The Nashville retail real estate market remains healthy in the face of a toughening national economy.
But brokers are beginning to see retailers get cautious with expansion plans. That begins to show in development.
“You don’t see [expansions] on site plans,” said Arthur Perlen, a retail broker with Grubb & Ellis/Centennial.
CoStar Group’s quarterly report shows a slight increase in vacancy rates to 5.8 percent. The overall number includes area malls. General retail was tighter, posting a 3.3-percent vacancy.
Rents continue to climb, however. Average quoted rates for general retail was 17.08 per square foot in the first quarter, $4.67 higher than the same period last year.
Other than Hickory Hollow Mall, the area malls seem to be holding strong, though the trend in development has been large lifestyle shopping centers. The Mall at Green Hills tops the other malls in Davidson County at least.
“They have the best sales of any of the malls,” said Curtis Oaks, an appraiser with the Metro Property Assessor’s office.
Oaks and his office see the numbers when establishing the value for tax purposes.
The Green Hills Mall now is higher than Hickory Hollow. Metro has just appraised it at $90.2 million.
Hickory Hollow Mall has struggled for several years. In 2001 and 2002, its owner CBL & Associates based in Chattanooga, appealed Metro’s appraisal on the mall. The value was reduced from $99.9 million to $91.4 million. Hickory Hollow’s appraised value now is $71.8 million.
CBL showed in its latest annual report that the mall’s occupancy is 84 percent. By comparison, CBL’s Rivergate Mall has 97 percent occupancy and CoolSprings Galleria is 99 percent.
“Opry Mills is trucking along too,” Oaks said.
Oaks attributed Hickory Hollow’s lower valuation to changing demographics in the area and the siphoning of shopping with new shopping centers in Wilson and Rutherford counties.
Leasing in those centers and new ones could slow some. Perlen said revenues are down for retailers.
“A lot of the retailers grow through internal funds,” Perlen said. “If they aren’t there, they don’t grow.”
Allen McDonald, a principal in Baker Storey McDonald Properties, said certain areas around Nashville will slow more than others. CoolSprings and Green Hills, for example, will stay strong, Perlen said.
He said debt for projects is available and at favorable rates.
“There’s plenty of equity out there,” Perlen said. “But you need more of it in a deal.”