Category Archives: retail property

Retail Vacancy Down, Retail Lease/Rental Rates Up!

Retail vacancy on a national basis dropped to an average of 6.7 percent from the fourth quarter of 2012 to the fourth quarter of 2013. That’s the lowest rate since 2008, according to CoStar Group, a Washington, D.C.-based research firm.

 

The most recent National Retailer Demand Monthly report from RBC Capital Markets stated that chain retailers feel enough optimism about consumer demand in 2014.

While the declines in retail vacancy from quarter to quarter have been slim, the dropping in vacancies since 2011 amounts to “pretty good improvement,”  “It’s enough that now we see rent growth. The market went from totally tenant-dominated to more balanced, and there’s better productivity in retail storefronts than in the past.” according to Ryan McCullough, a real estate economist with CoStar.

Closer to home, here in Payson Arizona, Costar tracks the current Retail vacancy rate in Payson, at 7.9% ,down from 9.3% in the 4th quarter of 2012. with positive net absorption for 2013 and the 1st qtr of 2014.

Payson Retail Vacancy rates Source: CoStar

Payson Retail Vacancy rates Source: CoStar

 

Retail lease/ rental rates while down significantly from the 2nd qtr of 2009 are higher than they were in the 4th qtr of 2012 as well.

 

Let me know how I can help you with your commercial real estate investment needs.









The views and opinions expressed in this commentary are those of Richard D Chapin, PLLC as of the date of publication and are subject to change, and do not necessarily reflect the views of Arizona Elite Commercial Properties and/or its affiliates.

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always seek legal and/or tax advice to obtain further information you deem necessary. I want you to be prepared.

 

Retail Property Lease Rates in Payson Remain Flat – For Now!

 But as the retail inventory in Payson is absorbed, how long will the retail lease rate remain low?

The asking rental lease rates for retail property in Payson remained flat in the last quarterPayson Arizona in the Rim Country of Arizona (Mogollon Rim) and increased less than 1 % from the a year ago at $13.51 on average. By comparison the average asking rental lease rates for retail property in the greater Phoenix-area dropped to $14.23 on average in the last quarter.

One has to wonder how long we can expect these rental rates to remain flat as more businesses are attracted to opening up locations or relocate a business to Payson, as Payson grows from a struggling tourist town of 15,000 to a diverse college town of 40,000.

The proposed town’s General Plan revision anticipates major new projects in the four growth areas that will mingle commercial and residential and provide a setting for new industries to start up or relocate to Payson, providing year-round jobs.

Much of the new development is planned along the highway, around the proposed campus and in the planned industrial and high-density residential areas around the Payson Airport.

As Payson grows from 15,000 to a 40,000 college town, there will be a significant increase in the demand for additional retail.

How long will the retail rental rate remain low as the inventory is absorbed?









This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

Phx-East Valley Retail Vacancy Rate Higher than Greater Phoenix-area Overall.

While the Phx-East Valley’s retail vacancy rate is higher than the Phoenix area overall, thegilbert arizona water tower Phx-East Valley is experiencing it’s share of growth in the retail market.

The vacancy rate went from 11.1% in the previous quarter to 10.8% in the second quarter in the Phoenix area overall. With asking rental rates dropping to $14.23 on average.

 

By comparison the vacancy rate in the Phx-East Valley area decreased to 12.8% from 13.4% the previous quarter, with asking rental rates dropping to $13.37 on average.

 

It should be noted that 2 of the 3 largest lease signings in 2013 in the Phoenix area retail market have been in the Phx-East Valley.

 

The total retail market in the Phoenix area saw a net absorption or 1,032,400 in the second quarter of 2013, 434,000 of which was in the Phx-East Valley.

 

The Phx-East Valley leads the entire Phoenix area in terms of retail under construction, with 709,390 GLA, 98.8% of which is preleased.

Let me know how I can help you with your retail property needs!









 

This information is for informational purpose and not intended to be investment advice, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

 

Phoenix-area Retailers Back in Expansion Mode

The Phoenix retail market experienced a slight improvement in market conditions in the gilbert arizona water towerfirst quarter 2013 according to CoStar.

 

According to a just-released retail report by CB Richard Ellis. “Instead of hearing about massive store closures this year, we could get more news about chains opening their doors”. The report found that more than 90% of the respondents of surveyed executives at just over 100 retail companies, most of them national, planned to boost store counts.

 

Also according to data from CoStar- the Phoenix-area Retail Vacancy Decreased to 11.0% from 11.2% in the previous quarter to 11.0% in the current quarter. Net absorption was positive 484,603 square feet, additionally Quoted retail rental rates decreased from fourth quarter 2012 levels, ending at $14.29 per square foot per year.

