Stores hold up in ’16, face turbulence in ’17
It is not the most inspiring retail slogan: “Held Up Pretty Well in 2016.”
But it beats the buzz for 2017: “Uneven Performance.”
That’s how Price Edwards & Co. framed Oklahoma City’s retail property market at the turn of the year.
“Pretty well” wasn’t bad. In fact, retail property registered “probably the best performance of any asset type” last year, the firm said in its year-end retail market summary available at www.priceedwards.com.
That’s even with a slight increase in vacancy to 10.6 percent from 10.4 percent at midyear.
“But if you dig into the numbers, we added about 1 million square feet during the course of the year, and 700,000 of that was absorbed, which is good,” said Jim Parrack, vice president and retail specialist at Price Edwards. Occupancy, rents, lease volume and new construction all performed well, he said. But. “There are a few items on the horizon that are cause for concern,” Parrack said. “Continued low oil prices are one of them. Incomes have been down, especially the second half of last year ... and sales tax collections for the city have been down almost every month this past year.”
So, Price Edwards’ general forecast for 2017: Another slight rise in vacancy, flat rents and “uneven performance.”
Discount chains fared best last year and will continue with strong performance this year, Parrack said Thursday morning outside a busy T.J. Maxx store at Edmond Crossing Shopping Center at Broadway and 33rd Street.
“If you look at the retail environment right now, discounters are doing well, and T.J. Maxx is one of the prime ones. So if you look across the market — and we really expect this to continue — Ross, T.J. Maxx, Academy, Five Below, that group of discounters is kind of leading the market right now,” he said.
Development
Price Edwards reported the completion — or “near completion” — of the following projects, most of them pre-leased:
•The Market at Czech Hall, Interstate 40 and Czech Hall Road, phase one including Academy, Ross and Marshalls, 180,000 square feet.
•Sooner Rose, SE 15 and Sooner Road, with Academy and Hobby Lobby.
•Shoppes at Quail Springs, NW 148 and Pennsylvania Avenue, 96,000 square feet.
•University North Park, Norman, two new outbuildings and three stand-alone restaurants.
•WinCo, under construction in Moore and will start construction soon in three other locations.
•Chisholm Creek, Memorial Road and Pawnee Drive, added 76,000-squarefoot Tract 30.
•Numerous 10,000- to 20,000-square-foot strip centers.
Investment sales
Seven retail properties larger than 25,000 square feet sold last year — mainly smaller, none over 100,000 square feet — for a total of $25.7 million, “below historic levels,” Price Edwards reported. Two large Class A properties were marketed for sale but didn’t sell, Quail Springs Marketplace and 240 Penn Park.
“While there was significant interest in these properties, many of the institutional buyers who have been active in our market the last several years who have (driven up prices and) driven down capitalization rates (a way to measure rate of return) were absent from the bidding,” Price Edwards said. “Consequently, if the properties trade, they are expected to trade at a somewhat higher capitalization rate, putting them in play for private national/regional firms as well as local investors.”
Quail Springs Marketplace also lost some of its shine at the worst time for any potential investor wanting to pick it up.
“At the end of the day, it didn’t sell primarily because Golfsmith declared bankruptcy in the middle of the marketing process,” Parrack said.