Report: Luxury retailers and discounters most likely to expand

New York— Backed by an improving economy, a recent surge in jobs and ten consecutive months of rising retail sales, a broad range of retailers are poised to fill up empty retail spaces over the next 12 to 18 months, according to Colliers International, the third-largest commercial real estate services company in the world.

Retailers are actively discussing new store openings—including construction of new stores in select markets. In particular, luxury retail, restaurants and value and discount retailers—including discount apparel and dollar stores—are the sectors most likely to expand, accoding to Colliers.

The company also suggests that if a perfect storm materializes this year—declining gas prices, stabilizing home prices and improving employment figures—the retail market could generate as much as a 4.5% increase in consumer sales for the 2011 winter holiday season.

National retail vacancy now stands at roughly 11%, essentially flat on a year-over- year basis. And despite some improving leasing activity over the past several months, total absorption has remained under 2 million square feet nationally, as several big box retailers have put more than 65 million square feet of space back on the market. But with several improving sectors and densely populated urban markets rebounding more quickly, the retail market is loaded with potential.

"The national retail market is poised for a return to sound fundamentals and good credit retailers," added Ross Moore, chief economist in the U.S. for Colliers International. "There is polarization in the sector, with the high-end market on one end and discount retailers on the other. Overall, mid-range retailers have yet to see the impact of an improving economy, but there is more strength in the retail market than is being reported."

Colliers also noted that the strongest retail markets are predominantly in gateway cities—New York, Boston, Washington, DC and West Los Angeles—while Dallas and Houston also boast vibrant retail sector.

Polarization is also occurring within the shopping center segment, where high-quality, well-located retail assets are reporting consistent leasing activity, while poorly located, marginal centers continue to struggle.

Rents in high-end retail corridors appear to have stabilized and in many cases are beginning to rise, with New York City's Fifth Avenue and Madison Avenue, Chicago's Michigan Avenue and San Francisco's Union Square leading the way.