It’s hard to believe the holiday shopping season is around the corner, and with it comes some positive and also dreary new information about the health of retail stores, their tenants and landlords in the Treasure Valley.
In reviewing Colliers International 2010 Third Quarter Outlookprovided by the firm’s Boise office, a couple of items stood out, specifically about retail lease and vacancy rates as we move closer to the end of the year.
Collier’s Brook Blakeslee, who specializes in retail broker services, told me that rents have started to stabilize, specifically in three areas of Boise: downtown, near Boise Towne Square and along Eagle Road. While still nearly 20 percent to 25 percent off from this time in 2007, rental rates continue to “firm” up, which is positive news. Per square foot, average rents are hovering between $19 to $22.
Move out of those three key areas though, and as Blakeslee put it, the market remains volatile. Lease rates have nose-dived 40 percent to 45 percent from 2007. What those figures have translated into are landlords continuing to offer concessions for tenants; whether it is free or deferred rent, more money for tenant improvement or other allowances.
What’s also hindering some landlords from attracting tenants is banks continuing to tighten their lending restrictions; meaning if a landlord doesn’t have adequate cash flow, the likelihood of securing a loan for tenant improvements, is slim.
“When the markets are normal, banks will lend to tenants to improve space they want to lease,” Blakeslee said. “Now, landlords must come up with additional funding banks are unwilling to lend.”
The average vacancy rate, according to Collier’s data for the Treasure Valley is 13.4 percent. Again, the positive news with that figure, is it is up just slightly from the end of 2009, when it was 13.1 percent. Yet, what’s propelling that higher-than-average vacancy rate is the abundance of available “big box” retail space, which on average takes up to five years to re-lease.
So what happens now? Will the shopping season provide answers for the retail market? Yes, actually, and those numbers should start to become evident from the end of October through January, Blakeslee said.
“With the shopping season, retailers will be focused on making money. That data will offer up an indication of things to come.”