Posts from June 2017

Information contributed by Richard Weinstein and Chris Wilkins of NAI Ruhl Commercial 

Market Activity
2016 continued to see the trend of strong demand for retail space in the Quad Cities. Interest in the highest profile areas however was hindered due to the lack of available supply. This also impacted the number of closed transactions.

Small shop space (under 2,500 SF) is almost non-existent in areas such as Elmore Avenue, 53rd Street, and Utica Ridge on the Iowa Quad Cities side of the river and John Deere Road in Moline on the Illinois Quad Cities side of the river. Rents in these areas remain strong, and when space becomes available, it is filled rapidly.

Development on Elmore Avenue in Davenport, and John Deere Road in Moline, continues to grow, along with build-to-suit land opportunities. New construction in high demand areas is a good option for national tenants, but may be out of the budget for smaller local companies.

There are smaller, less expensive options in areas that still offer heavy traffic counts, including Old Town Mall, Kimberly West, Village Shopping Center, and Valley Fair all in Davenport, Iowa, and in Illinois on Avenue of the Cities in Moline, and Rock Valley Plaza in Rock Island. Local downtowns have unique retail opportunities that are well-suited for many retailers searching for non-shopping center locations.

Increasing reports on the national level include many store closings, such as Sears/Kmart, Macy's, JC Penney, Gordmans, RadioShack, Payless ShoeSource, and Family Christian Bookstores. This includes Walmart trimming the number of locations worldwide and in the US. Other big box stores are now looking at smaller footprints as they attempt to right-size or optimize their facilities. A major contributing factor for this is changing shopping patterns, especially among millennials, with an increase in online purchases. Retailers that have developed a combined online and brick and mortar strategy are best positioned in the new economy.

In the Quad Cities, both Gordmans in Davenport and Moline are part of the 50 Gordmans stores that have been purchased by Stage Stores, and will remain open under the Gordmans brand. JC Penney at NorthPark and SouthPark are NOT on the closing list. However, we have lost Kmart stores in Rock Island and Davenport, RadioShack in both Moline and Davenport, Staples in Moline, and Family Christian Bookstores in both Moline and Davenport.

Despite stores closing, this does create opportunities to bring in new retail businesses to the area.

While small space is limited, there are larger spaces available including:

Shopping center sale activity was very limited in 2016 due to significant absorption in 2015. However, in 2016 those centers saw increased activity as new owners invested in their properties with fresh store fronts and facades, updates throughout the properties, and new tenants. The Village Shopping Center and Kimberly Crossing (formerly Spring Village) are two examples.
 

Pricing
Retail rents in the highest demand areas within the Quad Cities are generally $18 to $26 per square foot, net. These numbers are unchanged from 2015. New construction and redevelopment properties in regional locations continue to demand the top end of this range. These locations can be found along the corridors of I-74 and Middle Road, I-74 and Elmore Avenue, and on 53rd Street between I-74 and 18th Street in the Iowa Quad Cities, and along John Deere Road between 7th Street and 70th Street in the Illinois Quad Cities.

Second generation spaces in downtown and neighborhood locations typically range from $12 to $16 per square foot, net. These rates would generally apply to spaces under 5,000 square feet.

We have seen a recent trend in the redevelopment of long established shopping centers that is likely to increase rents steadily over the next few years. Current rental rates are $9 to $16 per square foot. There have been a few exceptions for smaller spaces that have exceeded this range.

Big box rents (spaces in excess of 20,000 square feet) are $5 to $14 per square foot, net. Due to some high profile 'regional' big box vacancies, we have seen a significant increase in rents for this sector.

There continues to be upward pressure on retail rents as many other categories have remained flat in recent years. High traffic/high profile locations continue to be in demand while the vacancies remain very low. Therefore, it is anticipated that this trend will continue until new properties become available.

Notable Retail Transactions

Forecast
Downtown Moline is anticipating the redevelopment of the former O'Rourke Building located at 1205-1213 4th Avenue. The Q, a new signature development with retail, restaurants and Element extended stay hotel, is set to open in Fall of 2017. This will bring excitement to an already flourishing downtown.

SouthPark Mall continues to see increased traffic and renewed leasing interest both inside and outside the mall.

The Bend on the Mississippi in East Moline, Illinois, is set to break ground this spring, with Phase 1 consisting of a hotel and apartments. Retail opportunities are expected to be part of the future growth.

The John Deere Road corridor has seen new additions such as Mattress Firm and Popeyes in 2016. Based on rumored projects, it is anticipated this growth will continue.

The extension of Elmore continues to provide significant development opportunities. It is reported that multiple projects are in the works. The recent announcement by BettPlex, LLC has almost instantly created retail development opportunities in Bettendorf. This 75 acre sports, entertainment and event center will break ground in the spring of 2017. Hotel, retail and restaurant opportunities are projected to be high in demand.
 

The answer must be student loans, right? Wrong! While paying back an education is part of the equation for some, it is not the only factor that holds Millennials back from buying their first homes.

A survey of young renters by Fannie Mae found that the factor that delays the most potential buyers is an insufficient credit score or history (53%), followed closely behind by "affording the down payment and closing costs (50%)."

There are many potential homebuyers who have delayed their purchase because they 'believe' that they do not qualify with the debt they have (debt-to-income ratio), their credit score or even the amount of savings they have. The challenge is that many of those who delay their purchases are not aware of the opportunities available, and are n...

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