Q2 2012 Philadelphia, Pennsylvania Retail Submarket Trends

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Q2 2012 Philadelphia, Pennsylvania Retail Submarket Trends

The City of Philadelphia, co-terminus with Philadelphia County, has an abundance of street retail, with prime occupancy on key Center City streets and extensive vacancy in some other areas. It has attempted to attract new shopping centers to slow the leakage of its residents’ retail spending to the suburbs. As an older metro area, Philadelphia has many older shopping centers in its suburbs. These have been pressured by new suburban and exurban centers in new formats, such as power centers and lifestyle centers.

Philadelphia County

  • The second quarter 2012 community-neighborhood shopping center vacancy rate in Philadelphia County is 7.9% for 5.8 million square feet of anchor space, and 9.7% for 5.2 million square feet of non-anchor space. The second quarter 2012 average asking rent is $14.77 psf for anchor space, second highest among eight submarkets, and $20.90 psf for non-anchor space.
  • The overall vacancy rate decreased 20 basis points to 8.8% during the second quarter, but is up 60 from a year earlier due in part to more than 200,000 square feet of new supply. The average asking rent increased 0.7% during the quarter, with the average effective rent up 0.8% to $18.77 psf. The year-over-year gains are 1.1% and 1.0%, respectively.
  • The 90,000-square-foot first retail phase of the mixed-use Xfinity Live completed construction in April. The 30,000-square-foot retail portion of the Drexel University West Philadelphia Campus mixed-use project is expected to complete construction in September 2013.
  • The 220,000-square-foot Bakers Square community center is expected to deliver in December. The Philadelphia Business Journal reported in July, the project got a $29.5 million construction loan in July. Shop Rite and Ross Dress for Less anchor the project. Reis predicts a total of 506,000 square feet of community-neighborhood center space will be added during the rest of the forecast period, the most of any submarket.
  • “The vacancy in Philadelphia County decreased slightly from 6.8% to 6.7% in the second quarter,” according to Colliers.
  • “In one of the more significant developments of the quarter,” according to Cushman & Wakefield, “Daffy’s announced that it will be closing 19 of its retail stores including its long-standing location at 1700 Chestnut Street. They are expected to close that location by the end of September.”

Pennsylvania Suburbs

  • Reis reports a second quarter Montgomery County vacancy rate of 12.2% for 6.3 million square feet of anchor space, second highest among the submarkets, and 10.8% for 5.0 million square feet of non-anchor space. The second quarter average asking rent for anchor space is $17.13 psf, highest among the submarkets, while for non-anchor space the average asking rent is $21.47 psf.
  • The overall vacancy rate fell 10 basis points to 11.6%, and is down 50 basis points from a year earlier. The average asking rent rose 0.6% with the average effective rent up 0.5% to $18.96 psf. The year-over-year gains are 0.8% and 0.9%, respectively.
  • This submarket is home to extensive large scale retail development. The 768,000-square-foot Providence Town Center lifestyle center in Collegeville remains under construction with an uncertain completion date, although much of the space is already open. The 425,000-square-foot first phase of the Village at Valley Forge regional center in King of Prussia is underway with a September 2013 expected completion date.
  • “The new Wegmans is the first phase of the Village at Valley Forge project,” according to Colliers. “Simon Property Group is demolishing the former Boscov’s store at Montgomery Mall for a new Wegmans” and “plans an October opening of the 100,000-square-foot redevelopment of the former Strawbridge’s at the King of Prussia Mall.” “Acme opened a new store in Bryn Mawr, replacing a smaller store in the same location,” according to this source.
  • In Delaware County, the 2.3 million square feet of anchor space has a second quarter vacancy rate of 4.6%, lowest among the submarkets, and an average asking rent of $13.30 psf, according to Reis. For the 2.4 million square feet of non-anchor space, the second quarter vacancy rate is 4.8%, also the lowest metrowide, and the average asking rent is $22.10 psf, the highest.
  • The overall vacancy rate was down 10 basis points in the second quarter to 4.7%, down 10 basis points from a year earlier. Rents slipped 0.1% by both measures during the second quarter, and are up 0.9% asking and 0.7% effective from a year earlier. The effective average is $19.23 psf.
  • The 42,000-square-foot Darby Town Center neighborhood center completed construction in June 2012, but net absorption for the quarter was also 42,000 square feet. Despite the tightness of the local market, Reis reports no additional space under construction here. Although about 360,000 square feet of community-neighborhood space is forecast to be added by 2016, the vacancy rate is forecast to fall below 4.0%.
  • Sears closed a store in Upper Darby according to Colliers, but Sav-a-Lot opened a store there, backfilling a vacant Fresh Grocer.
  • The Reis second quarter vacancy rate in Chester County is 7.8% for the 3.7 million square feet of anchor space, and 15.7% for the 3.4 million square feet of non-anchor space, the highest metrowide. The second quarter average asking rent is $14.35 psf for anchor space, and $18.27 psf for non-anchor space.
  • The overall vacancy rate ended the second quarter at 11.6%, down 40 basis points from the prior quarter and 10 from a year earlier. Rents decreased 0.3% by both measures during the quarter, and are up 0.4% asking and 0.5% effective from a year earlier. The average effective rent is $15.69 psf.
  • Two big projects, the 745,000-square-foot retail component of the Uptown Worthington Town Square mixed-use in Malvern and 400,000-square-foot Oxford Commons power center in Oxford, are under construction. The 23,000-square-foot Shops at Devon neighborhood center in Devon is expected to complete construction in October.
  • At the New Garden Shopping Center in Chester County, Ollie’s Bargain Basement leased 30,230 square feet and ReStore leased 18,000, according to Colliers.
  • In Bucks County, the 4.7 million square feet of anchor space has a second quarter vacancy rate of 6.3%, second lowest among the submarkets, and an average asking rent of $13.41 psf, according to Reis. For the 4.0 million square feet of non-anchor space, the second quarter vacancy rate is 8.5%, and the average asking rent is $19.80 psf.
  • The overall vacancy rate increased 10 basis points in the second quarter to 7.3%, and is up 60 from a year earlier. Both the average asking rent and the average effective rent are up 0.2% for the quarter, with the latter at $17.58 psf. Rents are up 0.6% and 0.5%, respectively, in the second quarter.
  • Impact Thrift leased 66,500 square feet at Bucks Crossing, according to Colliers.
  • For all of the Pennsylvania Suburbs, the vacancy rate increased from 7.5% to 8.0% during the second quarter according to Colliers. “The main components of this increase were the closing of the 121,000-square-foot Sears at the Coventry Mall and the completion of additional stores at Providence Town Center.”

