The grocery-anchored shopping center vacancy rate in suburban Maryland declined to 5.6 percent at the end 2011, from 6.0 percent one year ago. Northern Virginia vacancy was 5.5 percent at year-end 2011, up from 5.3 percent one year ago.
The District, Arlington and Alexandria experienced no change in vacancy compared with a year ago, remaining at 5.0 percent at the end of 2011. The large inner suburban counties of Fairfax, Montgomery and Prince George’s experienced a slight decline of 30 basis points during 2011, to 4.8 percent. This compares favorably to outer ring areas such as Loudoun and Prince William counties, where vacancy rose to 7.9 percent.
Rental rates at grocery-anchored centers increased 2.1 percent in 2011, after declining 2.4 percent in 2010. The region’s average in-line tenant rents were $31.65 a square foot at year-end 2011, compared with $31.86 for suburban Maryland and $31.15 a square foot in Northern Virginia, up 1 percent from 2010.
The District, Alexandria and Arlington experienced a healthy rise in asking rates at 6.8 percent during 2011, as tenants sought to remain in the urban core, with only 200,000 square feet of available space. The inner and outer rings experienced rent increases at a less robust pace, at 2.1 percent and 0.5 percent respectively.
Overall, newer grocery-anchored shopping centers outperformed market averages during 2011. Centers built after 1999 in the Washington metro area hold a 6.5 percent vacancy rate at year-end 2011, a 70 basis point decline during the past year. Centers built in 1999 or before hold a 5.2 percent vacancy rate at year-end 2011, remaining unchanged from one year ago.
We expect the retail market in the Washington metro area to gradually recover during 2012. Consumer spending will be muted compared to prior expansion periods, but we expect shoppers to focus spending at wholesale merchants as economic uncertainty persists. However, luxury retailers should continue to experience steady demand, as consumers with cash are showing a renewed eagerness to spend.
We expect the vacancy rate for grocery-anchored shopping centers to decline steadily during 2012, as new retailers enter the Washington market and existing retailers look to expand. We also believe property owners will continue to invest in repositioning existing under-performing assets — either upgrading or transforming shopping centers into a grocery-anchored format.
Elizabeth Norton is vice president at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.
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