*SALE & LEASE TRANSACTIONS, Q1 2018 MARKET INDICATORS VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE* *Asking Rents 407 1,932,775 Q4 2017 Q1 2018 TOTAL RETAIL TRANSACTIONS SQUARE FOOTAGE IN DEALS Research & Forecast Report DETROIT & ANN ARBOR RETAIL Q1 2018 The Metro Detroit retail market posted an overall vacancy rate of 5.7%, down thirty-basis points since the fourth quarter 2017. Asking rental rates in the first quarter were $13.05 per square foot and net absorption is positive with 787,819 square feet absorbed in the first quarter. The market improved in 2018, compared to the fourth quarter 2017; vacancy was at 6.0% and asking rental rates were $12.97 per square foot. The decisions on how and where we shop continues to affect the retail landscape as we’ve come to know it. Due to a lack of traffic and in a world where convenience rules, the big box footprint we became accustomed to is becoming extinct in today’s shopping world. As retailers rework their strategies to overcome these changes and move forward, some were unfortunately met with store closures. In 2017 alone, retailers occupying 105 million square feet closed locations throughout the United States. In Michigan, we witnessed dozens of household names such as Sears, Kmart, The Limited, Macy’s and other underperforming stores disappear from the landscape. Adding to the list of closures in 2018, department store chain Bon-Ton and the retail giants Toys R US and Babies R US recently announced plans to close 180 stores. It’s not all bad news though. In 2018, we expect to see less store closures as retailers move toward a healthier business model and footprint. Many of these old stores are being repurposed from traditionally hard to fill big box space, to accommodate today’s shopper, which means smaller footprints and mixed-use variety. Retailers such as Ulta, Target and Meijer are already working to adopt smaller footprints in urban areas such as the Meijer slated to open in Downtown Detroit. The super home goods store, At Home, is finding that stores formerly operated as Sears and Kmart are a comfortable fit for their footprint and has added a couple stores to their Michigan portfolio, including the recently opened location in Roseville. In the world of chain discount stores, Sierra Trading Post recently opened stores in Novi and Ann Arbor with plans for another store in West Michigan in 2018. Aldi plans to renovate 20 Detroit area stores by the end of 2019 and it’s still building in Michigan with a store in Ann Arbor and west Michigan coming soon. RETAIL IMPROVES IN FIRST QUARTER Amber Goodwin Senior Research Analyst | Detroit & Ann Arbor
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
*SALE & LEASE TRANSACTIONS, Q1 2018
MARKET INDICATORSVACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE* *Asking Rents
407
1,932,775
Q4 2017 Q1 2018
TOTAL RETAILTRANSACTIONS
SQUARE FOOTAGEIN DEALS
Research & Forecast Report
DETROIT & ANN ARBORRETAILQ1 2018
The Metro Detroit retail market posted an overall vacancy rate of 5.7%, down thirty-basis points since the fourth quarter 2017. Asking rental rates in the first quarter were $13.05 per square foot and net absorption is positive with 787,819 square feet absorbed in the first quarter. The market improved in 2018, compared to the fourth quarter 2017; vacancy was at 6.0% and asking rental rates were $12.97 per square foot.
The decisions on how and where we shop continues to affect the retail landscape as we’ve come to know it. Due to a lack of traffic and in a world where convenience rules, the big box footprint we became accustomed to is becoming extinct in today’s shopping world. As retailers rework their strategies to overcome these changes and move forward, some were unfortunately met with store closures. In 2017 alone, retailers occupying 105 million square feet closed locations throughout the United States. In Michigan, we witnessed dozens of household names such as Sears, Kmart, The Limited, Macy’s and other underperforming stores disappear from the landscape. Adding to the list of closures in 2018, department store chain Bon-Ton and the retail giants Toys R US and Babies R US recently announced plans to close 180 stores. It’s not all bad news though. In 2018, we expect to see less store closures as retailers move toward a healthier business model and footprint. Many of these old stores are being repurposed from traditionally hard to fill big box space, to accommodate today’s shopper, which means smaller footprints and mixed-use variety. Retailers such as Ulta, Target and Meijer are already working to adopt smaller footprints in urban areas such as the Meijer slated to open in Downtown Detroit. The super home goods store, At Home, is finding that stores formerly operated as Sears and Kmart are a comfortable fit for their footprint and has added a couple stores to their Michigan portfolio, including the recently opened location in Roseville. In the world of chain discount stores, Sierra Trading Post recently opened stores in Novi and Ann Arbor with plans for another store in West Michigan in 2018. Aldi plans to renovate 20 Detroit area stores by the end of 2019 and it’s still building in Michigan with a store in Ann Arbor and west Michigan coming soon.
RETAIL IMPROVES IN FIRST QUARTERAmber Goodwin Senior Research Analyst | Detroit & Ann Arbor
TOTAL GENERAL RETAIL SHOPPING CENTERS
2 Detroit & Ann Arbor Research & Forecast Report | Q1 2018 | Retail | Colliers International
PROPERTY CITYSUBMARKET
SIZE OF DEAL BUYER NAME PRICE
3541 Highland Road Waterford Lakes Area 114,227 Amerco Real Estate
Co. $35.02
2051-2133 N Wixom Road Wixom West Oakland 44,000 North Wixom Plaza,
LLC $31.48
905 South Main Street Royal Oak 18,789 9 Zero 5, LLC $159.66
29330 Schoolcraft Road Livonia West Wayne 22,500 ALDI
7007 - 7093 Dexter Ann Arbor Road
Dexter Outlying Area 10,581 Redline Athletics
LEASES
Without a doubt there is growing interest in the Motor City from local and national retailers which is fueling supply and demand in Detroit and other downtown markets. Planet Fitness plans four new gyms in Detroit in 2018 and H&M is looking to join Nike, Under Armour, John Varvatos and other national retailers downtown. We look forward to flavor filled landscapes and destinations offering a variety of entertainment, theater, hotels, restaurants and retail experiences with ambiance and amenities at the center of the consumer’s focus.
