Over the retail horizon
Amidst a landslide of retail bankruptcy filings and store closures by chain stores and local shops alike commercial real estate brokers who work the retail beat put an optimistic face on the situation.
Their take: Restructuring of retailers paves the road to stabilization next year.
An analysis by the Reno office of Colliers International suggests retailers that survive the bloodletting will emerge stronger after a re-structuring in which they’ve reduced inventories or merged with rivals. And they’ll be positioned to take over the market share abandoned by failed competitors once the economy rebounds.
But while home prices are expected to bottom out during the first half of next year and then stabilize, a retail recovery may not come until 2010 or 2011.
Meanwhile, discount stores are going great guns. From supermarkets to thrift shops to dollar stores, consumers have turned to bargain hunting.
And inside those discount vaults, shoppers have already scaled down from premium to store label foods, so that house brands now account for 60 percent of purchases. And that figure is still rising.
Retail vacancy rates in northern Nevada are on the rise as well, prompting landlords to offer rent concessions and increased improvement allowances.
Overall vacancy rates in retail spaces rose slightly in the second quarter, says a mid-year review by CB Richard Ellis.
Colliers reports that vacancy rate jumped to 9 percent at mid-year from 8 percent a year earlier.
And NAI Alliance estimates retail vacancy rates hover at 9.6 percent, but that jumps to 12 percent for in-line shops (those in the 2,000-square-foot range) at strip centers.
Meanwhile, retail lease rates have fallen.
Shop-space rents in prime storefront and end-cap locations declined from $3.50 to $3 per square foot by the second quarter of this year. And annual ground rents in new lifestyle centers fell from $175,000 to $155,000, according to the Colliers report.
Figures from CB Richard Ellis show rents for anchored shops run $1.85 to $3.00 a square foot while unanchored shops space drew $1.50 to $2.75 per square foot. Small box stores rent for $1.20 to $1.50 per square foot while medium boxes brought about a dollar per square foot.
But while today’s frugal consumer proves more elusive than in years past, some developers are pressing on with their projects.
Park Lane Promenade should break ground late this year, bridging the current anchors of Gottschalks and Century Theatres. Talks are in process with a third anchor, says the Colliers report.
And The Legends at Sparks Marina has 600,000 square feet under construction. All total, over 1 million square feet of retail is under construction in Reno and Sparks.
But while those mega projects lumber forward, retail development on the whole has slowed. While 740,000 square feet of retail space was completed in 2007, only 207,000 square feet has been completed to date this year.
Adding to the difficulty of building new centers: Costs such as permits, traffic, and water and sewer hookup fees have nearly doubled. An acre-foot of water rights sells for around $23,500.
Store closings this year include:
Linens N Things, Shoe Pavilion, On The Border, Krispy Kreme, K-Mart (in the northwest), Dream Dinners, Beyond Juice, Spoiled Rotten Pet Boutique, Starbucks (downtown), Blockbuster (Galena), Keva Juice and Nestle Cookies (Summit Sierra), Figaro’s Pizza, Denny’s (Damonte Ranch and Spanish Springs), and Mervyn’s announced they will close all of its stores in the area.
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