Retailing and retail real estate in the Tacoma area lack the strength seen to the north in Seattle, where fundamentals are more formidable. Thus, notes Kidder Matthews in its third quarter 2012 report on Seattle-Tacoma retail real estate, Pierce and Kitsap counties are the region’s “softest markets.” Reis’ data on 7.05 million square feet of Tacoma area community-neighborhood shopping center space bear out the observation. If the year concludes as expected, 2012 will be the sixth in succession to post a negative net absorption total, the latest step in a pattern of tenant net contraction and rising vacancy that commenced prior to the recession. Thus, the first half of 2012 saw a combined total of negative 27,000 square feet of net absorption alongside no newly delivered supply.
Vacancy ended the quarter at 12.2%, up 30 basis points from the quarter before, up 80 year-over-year and the highest rate on the firm’s books for this market. The second quarter national community-neighborhood sector rate, for the sake of comparison, was 10.8%. Rents, despite this dreary profile, have seen some recent relief. Three consecutive years of loss were followed by respective increases of 0.6% and 0.5%, to $18.66 psf and $16.24 psf, for the asking and effective averages for the first half of 2012 (with most of the gains occurring during the first quarter). Reis’ First Glance report of selective third quarter data, meanwhile, subtracts 30 basis points from the vacancy rate and six cents from the mean asking lease rate.
No community-neighborhood sector space has completed construction since 52,000 square feet arrived on line during the second quarter of 2010. Two neighborhood centers, however, recently broke ground: the 249,000- square-foot Rainier View Marketplace got under way in February in Puyallup and 54,000 square feet of retail at the Point Fosdick Square redevelopment project in Gig Harbor started in April 2011. Completion dates are not specified. In addition, SEB Inc.’s revised University Place Town Center mixed-use development in University Place broke ground in June, as reported by The News Tribune. In addition, the large Ruston Point multi-use project in Ruston, delayed by the recession, is showing new life (see the Apartment and Office Space sections). On its retail side, Cinemark Holdings is planning a nine-screen multiplex theater for the development’s commercial center, Transportation Solutions Inc. reported in May. A 2014 opening is intended. In addition, “the developer is recruiting restaurants, a grocer and other retail and office tenants to the 250,000-square-foot commercial development.” Reis’ October 1 report on individual construction projects reports 150,000 square feet of neighborhood center retail proposed for several buildings at Point Ruston.
Negative net absorption for the year as a whole should raise the community-neighborhood sector vacancy rate to 12.4%. Rent growth at about 1.0% on average is expected for the year. Pierce and Snohomish counties will secure more retailers as a result of expanded employment, states Western Real Estate Business in an August report penned by a Marcus & Millichap executive. In addition, however, “a number of big-box sites [will] remain dark through the year.”