Nick Villa, associate director and economist at Moody’s, analyzed the mid-year performance of retail properties in five geographic regions and 80 primary retail markets. The metric is effective revenue, which is occupancy as a percentage multiplied by rent in dollars per square foot. In other words, if rent is the same throughout the property, effective revenue is the average revenue per square foot. It also reflects how much of the building is generating rent.
The basis is effective sales in the fourth quarter of 2023. For the US as a whole, this was $16.97 per square foot. Effective sales in the second quarter of 2024 were $17.05, an increase of 48 basis points.
The top five performing metros in terms of increase between Q4 2023 and Q2 2024 were Hartford, CT (+172 basis points growth from $14.35 to $14.60); Colorado Springs (+166 basis points growth from $11.74 to $11.93); Cleveland, OH (+166 basis points growth from $11.93 to $12.18); Greensboro/Winston-Salem, NC (+1.63 basis points growth from $12.16 to $12.36); and Las Vegas, NV (+141 basis points growth from $17.37 to $17.61).
In the five largest metropolitan areas, the following contributions from rent and occupancy were made: Cleveland (50.6%, 49.4%); Hartford (60.7%, 39.3%); Las Vegas (77.4%, 22.6%); Greensboro/Winston-Salem (95.9%, 4.1%) and Colorado Springs (97.3%, 2.7%).
The five worst performing metros were Providence, Rhode Island (-76 basis points from $16.44 to $16.32); Louisville, Kentucky (-81 basis points from $13.93 to $13.81); Tulsa, Oklahoma (-89 basis points from $9.07 to $8.99); Indianapolis, Indiana (-153 basis points from $11.37 to $11.20) and Albuquerque, New Mexico (-326 basis points from $11.54 to $11.16).
Interestingly, among the top five and bottom five, only Las Vegas had an effective rent above the U.S. average. Changes in effective retail sales varied across metropolitan areas. Cleveland’s effective rent increases were due to changes in occupancy rather than rent growth. Concessions were important in Cleveland because there is a 14.6% discount between asking and effective rent.
The top regions were close to the national average. The Northeastern region, which was at the top, saw growth of 57 basis points, while the Southwestern region, the next highest, reached 56 basis points – both were at 48 basis points. The other three were the Southern Atlantic region (44 basis points), the Western region (32 basis points) and the Midwestern region (15 basis points). All saw an increase in effective revenue.
In the Northeast, the vacancy rate fell by 20 basis points. In the other regions, the vacancy rate stagnated or increased, but the increase was no more than 10 basis points. Effective rental growth was positive in all regions.
