The Puget Sound retail market experienced a strong Q3,
with property sales nearly doubling from last quarter.
The overall NNN rental rate for all submarkets increased to $23.80/SF
Puget Sound retail sales totals continued to grow in Q3, propelled by the success of both e-commerce and traditional retailers. Nationally, sales ticked up in July due primarily to consumer expenditures at auto dealers and department stores. However, activity slowed in August and September, rising only 0.1% from July due to lower than expected sales totals for product categories excluding autos. Amazon still led the charge for e-commerce and is expected to garner 50% of all online orders by 2023. Interestingly, in an attempt to gain even more market share, the online retailer made brick-and-mortar headlines with the opening of two Amazon Go stores in Seattle: one in the CBD and another in South Lake Union. Malls continued to struggle this quarter, with the vacancy rate across the U.S. topping out at a record 9.1%. Sears’ recent Chapter 11 bankruptcy will likely cause further escalation of this trend. To offset increasing vacancy, malls such as Northgate are rethinking their fundamental structure, moving from purely retail to lifestyle centers in the hopes of drawing more consumer interest. On the Eastside, a similar plan is scheduled for Marketplace at Factoria, which will substitute hundreds of residential units and a hotel for the retail parcels currently on the site. One88, a high-end condominium tower currently under construction in the Bellevue CBD, posted retail asking rents as high as $70/SF. Tenants will be able to occupy that space in the spring of 2020.
- SeaTac/Burien’s Fred Meyer Redondo – Bldg. 4B was the only property over 20,000 SF to be completed in Q3, with Petco as the lone tenant.
- A total of 63,995 SF of properties delivered in Q3, a 76% drop from last quarter.
- While tenants occupied several large spaces this quarter, leasing was minimal, with Planet Fitness’ lease for 23,800 SF at Orillia Station Shopping Center in Kent Valley the top deal completed.
- As Puget Sound’s overall vacancy and number of available blocks of all sizes declines, rental rates will further increase.
- Towards the end of August, Brookfield Property Partners made headlines with its massive $15 billion purchase of GGP’s 125-property portfolio. This was quickly followed by CBRE Global Investors’ $1 billion investment in three super-regional malls across Georgia, Minnesota, and Texas. However, many buyers are hesitant to make similar acquisitions as the overall state of the market is largely unsettled. The closing of many big-box retailers will force mall operators to get creative with their offerings in order to reclaim consumer interest.