Regions Where Retail Rents are Soaring (and Why)
There are many reasons a retail business would choose to lease their CRE space rather than purchase it (this is a whole other subject in itself for another day). As a leasing tenant, you'll surely be interested to know that there are several different dynamics and factors that could cause your rent to rise -- sometimes even dramatically!
Common factors that may contribute to a rent rate hike can include an increase in operating expenses, the sale of your building, pre-set increases throughout the term of your lease, and the expiration and renewal negotiation of your current lease. Additionally, another factor that can contribute to an increase in your monthly rent is location. It's the basic concept of supply vs. demand: as the number of vacant and available CRE spaces decreases, the demand increases -- and so does the cost of rent.
It's true that CRE is on the downturn in some areas. In fact, some areas once thought to be immune to downturns are having majorly rethink their strategy and lower rates just to attract and retain tenants; however, there are some areas where the opposite is proving to be true.
Here are 4 areas where retail rent is on the rise...
Atlanta is in the middle of one of the hottest CRE markets in the city's rent history. To start off 2018, Atlanta saw businesses take up more than 840,000 square feet in less than 3 months. This is a marked increase over the first quarter in 2017, with businesses actually letting go of space. Thanks to new industries and sectors coming in to the market, Atlanta rent is growing at a fast and frenzied state -- causing CRE professionals to occasionally pinch themselves in disbelief at their good fortune.
Retail rent in Portland is in the middle of one of the largest rent hikes in the United States. On average, retail space for rent is up 22% in Portland -- jumping to an estimated $18 per square foot per year (average asking price). Move into Portland's historic core, and you'll be paying even more -- average asking price per square foot per year is closer to the $25 - $35 range here.
Charleston, SC is regularly ranked among the best cities in the world -- and for good reason. History abounds, the people are notoriously friendly and charming, and the job market remains steady and strong. It should come as no surprise, then, that retail space is at a premium right now. CRE rent throughout the Charleston area have skyrocketed to $27 per square foot. In the hot historical district downtown, rates are even higher -- nearly $40 per square foot.
Nashville is one of the hottest and trendiest markets right now. Today's Nashville is more than just country music and cowboy boots. Shopping, fine dining, and entertainment are just some of the things Nashville has going for it. And, no surprise, the cost of retail rent reflects its popularity. Some locally owned retailers are struggling to keep up with a nearly 20% increase in rent -- to $20 more per square foot.
Retail in 2018 & Beyond
While retail in some cities is suffering, it is still surviving, and even thriving, in these markets and more. Keep an eye on these hot regions primed for CRE growth in 2018 & beyond!