009 “Third Quarter National Retail Report show[s] that there has been at least a moderate meeting of the minds between retailers and landlords, which is reflected in the national average retail asking rental rate.” The report continues, “…the national average asking retail rental rate (triple-net basis) came in at $16.94 per square foot (psf) at the close of the third quarter, down nearly 4% compared to the rate a year earlier.” So the first answer is “Yes” by as determined by national average.

But not all markets follow the national average.

CoStar tracks 63 major retail markets throughout the country. Of those 63 markets, 11 showed an increase in cost per square foot at the end of the third quarter. But of those 11 markets that showed an increase, 10 were still under the national average of $16.94 per square foot. So the second answer to our original question would be “No” since we’re using the national average as our measurement base.

The one market that was the exception, higher than the national average and still saw an increase in cost per square foot? San Francisco, which weighed in at $31.98 per square foot. So the final answer to our question is “it depends.” It depends on where you do business if the cost for retail space has gone up or down.

The moral of the story? If you are a retail business owner, hire a professional who knows the trends in your area.

I’m Scott Capen for
Retail Tenant Source
Saving Retailers, Time, Money, and Aggravation.

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