Retail Real Estate Activity Slowing Down

Retail vacancies in Salt Lake City stand at just under 8% in the latest report from Commerce CRG. That number is up more than 1% from the year-end report from 2007 and up .5% from the mid-year report from a year ago.

“What you have in retail development is natural cycles of build and absorb,” says Darrell Tate, retail specialist for Commerce GRG. “Having come off of record build periods during the last half of 2006 and first half of 2007, it’s a natural part of the cycle that development will slow down as developers look to fill that vacant space.”

The report expects new retail construction to decline as landlords look to fill the vacancies that are already there. Tate says the slowdown is cause for concern, but not panic. “We’ve seen retailers be very cautios about their expansion plans. We’re likewise seeing new projects being very cautios about getting started.” Just over 600,000 square feet of new space was added to the market in the most recent period.

With the high vacancy rate and slowdown in construction, Commerce CRG expects retail rent rates to go down as well. “If there’s a supply of retail space, and the demand is less, it becomes more of a tenant market than a landlord market,” says Tate. “What we’re seeing is people with existing retail centers are in a good position to maintain those centers as the new space is absorbed. Because construction will be less and less coming online, existing ceters will benefit from that as well.”

You can view the Commerce CRG Salt Lake County Mid-Year Retail Report here.