Last year was a banner year for large retail power centers that host big box stores filled with national tenants.
Consider what was built last year and is still under construction. Winrock Town Center, with tenants including T.J. Maxx and Nordstrom Rack on the way. The South Valley’s massive Las Estancias’ development, which recently opened a 12-screen movie theater; and Rio Rancho’s Plaza at Enchanted Hills, with retailers Bed Bath & Beyond and Michaels.
A 4Q retail report by the Albuquerque office of CBRE shows of all the retail space leased out last year, 45 percent of it took place in power centers, while strip centers experienced 20 percent of the activity.
All that activity is pushing rents up for power center spaces. The median rent rate of those big centers was $22.75 per square foot in 2015, a big jump from $17 in 2014.
“This is primarily due to newly delivered small spaces available for higher lease rates, and strong demand for tightening availably in this category,” the report said, which is written by senior research analyst Atsuko Poelman.
A dive into the numbers show neighborhood centers — think grocery stores with small shops around — and strip centers, lost about 81,000 square feet of leased retail space last year, while the power retail centers gained 266,742 square feet of new tenants.
“I don’t think Albuquerque is different than other markets in that there is still a flight to quality and the smaller retailers are really utilizing and depending on the traffic that anchors bring to a retail shopping center,” said Lia Armstrong with CBRE’s retail team. “Nob Hill and Downtown are both great submarkets in their own unique ways and cater to the local, more unique tenant mixes versus the regional and national retailers that depend on anchors and regional/national tenant mix… I think there is room for both.”
Retailers coming into the market or expanding are demanding even more power centers, and with so few under construction and already pre-leased, they’ll look to redevelopment projects, the report said.
One such example is the West Central Plaza Shopping Center, the redevelopment of a large former Kmart store on Central Avenue and Atrisco Drive, where Burlington Coat Factory and Conn’s HomePlus will locate. With other national retailers closing, such as Staples downsizing in Albuquerque, it’s likely more redevelopment opportunities will occur in the market.
Overall activity in 2015 posted positive numbers. Gross activity was about the same as the five-year average, but not as much space was vacated when compared to the past two years. In the 4Q of 2015, the retail space in the Cottonwood area was 96.3 percent occupied (the highest), while Downtown posted the lowest occupancy rate at 73.5 percent.
By: Stephanie Guzman (Albuquerque Business First)
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