NORTHEAST RETAIL hough uncertainty — eco-nomic, political and otherwise — has been a theme of 2024, the retail real estate market in the Northeast has proven itself reliably strong. Even certain headwinds like high construction costs and minimal quality space to accommodate growth have ultimately helped fuel robust fundamentals throughout the region. Now, brokers, investors and develop-ers in those markets are looking ahead with optimism and faith in persisting tailwinds. Vacant retail space in Northeast markets has been hard to come by this year, and professionals in the re-gion aren’t expecting that to change anytime soon. The equation, they say, is simple. While retailers’ appetite for expansion has remained healthy, new construction and deliveries are very limited. “Almost nothing has been built in the past 10 years,” says Dan Zelson, a principal with Westport, Connecti-cut-based Charter Realty. “There’s really just very little new product.” Steve Gillman, partner at The Shop-ping Center Group (TSCG), notes that while some smaller, single-tenant buildings may still be coming on line, “nobody is building a big strip center with 100,000 square feet.” “There’s that imbalance of supply and demand: demand by the retailer and lack of supply of space,” adds Daniel Taub, senior vice president and national director of retail and net lease divisions at Marcus & Millichap. Research corroborates these obser-T vations of diminished levels of new construction. Colliers reports that of the top five metros nationally, New York City jointly ranked as the market with the least amount of new retail space under construction during the third quarter of this year. This distinc-tion was shared with Austin, Texas, with both cities having approximately 1.5 million square feet of product un-der construction. This is hardly more than a quarter of the retail develop-ment that was underway in the Dal-las-Fort Worth metro during the same period (4.1 million square feet). One of — if not the — primary rea-son for the paucity of development is simply heightened costs of construc-tion. Taub says that in some ways, though, the reduction in volumes of new construction is a blessing in dis-guise. In addition to increasing values of existing properties and benefiting their owners, the tighter conditions are ensuring that only high-quali-ty projects that pencil out are being greenlit, as well as preventing excess, untenable growth by retailers. Retailers, though, must contend with regional vacancy rates that are very low. “More brands are chasing fewer opportunities,” says Matthew Harding, CEO of New Jersey-based Levin Management Corp., which pro-vides retail services including property management, leasing, financial man-agement and reporting, construction management and development. According to research executed and published by Marcus & Millichap, re-tail vacancy in Northern New Jersey was at 3.1 percent in the fourth quar-ter of this year, marking a year-over-year decrease of 20 basis points.
Shopping Center Business December 2024: Page 44
