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Report: Consumer sales growth adding stability to retail real estate market

Chicago -- A report released Monday by Jones Lang LaSalle found that the U.S. retail real estate continued to show signs of stability in second quarter 2012.

According to Jones Lang LaSalle’s Mid-Year Outlook, the modestly positive outlook was led by major markets with strong demographic and population growth, a lack of new, high-quality supply and improving leasing velocity.

“Upward retail sales figures and a growing population continue to drive a modest recovery, though many remain cautious because of the European crisis and upcoming U.S. presidential election,” said Greg Maloney, president and CEO of Jones Lang LaSalle Retail. “We are seeing retail real estate stability and growth in select core markets and expect to see some secondary markets with stronger economic drivers soon emerge from the downturn.”

For the third consecutive quarter, vacancy remained flat at 6.9%, kept stable by net absorption of slightly more than 2.8 million sq. ft., modest compared to previous quarters.

Deliveries were relatively low as well, coming in at 7.2 million sq. ft. While vacancy rates ended the quarter approximately 50 basis points below their peak, they were still significantly higher than their trough in 2006. Tenants currently remain in control and should continue to be through 2013, according to the report.

Additional retail leasing highlights include the following:

  • Limited new supply will continue to put downward pressure on vacancy rate for some time;
  • National retail rents fell 1.7% year over year and inched down 0.5% in the second quarter;
  • Power center rents in major markets continue to fall the most across retail property subtypes, declining 3% year over year, as landlords offer attractive rates to tenants filling vacant spots; and
  • Specific markets that saw year-over-year growth include Miami, Washington, D.C., Tampa and Boston.
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