CoStar: Like fads, retailers come and go

By most measures, the Washington retail market is in good shape. At the end of June, the region’s retail property market posted its fourth consecutive quarter of positive net absorption, or more tenant move-ins than move-outs. The retail market here is following the national trend, but with an average overall vacancy rate of just 4.5 percent, the market has much less vacant space than the national average of 6.4 percent.

Another indicator of healthy demand for retail space in the market is rising rents. The D.C. retail property market has seen year-over-year rental rates increase more than 3 percent, putting average retail rates at just over $21.50 per square foot.

However, the recent news of the fad-following retailer Crumbs Bake Shop closing over 60 stores nationwide, including its six stores in the D.C. market, has led some to wonder what effect the specialty cupcake bakery and other fad retail stores can have on local and national real estate trends.

While there will always be new up-and-coming food trends, the specialty retailer scene today is dominated by cupcakes and frozen yogurt. Even if the new investment group reported to be buying the chain decides not to re-open the D.C.-area stores, the impact will not be noticeable. One thing that is typical of these type of retailers is their small store size.

None of the Crumbs Bake Shops in the D.C. area were larger than 2,000 square feet. Additionally, sampling more than 50 frozen yogurt shops among three chains in the D.C. area, the average square footage per store comes to just over 1,400 square feet.

This eases the impact if only a small number of shops close down. Of course, should one of the bigger chains decide to close that could really make a dent in the market. Because of the saturation of the market and high number of stores per brand, if even just one of the three larger frozen yogurt businesses in the area go under, the area would see anywhere from 8,000 to almost 60,000 square feet left vacant.

We have seen trendy stores rise and fall since before fondue was today’s cupcake, so this is nothing new for the real estate market. With new retail construction well below historical levels for the region and continued healthy demand for retail space, stores closings are an expected part of what most consider to be a strengthening retail market.

Kirstie Boatright is a research manager for CoStar Group in the District.

Source: CoStar

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Here is a look at how retail vacancy and rental rates have been faring since the first quarter of 2012.

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