Retail market may experience mixed recovery in 2013

The retail market may improve in the next year.

Property management companies with interests in the commercial retail market may experience some issues early next year, as the market is still dealing with recovery growing pains.

There is a high likelihood that the retail market won't be significantly affected by the "fiscal cliff," as lawmakers should come up with a plan to prevent the situation, according to a report from Jones Lang LaSalle. There will also be additional help from consumers, who will likely increase spending levels into next year, making retail businesses more profitable.

However, there are some issues with the market. The firm's 2013 National Retail Real Estate Outlook noted the market may have some issues regarding occupancy and rental rates. This is due to some entities growing significantly, but moving into smaller properties. There is also a need for smaller stores to take advantage of the extra space left by larger companies.

"Corporate retailers that are doing well will continue to acquire new locations in prime real estate in an opportunistic, but strategic fashion," said Lew Kornberg, executive vice president of retail tenant solutions for Jones Lang LaSalle. "Real estate that is largely dependent on cash-strapped mom-and-pops and/or smaller, regional, players and lacking national credit retailers will continue to struggle, with the potential exception of grocery-anchored, community centers. The health of those grocery anchored centers is, however, closely tied to strength/appeal of the grocer."

The report also noted that construction for the retail sector should rise by 52 million square feet next year, which is approximately 20 million square feet more than this year. Plans for new store openings should jump 11 percent from the level in 2011.

Retail vacancy levels should drop, rents may rise
While Jones Lang LaSalle showed caution in its report, an analysis from the National Association of Realtors showed there should be improvements in the vacancy rate and the rental prices for the retail sector.

Retail rents should rise 0.8 percent this year, while another jump of 1.4 percent should occur in 2013, according to the NAR's commercial real estate forecast. Vacancies for the sector should drop to 10.8 percent during the final three months of this year, while it will again fall to 10.6 percent next year.

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