Rebound unlikely for big retailers in 2017

As stores shut down, vacancies accelerate

A new report from commercial brokerage CBRE suggests this will not be the year that brickand-mortar retail rebounds, at least not for large spaces and big box national retailers.

CBRE’s Marketview report for the first quarter of 2017 predicts that some national value-add retailers, such as Ross Dress for Less and Skechers Shoe Outlet, will move in to fill large vacancies left by Macy’s, Sports Authority and similar stores. However, the report continues, “Gordman’s bankruptcy will lead to closures in the Cottonwood and Uptown submarkets, which will nearly offset these positive activities.”

As reported in Monday’s Business Outlook, the retail vacancy rate in the fourth quarter of 2016 was 10.8 percent of more than 26 million square feet of retail space in the Albuquerque area — encompassing Albuquerque, Rio Rancho, Placitas and Bernalillo.

That jumped to 12.6 percent in the first quarter, with Downtown and Uptown continuing as the submarkets with the highest rates at 24.2 percent and 23.6 percent respectively.

The report says the Cottonwood and Uptown submarkets would continue to get hit hard by national tenant bankruptcies but that Coronado Center and Winrock Town Center would add new tenants in the coming year.

“Super-Regional Centers,” like Cottonwood Mall, have been hit hardest with a 26.5 percent firstquarter vacancy rate, up from 20.5 percent at the end of last year.

CBRE commercial broker Lia Armstrong says the numbers can be misleading. “In a town our size, a large box like Macy’s vacating can (cause) a huge swing in the (vacancy rate) numbers,” said Armstrong.

The loss of Macy’s created a 165,000-square-foot vacancy, andthe Cottonwood submarket jumped from a 4.3 percent vacan-

cy rate to 9.4 percent.

Last year’s fourth quarter report suggested that while large-box department stores are failing nationally, smaller retailer occupancy was remaining steady.

The first-quarter report suggests those trends are continuing. Developments oriented toward smaller retailers, like strip centers and neighborhood centers, had small decreases in their vacancy rates from the end of 2016.

The most positive aspect of the report involves new construction. The report shows that as of the end of the first quarter, nearly 200,000 square feet of new space, like Heritage Marketplace at Ladera and Unser is under construction or completed. The new construction is already 91 percent leased.

Despite recent strong growth in e-commerce, the CBRE report predicts that physical retailers are not going to disappear, “at least not anytime soon.”

Armstrong says that the reality is not as dark as the report suggests. “It’s evolution, and that’s not all negative.”

Armstrong said she expected Albuquerque’s retail scene will turn around in the “next six months to a year” as experiential and entertainment businesses backfill space and value-added retailers become the new big boxes.