After some improvement earlier this year in Rochester’s 10.8-million-square-foot community-neighborhood shopping center market, vacancy has inched up again. The vacancy rate finished 2011 at 12.9%, fell to 12.5% in the first quarter, but rose to 12.8% in the second quarter. First Glance data from Reis show a third quarter rate of 13.0%. Power Center vacancy is reported at 8.6%, down 50 basis points year-over-year. One factor that has not helped this market has been negative net absorption. In the 10 years ending in 2011, net absorption totaled negative 46,000 square feet, while 319,000 square feet of community-neighborhood space was added. This is not a great amount of building, even for a small market like Rochester, but the demand was not there. So far in 2012, first quarter absorption was 50,000 square feet, followed by negative 35,000 in the second quarter, demonstrating again that this market has a limited demand for this type of retail space.
No community-neighborhood space completed construction within established Reis submarkets in 2011, and none is expected to in 2012. A 324,000-square-foot community center completed construction in July in Ontario County; and the largest project under construction is the 750,000-square-foot second phase of the Village Square power center in Monroe County, both outside of Reis’ submarket boundaries. Also under construction is the Eire Station neighborhood center, in West Henrietta, at 63,000 square feet. Even with no new construction, Reis forecasts net absorption to be negative 3,000 square feet for 2012. Reis predicts vacancy will end 2012 at 13.0%, with slight declines to follow.
Rents have not performed well here. Power center asking rent is reported at was $18.16 psf, down 0.3% year-over-year. Reis reports second quarter average asking and effective rents of $12.91 psf and $11.42 psf, unchanged and down 0.1% for the quarter, and down 0.5% and 0.6%, respectively, for the year. First Glance data show no change in the asking rent. Losses of 0.6% for both rental categories are forecast for 2012, after which gains of 2.0% for both rental categories are not forecast until 2015.