Seattle is 2017’s healthiest retail market: Report
Shopping Centers Today
Publish Date: March 30, 2017
Seattle is the top U.S. market for retail occupancy in 2017, thanks to a mix of rising rents and constrained construction, according to Marcus & Millichap’s latest ranking. The firm’s 2017 national retail index names the top five retail markets as being Seattle-Tacoma; San Francisco; Boston; Austin, Texas; and Nashville, Tenn., in that order. Markets are ranked based on their cumulative weighted-average scores for various indicators, including projected employment growth, vacancy, construction and rents.
Seattle-Tacoma climbed two places from last year, pushing the 2016 highest-ranked market, San Francisco, down to second place. Strong hiring and sizable rent growth helped boost the market’s health, according to John Chang, Marcus & Millichap’s first vice president of research services.
About 200,000 new jobs have been created over the past four years in Seattle-Tacoma, resulting in about 100,000 new households and driving incomes up by 17 percent. “The fast expansion in households propels the need for goods and services,” Chang wrote in the firm’s report. “Last year, retail sales in the metro increased at three times the national rate, and they will remain well above the U.S. level in 2017.”
The market’s vacancy is at its lowest level in 10 years. Projects scheduled for completion in Seattle-Tacoma this year include a 400,000-square-foot Ikea in Renton and the Fred Meyer–anchored Olympic Towne Center, in Gig Harbor.
Seattle-Tacoma’s strong retail market performance is luring buyers as well, especially private local investors, who are snapping up single-tenant, net-leased assets that generally begin in the 4 percent range, depending on quality of tenant and lease term. Small strip centers and assets with national credit tenants or a drive-through are especially sought-after, Chang reports. Developers are also buying properties on large lots with ample parking along major thoroughfares to convert to mixed-use buildings with ground-level retail, he says.
Overall, Marcus & Millichap is projecting that the U.S. will absorb some 81 million square feet of new retail space this year, with the national vacancy rate at 5.1 percent.