By Adrian Maties, Associate Editor
Retailers operating in the Cincinnati area are thriving. According to Marcus & Millichap, retail spending has increased in the region, thanks to the rising employment, household income and consumer confidence. As a result, this combination of factors has encouraged many retail tenants to expand their footprint in the area.
As they pick up more and more of the available space in the region, retailers are helping push down the metro area’s average vacancy to below pre-recession levels. In its Q3 report for 2014, Marcus & Millichap said that the region’s vacancy reached 8.2 percent at midyear and predicted that it would continue to drop to 7.7% by the start of 2015, with net absorption exceeding 1.1 million square feet. Northern Kentucky has the tightest vacancy in the region, while the Western Cincinnati submarket has the highest.
The highest average rents in the Greater Cincinnati area are located in the Cincinnati and Eastern Cincinnati submarkets, at $13.09 per square foot and $12.23 per square foot respectively. According to Marcus & Millichap, average rents rose 6.9 percent in the four-quarter period ending in June 2014, to $10.83 per square foot. The real estate services firm also predicted rents would continue to rise to 11.07 per square foot by the end of the year.
Greater Cincinnati’s tight vacancy has also influenced developers. More than 1 million square feet of retail space are currently under construction throughout the market, with an additional 2.8 million square feet is in the planning stages. However, most of these big-box projects are expected to come online over the next few years, which means that, for the time being, retail vacancy will continue to compress.
Demand for Cincinnati area retail assets is also on the rise, as a wide array of buyers are looking to acquire both multi-tenant and single-tenant properties. And, unlike the previous years, owners who have held onto properties through the recession are now more motivated to sell because of the rising property values, keeping transaction velocity elevated.
Some of the Cincinnati area’s most notable retail transactions of 2014 include the Inland-PGGM joint venture’s acquisition of Phase I and Phase II of Newport Pavilion, for a total of almost $67 million, as well as MetLife’s acquisition of the West Chester Retail Center,for $68.6 million.
Charts courtesy of Marcus & Millichap.