There's a reason why outdated shabby retail centers—that wouldn't get a second look five years ago—now have multiple LOIs on them. Beggars can’t be choosers. Tenants are going into the worst of the worst spaces because there is nowhere else to go.
Retail Solutions founder David Simmonds tells us retail tenants in the best locations can expect to pay $36 to $43/SF plus nets, but rates are approaching those numbers even in the outlying suburbs. Developers will have to start building soon because there’s not enough space in the market with 96% occupancy, he says.
The problem with Austin, David tells us, is that when people want to turn on the development faucet, the process with the city takes so long. This benefits projects already on the ground and keeps them leased up. When developers want to be aggressive, their most immediate options are these small outparcel deals. They can spend $15 to $20/SF on the dirt and generate $35 to $40/SF in rent, so expect to see more of that. Life’s too short to go through the process of a big-box assemblage and the city’s permit process, he says.
David says to look for the QSRs (think Chipotle, Einstein Bros Bagels, and Mama Fu’s) to continue their growth. QSRs have taken over the smaller outparcel strip retail centers that are dominating new retail development. They're joined by a migration of medical facilities (dentists, urgent care, eye care, etc.) moving out of traditional MOBs. Services like nail and hair salons and dry cleaners are picking up again, too. Another category not taking a breather is mattress store retailers. (After eating at Chipotle, we all need a nap.) When he's not shopping for deals, David likes to hang out with his kids and go fishing; he admits that he's just a big kid at heart.
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