 

Do these chains seem a bit optimistic about the picture out there or is it truly a good time for them to take advantage of better pricing?

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This information is for informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared

 

Phoenix Metro Area Commercial Retail Market.

The number of retail properties for sale in the Phoenix metro area has been rising four months in a row, moving up 3.6% in that time. However, this is still down 5.4% from the past year.

While interest in retail properties listed on LoopNet has risen 5.7% over the past year, however since June 2012, interest on LoopNet for retail properties listed in the Phoenix Metro Area has fallen by 4.3%.

Currently, the median sale price per square foot for retail properties in the Phoenix metro area is decline, falling 4.1% in in the past seven-months. Previously, sale prices had risen 22.4% over a eight-month period that ended in March. Sale prices per square foot for retail properties decreased to $101.04, down from last quarter.

However, sale prices have increased 17.1% in the previous 12 months. The highest median sale price in the past three years was $193.96, in October 2009. By comparison, the current median sale price is down by 47.9%. The current price is,17.4% above the three-year-low of $86.09 from August 2011.

Days on market has increased from last year and now take 127 days before turning over. Days on market have fallen 27.2% compared with June 2010, when days on market was at its highest.

In terms of leasing, the number of retail spaces available (inventory) for lease in the metro area has fallen four months in a row, declining 2.3%. The number of available retail spaces for lease has reached a new three-year low in the Phoenix Metro Area this month. The number of retail spaces available for lease in the Phoenix Metro Area has fallen 9.5% over the past year.

Interest (demand) on LoopNet for retail properties listed for lease in the Phoenix Metro Area has fallen by 16.5% since June 2012, However over the past year, interest has risen 1.4%.

Square footage of Retail properties available for lease has declined for the tenth consecutive month marking a new three-year low in square footage available (inventory) of retail properties for lease in the month of September. And a 17.2% fall in the Phoenix metro area in the past year.

The days on market for retail properties for lease in the Phoenix Metro Area is down by 33.6% to 193 days,  from last year, and down 38.7% from its highest point in October 2009.

 

 

 

 

 

 

This information is for informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared

Positive Net Absorption for the Phoenix Office Market. What Does That Mean?

 

With so much information available now on the internet I often talk with clients that read something and they are not sure what it means. Like what impact does a positive absorption rate have on the market or why might a $22/sf Triple Net (NNN) lease be over my budget when a $24/sf Full service lease is within my budget? What is a Triple Net (NNN) lease anyway?
As a result I have decided to list here some, (not all) of the most commonly used terms in Commercial Real Estate:

  • Absorption Rate – the amount of units inventory of a commercial property type that become occupied during a specific time (usually a year).
  • Air Rights – The rights to use  the air space over a piece of property.
  • Americans with Disabilities Act (ADA) – A civil rights law that was passed to prohibit discrimination against persons with disabilities.
  • Anchor Tenant – A tenant of a shopping center, building or industrial development that has leased a large space sometimes called a “destination” tenant, usually these tenants lease at least 25,000 SF. An example in a neighborhood shopping center anchor tenant may be a grocery store.
  • Base Rent – The minimum rent due the landlord. Typically a fixed amount, Escalations are calculated from the annual base rate.
  • Building Code – Local, state or regional ordinances that specifies the method and materials to be used in constructing improvements.
  • Capitalization Rate (CAP Rate) – The rate of return investors are receiving on similar investments.
  • Class A – A classification used to describe commercial buildings that are considered as extremely desirable investment-grade properties and command the highest rents and sales prices compared to other commercial buildings in the same market. These buildings contain a modern mechanical system, and have above average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings.
  • Class B – A Classification used to describe commercial buildings that qualify as a more speculative investment, ans as such command lower rents or sale prices compared to class A commercial properties. These commercial buildings typically have average to good maintenance, management and tenants. They lack prestige and must depend chiefly on a lower price to attract tenants and investors.
  • Class C – A classification used to describe commercial buildings that generally qualify as no-frills, older commercial buildings that offer basicd space and command lower rents and sale prices compared to other commercial buildings in the same market. These commercial buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and or mechanical/electrical systems. These commercial buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors.
  • Common Area Maintenance (CAM) – An expense that can include a variety of property expenses. Typically expenses such as utilities, maintenance, parking lot cleaning, management fee and landscaping expense.
  • Community Shopping Center – A shopping center that has a trade area of usually between 5 miles up to 20 miles, depending on the other competition. These centers typically have a total square footage between 100,000 and 350,000 SF and will generally have 2-3 large anchored tenants. Common anchors are supermarkets and super drugstores and sometimes contain tenants such as apparel, home furnishings, toys, electronics or sporting goods.
  • Due Diligence – The process of investigating all the issues that effect the property such as zoning, soil tests, feasibility studies, tenant interests etc.
  • Estoppel Certificate – A ratification of the tenant’s lease by the tenant(s). Requested by the landlord when selling or refinancing the property to prove the validity of the lease.
  • Full Service Lease – A lease that usually provides full services such as janitorial and utilities, always confirm what expenses are included.
  • Gross Lease – A very broad term where the landlord paying the operating expenses read carefully to determine who is paying what expenses.
  • Letter of Intent ( LOI ) – Used in the early stages of negotiation, is a non-binding outline of the terms of the agreement to aid in the drafting of the agreement.
  • Load Factor – equals the rentable square footage/usable square footage minus 1.
  • Neighborhood Center – Provides for the sales of convenience goods( food, drugs etc..) and personal services for day-to-day living needs of the immediate neighborhood with a supermarket being the primary tenant.
  • Net Lease – Where some or all of the rent is “net” of expenses to the landlord. Carefully review.
  • Power Center – The center typically consists of several freestanding anchors and a minimal amount of small specialty tenants. A Power Center is dominated by several large anchors, including discount department stores, off-price stores, warehouse clubs etc.
  • Rentable square footage – the area the tenant is being charged rent on. In office buildings this often includes a load factor. A load factor is a markup over usable space to reflect the common areas of the building.
  • Strip Center – A strip center is an attached row of stores or service outlets managed as a coherent retail entity, with on-site parking usually in the front of the stores.
  • Triple Net Lease ( NNN) – A Type of lease where the tenant pays some of the expenses in addition to the rent. In many areas including the valley the NNN part refers to common area maintenance (CAM), real estate taxes and insurance. Always confirm.
  • Useable square footage – The actual physical space occupied by the tenant. Useable space increased by the load factor will equal the rentable square footage.

