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Report paints brighter picture for retail

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After a dismal couple of years in the retail sector, a rosy report from the real estate investment firm Marcus & Millichap says vacancy rates and tenant concessions in Indianapolis are falling while rents and sale prices are poised to rise.

The report predicted retail spending in the market would continue growing, fueled by the addition of 16,000 jobs in the metro area, including 4,000 highly paid positions in the professional and business-service sectors.

That should fuel enough retail leasing activity to pull the vacancy rate down from 12.4 percent at the end of the first quarter to 11.9 percent by the end of the year, Marcus & Millichap said.
 
Asking rents will tick up less than a percent this year, to $14.26 per square foot, but effective rents will grow by 1.6 percent, to $12.13 per square foot. That’s a reflection of landlords granting fewer concessions to tenants. Concessions as a percentage of asking rent are predicted to fall to 14.9 percent this year in what would be the first year-over-year reduction in concessions in almost a decade, the report said.

Recent growth in the retail sector hasn’t yet caused a big bounce in sales of retail properties, Marcus & Millichap said. Buyers are back in the market, attracted by retail sales growth and low interest rates, but a lack of quality listings has suppressed sales.

The report predicts the supply of listings will grow as sellers try to take advantage of renewed interest among buyers.

Jordan Klink, an investment specialist with the local office of Marcus & Millichap, said the rising gas prices that crimped consumer spending after data for the report was finalized shouldn’t dramatically affect the local retail landscape.

Klink said the demand for properties among investors continues to be high in spite of fuel prices, which have trended down in recent weeks.

“Owners are evaluating and believe this is the time to get in,” he said.

Marcus & Millichap recently listed a 10,600-square-foot retail center that is 100 percent leased even though it commenced construction in 2009 during the depths of the recession. The Meijer Shops of Carmel at 1430 W. Carmel Drive is getting interest from regional and national investors because it’s in the strong Carmel submarket, Klink said.

Reports that characterize an entire market are useful to a point, but retail remains very location specific, said Scot Courtney, president of the local office of Lee & Associates.

Carmel and other submarkets, such as Castleton, Clearwater and Keystone, are a good reflection of the ongoing recovery, Courtney said. “If you compare what was happening 24 months ago to today, it’s a different world.”

Courtney agreed that concessions for tenants are beginning to soften. “Incentives are still stronger than they’ve been in a long time. It’s still a tenant’s market, but the market is improving from a landlord’s perspective.”

He said gas prices aren’t affecting the retail real estate market yet, but there is concern. “We’re going to be a lagging indicator on that,” Courtney said, noting that if the fuel price spike is short-lived, it’s less likely to take a bite out of the retail real estate recovery.

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  1. So much for Eric Holder's conversation about race. If white people have got something to say, they get sued over it. Bottom line: white people have un-freer speech than others as a consequence of the misnamed "Civil rights laws."

  2. I agree, having seen three shows, that I was less than wowed. Disappointing!!

  3. Start drilling, start fracking, and start using our own energy. Other states have enriched their citizens and nearly elminated unemployment by using these resources that are on private land. If you are against the 'low prices' of discount stores, the best way to allow shoppers more choice is to empower them with better earnings. NOT through manipulated gov mandated min wage hikes, but better jobs and higher competitive pay. This would be direct result of using our own energy resources, yet Obama knows that Americans who arent dependent of gov welfare are much less likely to vote Dem, so he looks for ways to ensure America's decline and keep its citizens dependent of gov.

  4. Say It Loud, I'm Black and Ashamed: It's too bad that with certain "black" entertainment events, it seems violence and thuggery follows and the collateral damage that it leaves behinds continues to be a strain on the city in terms of people getting hurt, killed or becoming victims of crimes and/or stretching city resources. I remember shopping in the Meadows area years ago until violence and crime ended make most of the business pack you and leave as did with Lafayette Square and Washington Square. Over the past 10 to 12 years, I remember going to the Indiana Black Expo Soul Picnic in Washington Park. Violence, gang fights and homicides ended that. My great grandmother still bears the scares on her leg from when she was trampled by a group of thugs running from gun fire from a rival gang. With hundreds of police offices downtown still multiple shootings, people getting shot downtown during Black Expo. A number of people getting shots or murdered at black clubs around the city like Club Six on the west side, The Industry downtown, Jamal Tinsley's shot out in front of the Conrad, multiple fights and shootings at the skating rinks, shootings at Circle Center Mall and shooting and robberies and car jackings at Lafayette Mall. Shootings and gang violence and the State Fair. I can go on and on and on. Now Broad Ripple. (Shaking head side to side) Say It Loud, I'm Black and I'm Ashamed.

  5. Ballard Administration. Too funny. This is the least fiscally responsive administration I have ever seen. One thing this article failed to mention, is that the Hoosier State line delivers rail cars to the Amtrak Beech Grove maintenance facility for refurbishment. That's an economic development issue. And the jobs there are high-paying. That alone is worth the City's investment.

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