A national report says vacancies in strip malls have declined for the first time in seven years, and local commercial real estate experts say that trend is obvious in the Toledo area.
Data by Reis Inc., a real estate research firm, show the national vacancy rate for strip malls fell to 10.9 percent between January and March from 11 percent in the fourth quarter of 2011. Reis said vacancies in strip centers, which are typically anchored by grocery stores or drugstores, had been rising since the second quarter of 2005, when their vacancy rate was just 6.7 percent.
Also, Reis said the average asking rental rate nationwide for strip malls rose during the first quarter by 0.1 percent, following a similar increase in the fourth quarter of 2011. The first-quarter rate was $19.05 per square foot. The "effective rental rate," which is the rate after months of free rent and other perks are stripped out, also rose 0.1 percent to $16.57 per square foot.
"Although we have not seen consistent enough improvement to declare a turnaround in the sector, the decline in the vacancy rate, coupled with the increases in asking and effective rents, is the strongest evidence to date that the sector is beginning to stabilize and recover," the report said.
Germano Bressan, a commercial real estate agent with the Toledo office of Signature Associates, said this area is among those benefiting from the strip mall activity trend.
"There's actually been some leasing going on, especially this first quarter. It got real really busy right after Christmas," Mr. Bressan said. "I think people's confidence in the economy has risen. Last year it got busy and then people thought we could take a nose dive, so it slacked off."
But this year, he said, confidence is high enough that many retailers are no longer afraid to sign on the dotted line. "I also think some people have also been sitting on their money for a while and they're tired of waiting. There's been more activity in the last few months than in the last three years," he said.
One of the local beneficiaries of increasing strip mall leasing activity is Pat Giammarco, founder of Marco's Pizza and owner of three strip centers in the Toledo area, including two on Monroe Street and a third on Central Avenue near McCord Road in Sylvania Township. He also owns a fourth strip center in Lorain, Ohio.
"I'm nearly full. I have two empty spaces out of four strip centers and I'm putting another lease together right now for one of the empty spaces," Mr. Giammarco said.
"I'm hearing that … there's a lot more activity going on and people are getting more quality tenants," he said. "By that, I mean tenants who are paying their rent on time."
Mr. Bressan said there also has been competition of late for vacant space, another aspect of retail leasing that has been absent for some time.
At a strip mall in Levis Commons in Perrysburg, Mr. Bressan said there are three empty spaces but in the last few months there have been six offers for the three spaces. "I didn't think that would ever happen," he said.
"I did five deals in January. That's the most I've ever done in a month. I was so busy I couldn't believe it," Mr. Bressan added.
Pete Shawaker, a commercial Realtor with CBRE Reichle/Klein in Toledo, said the well-placed retail strips are seeing the most activity. But "I've started to get offers in on multiple properties that have sat almost five years with no activity," he added.
Mr. Shawaker said the increased demand for strip mall space seems to be coming from three types of clients: existing local retailers who are relocating to better strip malls, existing local retailers who have decided to add locations, and retailers from outside northwest Ohio who have decided to expand into the Toledo market.
"Those three areas are why we're definitely seeing a pickup in activity," Mr. Shawaker said.
"It's not an avalanche of demand, and if you're a property owner you're still not out of the woods yet. But things are definitely headed the right way. Optimism is back," he added.
Contact Jon Chavez at: firstname.lastname@example.org or 419-724-6128.
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