Vacancy is edging down slowly in the 33.6-million-square-foot Minneapolis community-neighborhood shopping center market, aided by limited new supply. The 45,000 square feet of new supply in the second quarter, the only completion expected this year, was met by 106,000 square feet of net absorption, and the vacancy rate fell another 20 basis points to 11.5%. That was down 60 basis points from a year earlier. The July rate was 11.4%. Both the average asking rent and the average effective rent edged up a penny during the second quarter, to $17.52 psf and $15.10 psf, respectively. The effective average added a penny in July.
Reis predicts the slow descent of community-neighborhood shopping center vacancy will continue, with the rate reaching 11.3% at year-end 2012, 11.2% at year-end 2013, and 10.0% at year-end 2016. Slowing that descent will be the resumption of new supply, forecast at 257,000 square feet in 2013 and more than 400,000 square feet each year thereafter. The current under construction total is about 500,000 square feet. Rents are forecast to rise by less than 1.0% for all of 2012, with the effective average up 2.0% in 2013. Subsequent effective rent gains are forecast in the vicinity of 3.0%.
As in many markets the power center segment is stronger, with a vacancy rate of just 4.5% that is down 100 basis points year-over-year. The average asking rent for power centers, at $21.64 psf, is up 0.1% from a year earlier. By far the largest project under construction is the 3-million-square-foot second phase of the Mall of America, but three power center projects with 1.2 million square feet of space are planned.
“Overall retail vacancy ended the first half of 2012 at 8.9%, a small increase from 8.4% at the end of 2011,” Cushman & Wakefield reported. “Construction has begun on some significant developments in Bloomington, Eagan, Downtown Minneapolis and Wayzata that should bring new energy to those areas.”