Boston’s retail vacancy rate was tied with Austin as the 12th-lowest in the country, and was one of 38 markets that saw a decline in vacancies in the second quarter.
Craig Douglas
Managing Editor, Online Research- Boston Business Journal
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Greater Boston’s retail real estate market is far from red hot, but it still qualifies as one of the country’s best bets among investors and property managers alike.
That’s according to a new report by real estate research firm Reis Inc., which said the region’s retail-property vacancy rate was 6.5 percent as of June 30, some 10 basis points better than where it was three months earlier. The local market’s vacancy rate was tied with Austin as the 12th-lowest in the country, and was one of 38 markets that saw a decline in vacancies in the second quarter.
The Reis analysis included changes in retail vacancies and rents in 77 major U.S. markets.
Greater Boston’s relatively tight inventory for retail space is contributing to comparatively high rental rates. According to Reis, the region’s average effective rent — essentially what landlords receive net of tenant concessions — of $20.38 per square foot ranked 15th nationally and marked a 40-basis-point increase over what was recorded at the end of March.
Among the Reis retail report’s other highlights:
- The nation’s retail-vacancy rate was 10.3 percent as of June 30, a 10-basis-point improvement over Q1 and a 20-basis-point improvement over the rate recorded a year earlier. The national vacancy rate has decreased by approximately 1 percent since hitting its peak in 2011’s third quarter.
- Effective rents were up 0.5 percent in Q2 and ended June 30 up 1.7 percent on a year-over-year basis. All but 10 of the markets analyzed reported increases or flat rental rates in the second quarter. Reis said some 11 markets, including Boston, reported year-over-year increases in rental rates of at least 2.5 percent.
- Regional malls posted an average vacancy rate of 7.9 percent, a 40-basis-point improvement over the prior year’s mark. Mall vacancy rates are down from their most-recent peak of 9.4 percent in Q3 2011. Average rents were up 1.8 percent year-over-year, although Reis warned of potential weakness amid persistent store closings and retailer bankruptcies.