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News release


A Tale of Two Retail Markets: It Was the Best of Times, It Was the Worst of Times

Population growth and spending trends cause a divergence in the retail real estate market

ATLANTA, Sept. 4, 2013 - When Charles Dickens wrote his famous opening line, “It was the best of times, it was the worst of times,” he couldn’t have realized how apt it would be for the retail real estate market more than 150 years later. According to Jones Lang LaSalle’s U.S. Summer Retail Outlook, varying population growth and purchasing power across U.S. markets will widen the performance gap of centers creating a very different outlook for owners and occupiers of these assets.  

“Competitive centers[1] that are well-tenanted and ideally-located are seeing vacancy rates near four percent, and we expect them to see further improvements. However, underperforming centers that can’t sustain the needed sales volumes to remain competitive due to their surrounding demographic may continue to trend downward, and require eventual demolition, rebranding or a conversion,” said Greg Maloney, President and CEO, Jones Lang LaSalle Retail. “The retail market is making strides toward improvement, but there are still major hurdles to overcome before we see complete restoration.”

Catering to the Consumer
During the last year, consumer confidence took a deep dive, but rallied this summer as consumers benefited from higher stock and housing values, falling gasoline prices and lower debt levels. The improvement is expected to be tempered by high unemployment and slow income growth.

“Consumer confidence remains volatile, as shoppers adjust to changes in their income and the rising cost of goods. Nonetheless, we are confident about the modest growth and expansion of retailers, as performance heads in the right direction,” added Lew Kornberg, Leader of Jones Lang LaSalle Americas Retail Tenant Representation practice.

The Supply Spigot
New retail supply is at the lowest level in a decade, with only 16.9 million square feet of development underway. The supply coming online is mainly big-box single-tenant stores anchored by discount retailers. Absorption has been kept in check due to constricted supply and fewer mass store closings. In the first half of 2013 an average of 14 million square feet was absorbed nationwide. Overall retail market vacancy remains well above the 10-year average, although the rate is 80 basis points (bps) below the peak of the cycle.

Adjustments to consumers’ needs have pushed middle-of-the-road retailers out of the mix, as niche-specialty shops and regional mega-stores move in. Food, beverage, clothing and healthcare retailers will see improvements in markets where population growth exceeds the national average. In the next 12 months nearly 60 percent of expected store openings fall into the food and beverage category[2]. Grocery remains a hot commodity with aggressive openings and healthy year-over-year sales growth.

Retail Pricing Posed to Rise
The retail investment market traded $22.5 billion[3] in the first half of 2013, and sellers soon may be able to command higher prices for their retail properties. Although occupancy rates and rents continue to rise ever so slightly, there are important signs that the sector could be on the verge of improvement and, consequently, higher sales values and fairly consistent cap rates. Additionally, CMBS servicers have been much more conservative when liquidating troubled assets as properties return to full value.

Jay Koster, President of Jones Lang LaSalle’s Capital Markets Group added, “The U.S. retail market has become the object of much more intense investor interest and sales of unanchored centers have posted the largest gains in volume and price. We expect grocery-anchored and mall transactions to increase in the latter half of 2013 as properties stabilize.” 

Market Moves: U.S. Cities with the Deepest Vacancy Declines

  • Atlanta: Year-over-year vacancy declined 50 bps and will push up rents, but such growth is still several quarters away. In the near term, landlords are still offering tenant-favorable concession packages and lease structures. Construction starts will remain sparse near term, restricting themselves to affluent areas in the northern part of the metro.
  • Dallas: The retail vacancy rate fell 100 bps year-over-year, while the rental rate inched up 0.4 percent over the same time period. JLL expects vacancy compression to continue through 2013, although not beyond, thanks to equilibrium between supply and demand. Rents have started to rise and will continue as demand gets stronger. However, it will take another two to three years for rents to return to pre- recession levels.
  • Seattle: The long-run outlook for demand is solid as above-average population expansion and employment growth in high-paying tech industries will raise retail sales in Seattle. Rents are expected to start expanding this year as vacancy continues its descent with year-over-year declined of 70 bps.
  • South Florida: Palm Beach County: The retail vacancy rate fell 70 bps year-over-year due to strong net absorption, which outpaced deliveries. Retail sales have grown thanks to increased tourism. As a result, cumulative demand growth should best the national average. Rent growth in 2013 is expected to be the strongest the market has seen in years and is expected to last through 2015.


Jones Lang LaSalle Retail is a full-service provider of retail services nationwide. The firm offers a full array of services to its clients, including brokerage services for landlords and tenants, property management, financial reporting, tenant coordination, specialty leasing, marketing, research, development and receivership services.  For more information on Jones Lang LaSalle Retail, visit

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information, visit

[1] Centers with above 80 percent occupancy
[2] RBC Capital Markets
[3] RCA 2013 Mid-Year Review