Research firm Reis Inc. reported that both the national average
asking rent (at $21.39 per sq. ft.) and effective rent (at $18.73 per sq. ft.),
which excludes landlord concessions, increased 1.7
percent in the second quarter 2019 compared with one year
earlier. Reis reported that rents at regional malls were up 0.2 percent.
The sector is
seeing a “continued picture of slow, creeping rent growth in terms of both
asking and effective rents that are pretty much growing in step around the
mid-1 percent range year-over-year,” says Matthew Schreck, senior quantitative
strategist at Ten-X Commercial, an online real estate marketplace. That’s slow
compared to the last expansion in the early 2000s, when rents were growing in
the mid-2 percent to as high as the upper-3 percent range, Schreck notes. But
they’re still moving in the right direction.
“Rents are growing across property types and across markets, and I think it has
more to do with the fact that we’re in a longstanding, fairly robust economic
expansion,” he says. “The unemployment rate is really low. Incomes are growing.
People are spending their money and, in a sense, a rising tide lifts all
boats.”
But the degree to
which they’re lifted varies, Schreck adds. Some sectors and some markets have
seen much stronger real estate recoveries in this cycle than others, and retail
has been among the slowest to come back. He notes that the rate at which the
rents are growing is a bit disappointing. “And it sort of begs the question of
what would these [weaker] markets look like in the event of any kind of an
economic downturn.”
Reis research
reveals that rent growth in the second quarter was healthy in a number of
metros, with eight boasting rent growth of 1 percent or more. Metros with the
highest effective rent growth included Seattle; Nashville, Tenn.; Sacramento,
Calif.; Oakland-East Bay, Calif.; and Louisville, Ky.
However, 19 metros
posted an effective rent decline in the quarter, including Little Rock, Ark.;
Kansas City; Omaha, Neb.; Lexington, Ken.; and St. Louis.