Notes on the MarketALL SECTORSRetail is off to a good start as a flurry of activity in the first quarter leads to improved market conditions. The total retail vacancy rate in the Metro Detroit market was 5.7% this quarter, down thirty-basis points from 6% in the fourth quarter 2017. Year-to-date absorption was positive at 787,819 square feet absorbed in the first quarter. Ann Arbor’s retail sector is feeling the squeeze, posting a 3.3% vacancy rate in the first quarter with an average asking rate of $16.04 per square foot. The city of Troy remains tight with a 98% occupancy rate and asking rents of $21.94 per square foot, the highest rents in the market. The North Oakland County submarket is experiencing the highest vacancy rate at 9.8% with an average quoted rental rate coming in at $13.99 per square foot.
GENERAL RETAILGeneral retail (which includes all freestanding retail buildings that are not contained within a shopping center) closed the fourth quarter with a 3% vacancy rate. Year-to-date absorption for general retail was 209,567 square feet. Quoted rental rates are $13.75 per square foot. Year to date, there was 112,137 square feet delivered in the general retail category with 813,226 square feet currently under construction in 2018. Construction activity in the general retail sector accounts for the most active of all retail sectors as we move into 2018.
SHOPPING CENTERSIn the Metro Detroit market, the average quoted rental rate for shopping centers (all classes: community centers, neighborhood centers, and strip centers) is $12.38 per square foot in the first quarter 2018. Vacancy is 9.9% in the first quarter, little changed from the fourth quarter 2017. Shopping centers in Bloomfield’s submarket command top dollar for rent at $17.93 per square foot. However, the market is still relatively tight reporting the lowest vacancy at 3.5%. The Shopping Center sector absorbed 53,860 square feet so far this year.
POWER CENTERSMetro Detroit’s power center market (which includes centers consisting of several free-standing unconnected anchors and only a minimum amount of small specialty tenants, 250,000 – 600,000 square feet) decreased to 4.3%, a ninety-basis point decrease from 5.2% vacancy in the fourth quarter 2017. Rents continue to improve with a $16.11 per square asking lease rate, compared to $15.69 per square foot in the fourth quarter 2017.
SALES / LEASESIn the first quarter, there were 168 transactions with an average sales price of $97 per square foot, and an average cap rate of 7.9%. Investors seem eager to buy small multi-tenant retail strips, however, availability of such product is scarce.In Dexter, Redline Athletics signed a lease in February for a 10,581-square-foot training center, which marks the addition of their second location to the region. Among the flurry of new restaurants popping up, Broasted Brothers Chicken signed a lease at Sheldon Place in Plymouth and plans to open in early summer.
TOTAL GENERAL RETAIL SHOPPING CENTERS
QUOTED RENTAL RATESOVERALL MARKET
NOTABLE RETAIL DEALS
OCCUPANCY RATEOVERALL MARKET
3 Detroit & Ann Arbor Research & Forecast Report | Q1 2018 | Retail | Colliers International
BY THE NUMBERS
SHOPPING CENTER MARKET STATISTICS BLOOMFIELD DETROIT / THE POINTES DOWNRIVER LIVINGSTON /
W OAKLAND MACOMB NORTH OAKLAND ROYAL OAK SOUTHFIELD TROY WASHTENAW WEST WAYNE TOTALS
CONSTRUCTION & DEMOLITION ACTIVITYDuring the first quarter 2018, 132,019 square feet completed in Detroit’s retail market. There is currently 1,182,962 square feet under construction as we move into 2018. Top Golf broke ground over the winter in Auburn Hills and is expected to open in the winter of 2018. Construction activity is especially hot in downtown Detroit. New retail, restaurants, hotels, mixed-use and multi-family developments dot the area, including a European-style promenade which is planned for the block between Fox Theater and the new Little Caesars headquarters downtown. The 7.Liv project envisions a 20,000 + square foot commercial space with 10-residential apartments. In February it was announced that the overpass at Woodward and I-75 may be widened in anticipation of 9,000 square feet of new retail.
2018 REVIEW
» Overall retail improved in the first quarter 2018
» Retail users re-think their strategy and adjust footprint to eliminate dead space and reduce their real estate costs
» Food users drive per-square-foot prices
» Construction activity remains active
2018 OUTLOOK
» There is an abundance of opportunity for retail in Metro Detroit with a demand for almost every category of supportive services such as grocery, restaurants, coffee shops, bakeries, pet stores, furniture, and health & fitness
» Smaller more convenient footprints will dot landscape
» Downtown areas such as the Central Business District and suburbs like Birmingham, Royal Oak, Ferndale, and Ann Arbor remain highly sought after
» Re-population and demand in the City of Detroit drives a spur of new construction of residential units, retail, office and mixed-use space
» Opportunity spreads from Detroit’s Central Business District to communities outside downtown such as New Center, Midtown, Brightmoor and 7LIV
4 North American Research & Forecast Report | Q1 2014 | Office Market Outlook | Colliers International