There is no sign of improvement in the 19.6-million-square-foot Memphis community-neighborhood shopping center market. The second quarter of 2012 saw 28,000 square feet of positive net absorption and a 10 basis-point vacancy rate decrease to 13.1%. That was still up 110 basis points from a year earlier. In July, moreover, 25,000 square feet of negative net absorption pushed the vacancy rate back up 10 basis points, near the high for the cycle. Both the average asking rent and the average effective rent lost 0.1% during the quarter, falling to $13.38 psf and $11.75 psf. Rents were down 0.5% from a year earlier by both measures, but July saw a penny increase for each.
New supply was absent from the community-neighborhood shopping center market in 2010 and 2011, but in August a 48,000-square-foot expansion of the Gallina Centro neighborhood center completed construction in Collierville, leaving the 18,000-square-foot Germantown Station under construction in Cordova. Reis predicts a return to positive net absorption late in the year, following two negative years, will cut the vacancy rate to 12.9% at year-end 2012. Despite increasing demand it is expected to remain in double digits through 2016. Rents, meanwhile, are forecast to be flat for all 2012, with small increases to follow. Not until 2016 are increases in excess of 3.0% expected in any year.
Memphis area power centers continue to suffer with a second quarter vacancy rate of 14.3%, that is up 30 basis points from the prior quarter and 320 from a year earlier. The power center average asking rent of $16.86 psf in the Memphis area is down a penny from the prior quarter and down 0.1% from a year earlier. Development outside the community-neighborhood center segment has virtually halted in metro Memphis, with some projects remaining on the drawing boards for years.