The Greater Philadelphia retail market, which includes South Jersey, was strong in the months before COVID-19 hit the area, according to CBRE‘s Q1 2020 Marketview report, however, high construction costs mixed with an abundance of big box availability slowed new shopping center construction activity.
The availability of shopping centers dipped to 8.1% in the first quarter, a three-year low, the report showed. Several expanding grocers, such as Lidl opening its second South Jersey location in Cherry Hill in February, anchored new centers or occupied vacant spaces.
Reflecting a booming economy before the pandemic, retail availability dipped 20 basis points quarter-over-quarter (the lowest point since Q3 2019). While the region saw small hints of small-space availability, occupiers were more interested in anchor spaces, CBRE said.
Leasing was also strong, according to the report, with South Jersey’s availability rate falling 10 bps to 9.5%, small-space asking rents remaining at $20.91 and anchor space asking rents rising by 0.18 quarter-over-quarter.
The quarter’s retail sales volume for the Philadelphia market reached a two-year high in Q4 2019, then immediately dropped by 70.26% in Q1 2020, CBRE found. In January, five properties traded over $10 million, but, after a slow February, the coronavirus spread and basically froze capital markets. Institutional investors slowed spending while debt and equity availability shrank nationwide.
Other highlights from the report include:
- Cherry Hill had 3.1 million square feet of inventory, 8.9% of availability and in-line rates of $22.52 per-square-foot;
- Deptford had 2.1 million square feet of inventory, 14.3% of availability, in-line rates of $15.33 per-square-foot and anchor space rates of $11.13 per-square-foot;
- Maple Shade/Mount Laurel had 2.5 million square feet of inventory, 4.2% of availability, and in-line rates of $17.06 per-square-foot;
- Marlton had 2 million square feet of inventory, 11.1% of availability; and in-line rates of $25.02 per-square-foot and anchor space rates of $20.81 per-square-foot;
- Princeton/South Brunswick had 1.26 million square feet of inventory, 10.9% of availability, and in-line rates of $27.66 per-square-foot and anchor space rates of $17.16 per-square-foot.