Growing Economy and Population Bolster Retail Market.

• Author: Rawlins, Brandon
• Position: RETAIL

The Salt Lake economy is experiencing a rapid expansion with a 2.2% 12-month job growth rate, almost doubling the 1.2% national growth rate. There are no signs of a slowdown either, with the Salt Lake labor force growing at 3.5% annually vs. a 0.8% national growth rate, while only exhibiting 3.4% unemployment compared to the national 4.2%.

* Overall vacancy is elevated due to big-box availability.

* Large deals in the pipeline should bring vacancy down near that of last year and add to positive absorption.

* Repurposing of large vacant space adds unexpected momentum to already thriving market.

Continued positive absorption with upward pressure on asking lease rates are the primary themes of the retail market. Prominent national tenants are still focused on entering and expanding in Salt Lake and are keeping demand high for quality space.

The top growth areas contributing the most to our positive absorption are the South Valley, West Valley, Davis/Weber Counties and Utah County. Population growth and an expanding office market are prime drivers of retail growth in these areas.

Store Closures Bring Shift in Focus

Large block users downsizing or leaving the market like Kmart, Shopko, Toys "R" Us, JC Penney, Macy's and the Gap, to name a few, caused vacancy to jump and mitigated the positive absorption seen in other market segments. Apparel and shoe retailers have announced the most store closures followed closely by office supply.

The dynamics behind these closures are varied, whether the company is going through bankruptcy or trying to adjust to changing demographics and shopping habits. The growing influence of millennials brings a shift in consumer tastes toward discounters and fast fashion and greater utilization of online shopping. While some companies, like The Limited and American Apparel, have failed to adjust to the shifting retail landscape and are closing stores due to bankruptcy, others like the Gap and Macy's are closing profitable stores in order to use that capital to expand their omni-channel platforms.

Already profitable companies like Walmart and McDonald's are implementing new concepts to both attract and keep customers. Walmart has developed an innovative concept solely designed as a pickup location for online grocery ordering. The customer places an order online and is given a pickup time range and a parking lane number. At their appointed time they park their car in that lane and Walmart brings their groceries out to...