I just finished putting together an Inland Empire 2017 Mid-Year Retail Sector Review and I thought I would share some of the highlights with our industry friends:
- IE unemployment is at 4.5% and you can feel it. The streets are busier, restaurants are busy, and it is becoming more challenging for everyone to hire the right person for a job.
- Housing is improving, but is nowhere near the levels of the mid 2000’s (this is very good news as the massive residential construction in the 2000’s is what got us into the Great Recession (“GR”).
- Records since the GR include:
- 2,200 single family homes were built in the 1st quarter of 2017 – the highest quarterly figure in 9 years
- Retail vacancy is at its lowest in almost a decade at 7.4%
- Net absorption (space leased less space vacated) exceeded 2,000,000 SF for the 12 months ending June 30, 2017 which is also a record amount post GR
- We are seeing grocery-anchored neighborhood shopping center construction for the first time in almost a decade. Amongst the projects are:
- 365 by Whole Foods Center being built in Upland
- Sprouts anchored centers under construction in Redlands and Lake Elsinore
- Stater Bros. anchored centers being developed in Rancho Cucamonga and Norco
- Smart & Final anchored project coming to Eastvale
- Lease rates for “best in class” retail continue to increase. Examples include record lease rates for a 24 Hour Fitness build to suit in Riverside, a Raising Canes deal in the Hospitality Lane area of San Bernardino and a Starbucks deal near Cal State University in San Bernardino. High quality shop rents are regularly exceeding $3/SF, NNN. Rents in B and C centers are increasing, but more modestly as corporate and franchise concepts are not nearly as attracted to these centers.
- Cap rates for single tenant investment properties with long term leases are continuing to command record low cap rates, while multi-tenant properties, especially those over $10M are definitely seeing cap rates increase by as much 50 – 100 basis points over the peak which was in the latter part of 2015.
As a firm specializing in the leasing and sale of retail properties in the Inland Empire, Progressive Real Estate Partners is pleased to also be experiencing a record year and we continue to maintain our ranking at the top of the charts for combined leasing and sale activity in the marketplace. If you want to talk “Retail” in the IE feel free to contact me at brad@progressiverep.com or 909.230.4500.