The future of retail is morphing as we speak
The fourth quarter of 2020 had an overall negative absorption of 20,953 SF, continuing a trend that occurred through most of 2020 in the New Mexico market. The vacancy rate rose only 6 basis points to 6.62%, consistent with this modest negative absorption, as leasing activity held its own in the face of the Covid pandemic.
Asking rental rates rose 6.6% to $19.30 NNN compared to last quarter which was $17.97 NNN. This shift is due to high-end retailers moving to secure locations that will allow them to continue to turn a profit during the industry shifts that are occurring due to COVID-19, at costs they might not have considered at this time last year.
The future of restaurants and casual dining are still up in the air. Ongoing restrictions prevented many restaurants from offering indoor dining, and others were forced to close due to lack of business. Take-out and delivery demand rose, and the popularity has led to increased interest in drive thru opportunities. Existing drive thru modeled eateries like Taco Bell, Dunkin’ Donuts, and Dutch Bros Coffee, Popeyes have all announced expansions, indicating that their model can withstand the market stress on the food industry. This has led to very high activity levels for freestanding retail pad sites, which buyers may look to develop into additional drive thru venues.
Key factors this quarter
The future of restaurants and casual dining are still up in the air.
The mall industry is seeing a significant shift towards open-air outlets, with national data indicating that foot traffic is rebounding at a far faster rate in these areas than enclosed shopping malls and retail centers.
Converting vacant retail spaces to industrial warehouses, office or medical use are more cost-effective and efficient than building from scratch, and the market will likely see several of these projects over the course of 2021.