Key Performance Indicators Reveal Retail Market Strength
The Fredericksburg Region’s Retail market enjoyed another solid quarter in Q3 2015. Key performance indicators in the commercial real estate market revealed that the region’s retail market continues to improve and provide growth opportunities. In Q3 2015 retail vacancy declined, rental rates increased and net absorption remained positive. These key indicators are showing that the market has made it out of the lull from the recession and is starting to reach full stabilization across all measures. The pain of the recession has made it hard for many people to be optimistic about the real estate market but after fully digesting the statistics people’s mood may change:
- Vacancy Rates are less than 5% for only the second time since 2008
- NNN Rental Rates are over $15 psf for the first time since Q1 2012
- In the past 12 months Net Absorption is over 300,000 SF…that’s up 192% from the 5 year average 12 months
The overall retail vacancy rates declined by 20 basis point to 4.9% in Q3 2015. Retail vacancy rates dropped in every locality in the Region with the largest in Caroline County, declining 80 basis point from the previous quarter. Overall retail vacancy for the region is down over 30 basis points from the same quarter of the previous year. Another impressive mark was met in Q3 as every locality recorded vacancy rates under 6%.
Overall NNN retail rental rates for the Region jumped to $15.26, recording an increase of $0.38 from the previous quarter and up $0.66 from the previous year. Spotsylvania County (+ $0.40) and The City of Fredericksburg (+ $0.39) experienced the largest rent increases over the third quarter while the counties of King George (-$0.91) and Caroline (-$0.74) posted fairly large decreases. Stafford County recorded a slight increase (+$0.09) but still holds the highest rents in the region.
Net Absorption has remained positive for 5 consecutive quarters with the last quarter of negative absorption in Q2 2014. Over the past 12 months the retail market has seen high demand with over 300,000 SF in positive net absorption compared to the 5 year average of 102,000 SF over 12 months.
Leasing activity is also strengthening with over 441,000 SF of retail leased in the past 12 months compared to the 5 years average of 428,000 SF over 12 months. The outlook for the retail market looks bright for the remainder of the year and into next. With the announcement of a Walmart Supercenter coming to Caroline County and Lidl closing on their 2nd store sites in Spotsylvania County, the area should see an increase in supporting retail leasing and construction activity.