 

 

 

This information is for informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

There is more to Commercial Real Estate Investing than Location, Location, Location!

Yes location is important in commercial real estate, but and to the list use and approval, which are also important in commercial real estate for retail, office as well as industrial properties, but for different reasons.
With retail properties when considering location, demographics need to be looked at as well. If you were looking for a location to open a high end restaurant and the demographics showed few could afford to eat at your establishment, even if all other factors indicated it would be an ideal location for your intended use, keep looking.
Not only is the traffic count important in retail properties, but  research needs to be done as to construction on any roadways in the area that would disrupt traffic count for a time or a proposed bypass that change traffic counts permanently.
Traffic Flow is also important to retail tenants, a doughnut shop would be more interested in being on the “AM” side of the road than the “pm” side of the road, even at the same intersection.
So we have covered location and use, Zoning ordinances are the key that opens the door to use and use governs value, if a properties zoning is not approved for your desired use, you may need to go through the process of rezoning or you may be able to apply for a special use permit ( again approval required) if the zoning allows.
Also don’t assume that an allowed use for a zoning code in one city has the same allowed uses in a neighboring city ( even if it ‘s just across the street) many of the city codes, ordinances and regulations may sound the same but they are not.

 

 

 

This information is for informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.

Are Lease Rates for Retail Property Finally Starting to Go Up?

The asking lease rates for retail property in the Phoenix metro area, although leveling off in the last year, have been going down since mid 2008, the same can be said for the east valley with the exception of Gilbert, which has seen a slight (less than 2%) increase in asking rent for retail property in the past 3 months.
According to LoopNet, the number of available retail spaces has fallen by 6.6%  (inventory going down) over the last year in the Phoenix Metro Area. However demand on LoopNet for retail properties spiked in the Phoenix Metro Area market, rising 21.4% since December 2011.
Of course even commercial real estate is “local” several weeks ago I was searching for retail property for a client in the east valley to lease and had located a new building with up to 6 suites, about to be completed that was in the area my client was interested in.
I contacted the leasing agent to inquire as to the price (the property was not listed), and I was quoted a price that was 50% higher than anything that had actually been moving in that area in the previous 6 months. When I pointed this out and asked how firm the rate was the leasing agent said he was talking with 9 companies interested in space in the building and suggested I show my client the properties that were 50% less (buy the way this property currently has NO anchor). I mentioned this in a company meeting and a couple of over agents didn’t think they would ever lease it out at that lease, I disagreed but felt it would several months before all 6 spaces would be leased at that price.
Several weeks have passed, I found a better space ( with a major anchor) for less than that other building, oh and speaking of that other building, in less than 2 months all but 1 of the 6 suites are leased out.
So is this just a isolated area in the east valley, starved for more retail businesses and business owners that have found an area with a need that they are scrambling to fill? Or have we started to turn the corner and will we see retail lease rates and demand for retail property going up?
What do you think?

 

 

This information is for informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.