The strength of suburban retail markets has given Cincinnati-area building owners a bit more pricing power lately. And that’s just part of the good news coming from Marcus & Millichap‘s Third Quarter Retail Research Market Update.
According to the report, light construction activity and favorable lease terms in the Cincinnati suburbs will allow owners there to backfill space. At the same time, restoration projects in downtown Cincinnati should spark retailer demand in the center of the city, Marcus & Millichap’s researchers say.
This means that formerly overbuilt areas such as West Chester, Mason and Northern Kentucky should perform well throughout the rest of the year and into 2012.
Marcus & Millichap predicts that retail vacancy rates in the Cincinnati market will drop 60 basis points this year to 12.8 percent. In 2010, vacancy rates in this sector fell 50 basis points on positive net absorption of 650,000 square feet.
Marcus also predicted that retail operators will be able to raise rental rates in 2011 for the first time since 2008. Asking rents should rise 0.5 percent to $14.13 a square foot, while effective rents will climb 0.9 percent to $11.96 a square foot.
This isn’t a huge increase, but it is an improvement over 2010, when effective rents actually fell 0.8 percent.
The Marcus & Millichap report makes it clear that the retail market in Cincinnati and its suburbs has a way to go before it reaches the health it saw before 2008. But at least the market is now trending in the right direction.