The 4.4-million-square-foot Chattanooga community-neighborhood shopping center market is making a very slow, somewhat unsteady turn toward recovery. No space in this category has completed construction since 13,000 square feet finished in 2010. No such projects were under way or on the very short list of planned or proposed retail developments. Net absorption through the first half of 2012 was negligible at 3,000 square feet. Vacancy ended the quarter at 12.5%, same as half a year earlier, up 120 basis points year-over-year and well above the 10.8% second quarter national community-neighborhood sector rate. With no new supply added, the increase to 12.9% cited by Reis in its First Glance report of third quarter data indicate additional negative absorption. Rents, meanwhile, are weak. At $12.38 psf and $10.97 psf, mean asking and effective rates for the second quarter were down 0.3% and 0.2% since year-end following gains of 0.6% and 0.4% all told in 2011. The third quarter shaved another cent from the asking average.
Current construction as reported by Reis on its October 1 list of retail development projects consists solely of the 220,000-square-foot first phase of the Fountains of North Chattanooga power center in Hixson. Much of the space, however, has been completed. A new Kohl’s store is included (see Special Real Estate Factors for more about this retailer’s regional activities). A 190,000-square-foot second phase is planned. Reis put second quarter power center market vacancy at 7.2%, up from 6.6% a quarter and four quarters prior. The second quarter national rate for this property type was 6.3%. At $17.27 psf, the second quarter average asking rent for local power center space was up 0.4% for the period and was up 0.6% year-over-year.
Other activities include CBL & Associates Properties, Inc.’s announced renovation of Northgate Mall to include “a multi-million dollar renovation” of the mall and redevelopment of the adjacent T.J. Maxx-anchored community center, “adding Ross Dress for Less and Michael’s Arts & Crafts,” The Chattanoogan reported in October. “Construction will begin on the associated center in early 2013 with completion anticipated in fall 2013.” In addition, downtown’s Project: PopUp, “the Chattanooga retail incubator meant to attract and support new opportunities in downtown’s City Center district,” as described by The Chattanoogan in September, has welcomed new retailers to CitiPark on the 800 block of Chestnut Street. Also downtown, the Warehouse Row redevelopment area has been attracting new retailers after losing numerous tenants in the early 2000s, the Times Free Press reported in June.
An overall flat performance for the year in the community-neighborhood shopping center sector should be followed by gradual improvement in 2013.