Retail real estate investors and consumers alike should be excited about the market trends we experienced in fourth quarter 2015!
There are several strong indicators that the local market is healthy, growing and catching the eye of some major retailers like Field and Stream. The highlights from the most recent quarter include the lowest vacancy rate since prior to 2012 even with a continual increase in inventory as four new buildings were delivered this quarter. Additionally, a positive and increasing net absorption demonstrates the market’s ability to handle the new space while still growing in demand.
What else can we learn from how the retail real estate market in Central PA performed at the close of 2015? Let’s take a look at more important trends worth noting…
Select Year-to-Date Deliveries:
Specifically this quarter, we saw two new retail spaces delivered to the Central PA submarket that made it to the top 15 list for the Philadelphia market. Coming in at number 11 is the retail building at 4250 Chambers Hill Road in Harrisburg. This 59,400 square-foot space is 100% occupied by Restaurant Depot. Coming in at number 12, the Central PA market gained a new Field and Stream near the Capitol City Mall in Camp Hill that delivered 50,000 square-feet of new space to the market and is also 100% occupied.
Select Top Sales:
Among the nine select top sales highlighted in the fourth quarter for the Philadelphia market, just one occurred in the Central PA submarket. The 171,069 square-feet Lowe’s building located at 250 S. Conestoga Drive in Shippensburg was sold by Excel Trust, Inc. to the ARC Companies for $24,250,000.
In fourth quarter 2015, the vacancy square-footage and vacancy rate dropped ever so slightly from the previous quarter, but overall these are the lowest numbers we have seen since prior to 2012! The vacant square footage is 4,295,660 and the vacancy rate is 4.9%. This is the first time we are seeing the vacancy rate drop into the 4’s since at least four years ago.
2015 finished the year with retail rental rates at $11.71. While this did not set any all-time low or high records for recent quarters, it is a slight decrease from the $11.76 we ended with in the third quarter. With the highest peak in recent history occurring in the second quarter of 2015 at $11.88, it will be interesting to see if this decreasing trend continues into 2016 and beyond.
Absorption and Demand:
Net absorption increased this quarter to 227,275 square-feet. A total of four new buildings were delivered to the market (two we just discussed) which contributed an RBA of 124,295 square-feet. The total RBA of existing inventory rose to 87,242,952 square-feet which is the highest we have seen since prior to 2012. Historically, total RBA has been on a steady climb for nearly four years and counting.
Fourth quarter 2015 delivered good news and positive signs of growth for the Central PA retail real estate market. We experienced the lowest vacancy rate in recent history, dropping into the 4’s with a rate of 4.9%.
What’s most impressive is that this decreasing vacancy rate occurred during a quarter in which inventory also increased, four new buildings were delivered to the market and nine new buildings are still under construction. The positive (and increasing) net absorption tells us that the local retail market is well-poised to handle this new inventory and that businesses are growing and expanding into Central PA.
Based upon the activity in the Central PA submarket for retail real estate in fourth quarter 2015, what do you think will have the greatest impact on our local economy? Share your thoughts by commenting below!