Areas Commercial Vacancy Rates Headed in the Right Direction (Opinion)

I think this was my 14th year in a row to attend the International Council of Shopping Centers conference, which took place May 20-23 in Las Vegas. This conference is considered the premier global trade association gathering for the shopping center industry.

Developers, brokers, investors, retailers, municipalities, engineers, architects, contractors, tradesmen and more all converge over four days. For many years, the venue has been the convention center of Las Vegas. About 33,000 people attended last week’s conference, as well as about 1,000 exhibitors. This was far from the record high of more than 50,000 in 2007, yet an increase from last year’s estimated attendance of about 30,000.

It’s unclear how many of this year’s attendees were from Arkansas, but our state has more than 200 registered members, and a Regional Idea Exchange will be held in Northwest Arkansas in February.

The ICSC holds a similar conference each year on an international platform. The ICSC Retail Real Estate World Summit will be held Sept. 11-14 in Shanghai, Cina. Hundreds already have registered, and most of the U.S. companies that operate internationally will be represented. The conference will address topics such as Socio Economic Wave, Plateauing of New Development, Retailers Going Global, Capital Flows, and Collapse of Employment.

The ICSC is led by president and CEO Michael P. Kercheval. At the World Summit, Kercheval will kick off the conference by delivering a State of the Union-style speech, and also talk about the ICSC’s impact on the success of the shopping center industry over the last 50-plus years.

But, back to Las Vegas. The feel of this year’s conference was far more optimistic than the past several years. Attendees seemed to greet and meet with purpose and focus, unlike previous years when attendees seemed to be handing out more resumes than business cards.

Retailers seemed open to discussing new locations, too, while developers and owners talked financing and leasing, as well as about some of the political issues within the industry. Though new large developments on a national scale still appear scarce, occupancy through absorption seems to be on the increase.

According to the CCIM Institute’s most recent issue of Investment Trends Quarterly, the national vacancy rate among retail shopping centers at the end of 2011 was 11 percent, which was flat with the fourth quarter of 2010. This compares to an 8.2 percent rate at the end of the 2012 first quarter in Northwest Arkansas, said Jordan Ligon of Xceligent Inc. Xceligent is a verified provider of commercial real estate information throughout the U.S.

That number is in line with what historically has been the case in Northwest Arkansas, where we have generally performed better than national average. Our 8.2 percent vacancy rate among retail centers shows strong signs of a good recovery, especially considering we ended the fourth quarter of 2010 at 8.4 percent, and just a year ago, were sitting at 9.3 percent.

At the Pinnacle Hills Promenade, leasing interest has increased over the last three to six months, according to David Faulkner, senior general manager for General Growth Properties. Vacancy has improved significantly due to new retailers who have joined the center. Such additions include Arkansas’ first Cabela’s store. The roughly 106,000-SF store is scheduled to open later this summer.

Additionally, Fresh Market is taking the former 18,000-SF home of Borders bookstore and is expected to open during the third or fourth quarter. Houlihan’s restaurant and bar, meanwhile, is taking over the former 9,000-SF Granite City location and plans to open in August.

Other new tenants are in the works, Faulkner said. He also mentioned that office lease interest has increased for space on the second floor of the Promenade.

The retail sector of commercial real estate is usually a good lagging indicator that the residential sector is rebounding, consumer confidence is improving and job growth is at least stable.

Randy L. Crossno, CCIM, is the principle broker of Capstone Commercial Advisors in Rogers, and vice president of the Northwest Arkansas chapter of CCIM. For more info, visit www.CapstoneCREA.com.