The growth of e-commerce has benefited small community and neighborhood strip centers, and affected large retail centers as well, reported Cassidy Turley, Washington, D.C.
"The good news for landlords [of the community and neighborhood strip-center segment] is that it should post the strongest gains heading forward," said Kevin Thorpe, chief economist with Cassidy Thrley. "That is because the traditional tenant mix--at least of community and neighborhood centers--is grocery or drug anchors, restaurants and retail services; in other words, all of the retail categories that have been least impacted by the onset of e-commerce."
But Thorpe delivered more news for owners and financers of this segment in the firm's Spring Retail Review. "The bad news, of course, is that this is the shopping-center type in the United States that currently has the highest vacancy level," the report stated. Community and neighborhood strip centers closed 2013 with a 10 percent vacancy rate.
Community and neighborhood strip centers make up most of the shopping-center market, accounting for 67 percent of the nearly 5.3 billion square feet of shopping-center space that Cassidy Turley tracks. "So it shouldn't come as a big surprise that the 24 million square feet of net absorption posted last year comes out to about 63 percent of all retail growth last year," Thorpe said.
Nearly 10 million square feet in new community and neighborhood strip centers delivered in 2013; Cassidy Turley expects similar deliveries for 2014. "The return of residential development in 2014 and beyond will mean that there will be new rooftops to follow and stronger construction numbers going forward," Thorpe said. "The good news is that unanchored strip construction will be virtually non-existent without strong leasing commitments in place. Slow improvement from the mom-and-pops will help somewhat for that sector, but declines in vacancy will be measured in basis points, not percentage points."
Looking at community neighborhood strip centers' biggest rival, power centers, Thorpe said these 250,000-plus-squarefoot centers rose...