by Dan Rafter
Retailers across the country certainly face challenges today. But in the majority of major Midwest cities, the retail sector is actually seeing lower vacancies and higher rents.
Credit the rise of specialty retailers, discount stores, fast-casual restaurants and entertainment centers. While large, brand-name department stores are struggling, these niche retailers are thriving.
Marcus & Millichap recently released several retail market overviews for cities across the Midwest. For the most part, the reports contained good news, though each of the cities that Marcus & Millichap surveyed face its own retail challenges.
The company’s Kansas City, Missouri, report is a good example. According to Marcus & Millichap, the retail vacancy rate here should fall for the eighth straight year, dropping by 30 basis points throughout 2017. At the same time, Marcus & Millichap predicts that retail rents will rise 2.2 percent to an average of $12.19 a square foot this year.
The news is good in Columbus, Ohio, too. Marcus says that companies such as Ikea, Amazon and Kroger are expanding in this market. This makes up for the exits of other national retailers such as Macy’s, Sears and The Limited.
The retail vacancy rate in the Columbus market is expected to fall to its lowest point in 10 years, according to Marcus & Millichap’s forecast, and should end 2017 at 4.4 percent. Rents are expected to increase 2.5 percent during the year to an average of $12.33 a square foot. That follows a 2016 in which retail rents here jumped 4.6 percent.
Also in Ohio, Cleveland is expected to see a strong year for retail, too. Old Chicago Pizza and Taproom recently announced plans to open three to five new restaurants in the metropolitan Cleveland area, while Seasons Kosher Supermarket will open its first Midwest location in the Cleveland suburb of South Euclid this year. That store will be a key part of the 100,000-square-foot expansion of Oakwood Commons retail center.
Marcus & Millichap predicts that retail vacancies in Cleveland wil fall 40 basis points this year to 6.5 percent, thanks to the absorption of 1.1 million square feet in the market. Rents are expected to rise 1 percent to $10.65 a square foot. This is welcome news. In 2016, retail rents fell 2.5 percent in the Cleveland market.
Retail construction is slowing in some markets, including St. Louis. Marcus & Millichap said that a 270,000-square-foot retail center in the suburb of Saint Peters will account for half of all retail delivery volume this year in the St. Louis market.
This means that vacancies here will fall throughout 2017, with Marcus & Millichap predicting that this rate will drop to 6.2 percent by the time the year ends. The company says that retail rents will jump 1.6 percent in 2017 to an average of $12.65 a square foot.
In Indianapolis, the big news is that the market in 2017 will see its first Ikea store. The furniture giant is opening in nearby Fishers this year, something that is already encouraging other retailers to open new shops in this suburb.
Marcus & Millichap predicts that the retail vacancy rate in Indianapolis will fall 20 basis points in 2017 to a 10-year low of 5 percent. Retail rents should rise 1.3 percent to an average of $13.43 a square foot.