Retail Improves in First Quarter
The Metro Detroit retail market posted an overall vacancy rate of 5.7%, down thirty-basis points since the fourth quarter 2017. Asking rental rates in the first quarter were $13.05 per square foot and net absorption is positive with 787,819 square feet absorbed in the first quarter. The market improved in 2018, compared to the fourth quarter 2017; vacancy was at 6.0% and asking rental rates were $12.97 per square foot.
The decisions on how and where we shop continues to affect the retail landscape as we’ve come to know it. Due to a lack of traffic and in a world where convenience rules, the big box footprint we became accustomed to is becoming extinct in today’s shopping world. As retailers rework their strategies to overcome these changes and move forward, some were unfortunately met with store closures. In 2017 alone, retailers occupying 105 million square feet closed locations throughout the United States. In Michigan, we witnessed dozens of household names such as Sears, Kmart, The Limited, Macy’s and other underperforming stores disappear from the landscape. Adding to the list of closures in 2018, department store chain Bon-Ton and the retail giants Toys R US and Babies R US recently announced plans to close 180 stores. It’s not all bad news though. In 2018, we expect to see less store closures as retailers move toward a healthier business model and footprint. Many of these old stores are being repurposed from traditionally hard to fill big box space, to accommodate today’s shopper, which means smaller footprints and mixed-use variety. Retailers such as Ulta, Target and Meijer are already working to adopt smaller footprints in urban areas such as the Meijer slated to open in Downtown Detroit. The super home goods store, At Home, is finding that stores formerly operated as Sears and Kmart are a comfortable fit for their footprint and has added a couple stores to their Michigan portfolio, including the recently opened location in Roseville. In the world of chain discount stores, Sierra Trading Post recently opened stores in Novi and Ann Arbor with plans for another store in West Michigan in 2018. Aldi plans to renovate 20 Detroit area stores by the end of 2019 and it’s still building in Michigan with a store in Ann Arbor and west Michigan coming soon.
Without a doubt there is growing interest in the Motor City from local and national retailers which is fueling supply and demand in Detroit and other downtown markets. Planet Fitness plans four new gyms in Detroit in 2018 and H&M is looking to join Nike, Under Armour, John Varvatos and other national retailers downtown. We look forward to flavor filled landscapes and destinations offering a variety of entertainment, theater, hotels, restaurants and retail experiences with ambiance and amenities at the center of the consumer’s focus.