Top 10 U.S. Retail Markets

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Top 10 U.S. Retail Markets

11/17/2014

Investment in digital shopping continues throughout retail, but one thing remains consistent: brick-and-mortar is still king. As retailers continue to embrace the omnichannel reality the store remains the pillar on which the rest of the enterprise is built.

The foundation of the organization is built upon quality retail locations located in sought after sites. Not every retail store is placed on premium real estate, but the ones that garner the most attention often are. National Real Estate Investor's recently released "Top 10 Retail Markets" ranks the U.S. cities with the most desirable retail real estate based on vacancy levels, rents, and active investment marketplaces.

The ranking reveals that when it comes to retail real estate the old adage location, location, location, rings true. Here are the top 10 cities for retail investment according to the report:

1. Manhattan, N.Y. No big surprise here. When retailers are looking to make a splash with a new flagship or digitally-empowered store downtown NYC is often the first choice. With a premier location comes premier cost: the vacancy rate is 3%, and rents are the highest in the country at $93.29 per sq. ft.

2. San Francisco. The home of many of retail's innovation labs, San Francisco's real estate boom has propelled it to second place on the list. The vacancy rate is the lowest in the country, at 2.4% and rents are the third highest, at $32.57 per sq. ft. With just 95,930 sq. ft. of new retail construction in 2014 prime locations will continue to be in high demand.

3. Honolulu. Not only is the Big Island an ideal vacation spot, it is a thriving retail mecca as well. The amount of new retail space under construction in Honolulu is low at 323,203 sq. ft., which will undoubtedly help keep vacancy low and rents high at $34.57 per sq. ft.

4. Miami. Vacationers hit hot spots like Miami for fun-in-the-sun and up-scale shopping opportunities. With 1.2 million sq. ft. coming on the market the south Florida city is certainly a growth market for retail. Vacancy rate are just 3.7% and rent averages $28.94 per sq. ft.

5. San Diego. The home of PETCO combines low vacancy, at 4.3 percent and strong rents, at $22.37 per sq. ft. The city also ranked sixth on Marcus & Millichap’s National Retail Index this year.

6. Boston. Since the country began to rebound from the economic downturn Boston has emerged as a leading city for retail expansion. It vacancy rate is 4.2%, but that may jump significantly with the 2.8 million sq. ft. of leasable space that is currently under construction hits the market.

7. Los Angeles. Like Manhattan in the top stop retailers hoping to make a splash often turn to L.A. to place the latest and greatest store experience. Keeping the second most populated city in the country in the second half of this ranking however was the 1.3 million sq. ft. of new construction in the pipeline — the more available space the less prestigious the location.

8. Oakland. At first blush Oakland, CA may seem like a second-tier retail location but with vacancy levels of just 4.3% and average rents of $21.82 per sq. ft., top-tier retail locations in this Northern California port city are at a premium.

9. Houston. Like much of Texas real estate in Houston is as hot as the Southwest sun. The hometown of department store chain Stage Stores is enjoying vacancy rates of 5.8% and is expecting 1.29 million sq. ft. of new retail space in the near future.

10. Denver. Denver might be best known for fresh mountain air and a laid back atmosphere but its vibrant retail centers are attracting major attention as well. The volume of retail assets changing hands in the city rose by 110% between mid-year 2013 and mid-year 2014, to $387 million.