While occupancy levels have firmed, they remain shy of the historically high levels of 97 to 99 percent experienced over the past several years.The result of this pressure is to limit rental increases, although concessions are not widespread at this time.Sale velocity is restrained with only a handful of significant transactions taking place this year what is house valuation based on First National Bank of Omaha held the grand opening of its 750,000 square foot tower.
With two area malls trading over the past three years, new ownership has opted to expand their properties.Westroads Mall, the trade area’s largest, is adding a Galyan’s anchor and additional shop space as well as peripheral development with restaurants such as P.F.Changs and Macaroni Grill.Ownership of smaller shadowanchored properties is concentrated in the hands of local investors, and there has been relatively little activity in the sale of these assets.
While the retail market remains healthy, there are a few new developments that provide investment opportunity.While these soft market conditions are bad news for building owners and developers, they are good news for tenants.Those companies fortuitous enough to be leasing space right now are locking in some of the lowest rates and most favorable terms this market has seen in years.One of the key factors contributing to the lackluster conditions can be summed up in two words – sublease space.As companies continue to navigate through the rocky economic shoals, many are forced to downsize, merge or exit the market altogether – leaving a glut of office space behind.
Companies such as Cap Gemini Ernst & Young, Energizer and SWB Communications are currently subleasing their space.MCI WorldCom is also expected to be putting space back on the market in the coming year.Those submarkets posting the highest amount of sublease space include Downtown at 207,609 square feet, and the historically strong Highway 40/Chesterfield submarket with 388,224 square feet.Options such as free rent, shorter lease terms and a buyout of a prospective tenant’s current lease are all on the negotiating table.Sublease space can also be a particularly lucrative option for tenants as these deals sometimes include the furnishings, telecommunications equipment and computer systems left behind by the previous tenants.
One differential between this soft market and those seen in the past is that the current downturn appears to be economically driven rather than real estate driven.