The economic and housing woes and the virtual halt to residential development have been poor soil for the growth of retailing and retail real estate in the Inland Empire in recent years. The delayed economic turnaround is finally providing a more favorable environment; progress, however, has been slow. For the 50.8 million square feet of community-neighborhood shopping center space tracked by Reis, net absorption, following four miserable years, was modestly positive at 72,000 square feet through the first half of 2012. July and August added a combined 40,000 more. Vacancy ended the second quarter at 10.4%, down 20 basis points for the period, up 30 year-over-year, yet 40 points below the second-quarter national rate for this product category. By the end of August, the rate had lost another 10 points. Rent growth reflects the general lassitude; 2011 was the fourth year of loss for both the asking and effective averages. While the pace of decline has slowed, 2012 will see additional attrition. At $20.53 psf and $17.73 psf, meanwhile, second-quarter asking and effective mean rates were up 0.1% and 0.2% for the period but were down 0.9% and 0.8% year-to-date. The July–August period brought gains of 0.2% for both measures. Small losses, however, are projected for the year-end calculation.
Following the 6.6 million square feet of community-neighborhood shopping center space that completed construction over the four-year span 2005–2008, construction slowed rapidly. Only 61,000 square feet belonging to this space category delivered in 2011. Only 90,300 square feet within established submarkets will make up the 2012 total—all in the Shoppes at Calimesa neighborhood center, which delivered in August in Calimesa (Riverside County). Under way beyond current submarket boundaries (and thus not included in the net absorption calculation) is the 372,100-square-foot, Super Target–anchored High Desert Gateway community center in Hesperia. Reis expects completion in December. And the 66,000-square-foot Village at Mission Lakes neighborhood center in Desert Hot Springs is due online in May 2013.
Construction of large-format projects, meanwhile, is spotty. The 200,000-square-foot third phase of the Colonies Crossroads power center in Upland broke ground in February for an April 2013 finish. Other flashes of activity are seen here and there. In August, the City of Jurupa Valley voted to consider amending the city’s general plan to allow development of the 266,000-square-foot Pedley Shopping Center, the Press-Enterprise reported at the time. The 256,600-square-foot, Super Walmart–anchored Redlands Crossing has been proposed for that city. The town will consider the proposal in early October, the Press-Enterprise reported in late August. A 34,000-square-foot Nordstrom Rack will open in spring 2014 at One Eleven Towne Center in Palm Desert in space formerly occupied by Best Buy, PRNewswire reported in July. Reis puts second-quarter metro area power center vacancy at 6.9%, down 70 basis points for the quarter, up 10 year-over-year, and 60 points higher than the national second-quarter rate. At $29.49 psf, the mean asking rent for local non-anchor power center space was up 3.0% for the quarter but was down 2.1% since the second quarter of last year.
Reis expects net absorption of community-neighborhood sector space to exceed new supply over the remainder of the year. Year-end vacancy is forecast at 10.3%. Losses at or about 1.0% are projected for both average rents for the year all told. Current weakness aside, 14.6 million square feet of retail space of all types remains in the planning phase, 7.4 million of which belongs to power centers.