Low Rental Rates Prompt Retailer Expansions

The national retail sector is still a tenant’s market, according to CB Richard Ellis’ summer 2011 survey Shop Talk — A Retailer’s Perspective. Fifty-nine percent of respondents said that they planned to open more stores thanks to compelling rent levels, while only 9 percent said that they would not expand. Expansion plans vary by market and store category, but well-located centers in top-tier markets, discount retailers, wholesale clubs, and luxury retailers are leading the way.

Retailers have also seen more perks from landlords. This year, 94 percent of survey respondents were able to negotiate tenant improvements, rent per square foot, and lease terms, up from 73 percent in 2010. As the economy recovers, landlords are expected to regain leverage and raise rents.

In the meantime, retailers are optimistic. Ninety-two percent of survey respondents plan to add more store locations this year, a 10 percent increase from 2010. And among the respondents who plan to reduce their number of store locations, 80 percent reported that any reduction would be relatively minor at 6 percent to 10 percent.

The trend toward smaller store layouts continues to emerge as well. Twenty-three percent of respondents were considering reducing store sizes, while just 10 percent expected to add square footage. “Recently, we are seeing a number of retailers expanding with smaller formats,” notes Scott Riddles, senior vice president with CB Richard Ellis Retail Services in Newport Beach, Calif. “This is due in part to a number of retailer categories now being purchased via the Internet as well as retailers going smaller so they can get a foothold in urban markets.”