Southern New Jersey

  • In Camden County, the 3.5 million square feet of anchor space has a second quarter vacancy rate of 17.0%, highest metrowide, and an average asking rent of $12.76 psf, the second lowest according to Reis. For the 3.1 million square feet of non-anchor space, the vacancy rate is 10.2%, and the average asking rent is $15.86 psf, also the second lowest.
  • The overall vacancy rate was 13.8% for the second quarter, up 50 basis points over three months and 60 over twelve. The average asking rent decreased 0.6% and the average effective rent fell 0.7% to $13.48 psf during the quarter. The year-over-year decreases are 1.6% asking and 1.4% effective.
  • The 165,000-square foot retail portion of the Town Place at Garden State mixed-use project in Cherry Hill completed construction in May 2012. No additional space is under construction.
  • Reis reports the second quarter vacancy rate in Burlington County at 10.7% for 3.8 million square feet of anchor space, and 4.9% for 4.2 million square feet of non-anchor space, second lowest among the submarkets. The average asking rent is $14.13 psf for anchor space and $21.66 psf for non-anchor space, second highest among the submarkets.
  • The overall vacancy rate of 7.6% was down 10 basis points in the second quarter and down 20 from a year earlier. Both the average asking rent and the average effective rent decreased 0.3% during the quarter, the latter to $19.74 psf. Rents are down 0.5% from a year earlier by both measures.
  • In Gloucester County, the 2.1 million square feet of anchor space has a second quarter vacancy rate of 11.4%, and an average asking rent of $9.89 psf, lowest among the submarkets. For the 1.8 million square feet of non-anchor space, the vacancy rate is 12.9%, second highest among the submarkets, and the average asking rent is $14.69 psf, the lowest.
  • The overall vacancy rate of 12.1% is up 110 basis points from the prior quarter and 230 from a year earlier. The average asking rent edged down 0.1% during the quarter, as the average effective rent decreased 0.2% to $13.00 psf. The asking and effective averages are down 0.8% and 1.0% from a year earlier.
  • Uniquely among the eight submarkets, Reis predicts no new community-neighborhood center space will be added here in the next five years.
  • “The overall vacancy rate decreased from 10.9% to 10.1%” in Southern New Jersey according to Colliers. “There were some store closings, such as Syms’ 150,000-square-foot store in Cherry Hill, but a major vacancy was absorbed by Speed Raceway at the former VF Outlet in Cinnaminson for an indoor go-cart track.”
  • “While there are still centers with persistent vacancy,” according to this source, “retailers are expanding. Walmart opened a 219,000-square-foot supercenter in Williamstown. Bottom Dollar opened stores in Cinnaminson and Bordentown and plans additional stores in Edgewater Park, Bellmawr, Woodbury, and Mount Holly. Other national chains, such as 5 & Diner, are scouting Southern New Jersey franchise locations.”