Thursday, March 08, 2012
|Seattle Times||Daily Journal of Commerce Headline|
|Seattle’s port losing big customer to Tacoma||
Seattle is one of top retail markets in U.S.
|Toll Brothers buys Bellevue tract||A new report by Marcus & Millichap ranks Seattle the third best retail market in the country.
The brokerage moved Seattle up seven spots from last year because vacancy rates are down and sales projections are up.
Hiring by tech companies has boosted downtown markets. The result is rising rents, which in turn will increase competition among investors, according to the report.
Local brokers say what they’re seeing on the ground mirrors what’s in the report.
“For the first time in a really long time retailers are looking at the urban market,” says Elizabeth Best of Seattle Pacific Realty.
Rents dropped enough during the recession to bring in companies. Rates are ticking back up, but shopkeepers still want to be in areas where people want to live.
Jason Miller of Colliers International says ring neighborhoods, such as Capitol Hill, Ballard and Fremont, are attracting national retailers and restaurants. They are “coming here in droves. They’re just following the money.”
The denser the neighborhood, the higher the rent hikes. In some urban mixed-use projects, landlords are asking $40 a square foot, Miller said. This is pushing out a lot of mom-and-pop shops and giving small chains sticker shock.
In suburbia, meanwhile, activity is strong for some retail sectors, but lagging for others.
Jeremy Moller of JSH Properties markets space at Renton Landing and Northgate Village. Cinemas, big box stores and restaurants are doing well.
“What we are trying to fill in with is soft-goods retail,” such as clothing stores, he said.
He chalks up the weakness in some areas to the “Amazonification” of retail: Shoppers go to stores to look, but buy online.
Spaces that clothing stores don’t want are getting filled by spas, fitness companies and medical service providers, said Moller. He recently leased 4,500 square feet at Northgate Village to Hot Yoga Inc., a regional company. Miller said national companies, such as Core Power Yoga and Planet Fitness, are coming here because of Seattle’s reputation as a fitness-conscious city.
Not all suburban submarkets are suffering. Best said 90 percent of Maple Valley Town Square, a 235,000-square-foot project that will be anchored by a Fred Meyer store, was leased before construction. The project will open this spring.
Retailers are being “very strategic and very methodical” about sites, Best said. “The site has to have everything — everything — lined up for them to consider the location.”
Best said it’s all about limiting risk. Companies only want to be in growing areas with proven sales, such as Bellevue and the Eastside.
The Marcus & Millichap report states that in 2012, King County will be a big draw for new retailers. While high-traffic centers in Pierce and Snohomish counties will do OK, overall vacancy rates in outlying areas will be twice as high as pre-recession levels. This will lower prospects for meaningful rent hikes.
According to the report:
• King County’s Class A grocery-anchored centers are likely to trade at cap rates in the low 6-percent range. Similar properties in secondary locations will sell with first-year returns of around 8 percent.
• Cap rates for strip centers in urban pockets of King County will average in the mid 7 percent range. Suburban properties will trade in the low 8 percent range.
• The region will add 52,000 jobs this year compared to 44,000 in 2011.
• Vacancy in the local retail sector will fall 70 basis points to 5.8 percent. The rate fell 40 basis points last year.
• Asking rents will tick up 1 percent to $21.54 per square foot. Effective rents will rise 1.6 percent to $18.93 a foot.
Marcus & Millichap ranks San Francisco and San Jose, Calif., the No. 1 and 2 markets respectively. San Diego is fourth; Austin, Texas, is fifth; and Portland is sixth.
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|Puget Sound Business Journal|
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