Moving into the last part of 2009, retailers were holding their breath in the hope that final holiday sales would help the bottom line and give them a boost into 2010.
Retail sales for the two-month period ending in December were $509.3 billion, up 2.3% from a year earlier, the Commerce Department reported this month.
The numbers were better than retailers’ low expectations.
Consumer confidence has improved somewhat, as well. The most recent Conference Board consumer confidence index was 52.9, up from 50.6 in November.
While the index has been making moderate gains of late, it is still at a 26-year low, with the index being at 75.8 in December 2007, the Conference Board’s research center said.
While the fourth quarter saw some positive signs for consumer spending, the retail property market continues to see a decline in overall demand.
In the fourth quarter, the overall vacancy rate for the Orange County retail market saw another increase, rising 5% to 8.3%. This is a 32% rise from a year earlier.
Increased vacancy levels led to 137,614 square feet of negative absorption, bringing the year-to-date total to 616,912 square feet of negative absorption.
The majority of the fourth quarter’s negative absorption was concentrated in neighborhood and strip centers, which was offset by some positive momentum seen in power and specialty centers.
The average asking lease rates for the county declined 2 cents in the fourth quarter to $2.55 per square foot, remaining 8 cents below recorded asking rents just one year earlier.
Construction of new retail space in OC has officially come to a halt. Following 2008, when nearly 1 million square feet of new retail space was completed, no new centers were delivered to the market in 2009.
Construction at Pacific City, the 191,000-square-foot specialty center in Huntington Beach, stopped in the fourth quarter, leaving no centers in the development phase.
The uncertainty of the market has only increased reluctance by developers to begin construction of any new retail space. Several projects totaling 1.8 million square feet remain in the planning phase, some of which have been put on hold indefinitely until economic stability can be achieved.
Submarket Details
The West County submarket saw the most significant rise in vacancy, increasing to 9.8% from the 8.6% posted in the third quarter. Central and South County also saw increased vacancy levels. Central County rose to 8% and South County rose to 8.5%.
Despite seeing a decline in the fourth quarter, specialty centers continue to have the highest vacancy level, at 12.6%, while power centers now hold the lowest vacancy rate of 5.4%.
The majority of the fourth quarter’s negative absorption was in the Central County submarket, which posted more than 68,000 square feet of negative absorbed shop space. West County had the second largest amount of negative absorption with 44,414 square feet, while South County followed with 30,374 square feet of negative absorption.
The Central Coast recorded positive absorption for the second consecutive quarter, posting a relatively flat 5,819 square feet, while North County saw minimal negative absorption with 408 square feet.
Central Coast has the widest range of lease rates, from a low of $1.10 per square foot to a high of $6 per square foot for specialty centers, producing an overall weighted average of $3.51 per square foot.
Data and analysis by CB Richard Ellis Group Inc.
