Retail Market Report Q1 2016
National retailers dominate local retail market; occupancy costs continue to rise
VACANCY AND ABSORPTION TRENDS
After a record-breaking level of absorption during 2015, the Minneapolis-St. Paul retail market continues to show strength and strong demand. Over 1.1 million square feet of retail space was absorbed during 2015, the most absorption we have recorded in this market for more than 10 years. Vacancy as of the first quarter of 2016 is 4.4 percent, flat since year-end. There was 35,235 square feet of absorption, a slowing since Quarter Four. We expect absorption to pick up through the end of the year. There is 1.3 million square feet of space under construction, including four Hy-Vee stores, a Fresh Thyme Farmers Market, and a Whole Foods store.
The highest demand exists for spaces in the 2,000 to 3,000 square-foot range and competition is strong. Due to the attractive demographics and incomes in the region, national tenants have pushed to expand in the Twin Cities. Locally-based retailers have slowly been pushed out and we are seeing a significant reduction in locally-owned retailers opening. The exception is in high-end spa and skin clinics and a few highend chef-driven food concepts.