This is a market in which news of a store closing from the likes of Bed Bath & Beyond or David’s Bridal often is viewed as “good news” by both landlords and prospective tenants. That’s a testament to the scarcity of supply and voracious demand for junior-box space.
Tenants searching for junior-box spaces are finding few options and radically higher rents, particularly in high-growth areas across the Sun Belt.
“Obviously, there are capital constraints, but tenants are stepping up to rent numbers that we haven’t seen in the past for junior-anchor and even anchor-size boxes because it is just that tight,” agreed SRS Real Estate Partners senior vice president and principal Dawn Greiner. Rents vary depending on the geographic area and store buildout costs. In Texas, rents on junior-anchor boxes in Texas are pushing into the low $20s or even close to $30 per square foot. “In markets that are 45 miles away from the Dallas core, we’re seeing rent numbers being quoted in the $30s and even $40, which is extremely high from what Texas has seen in the past,” said Greiner. Tenants also are committing to longer, seven- and 10-year deals to better compete, she added.
Even at auction, the deals are a little tough for tenants to pencil because they don’t account for needed capital improvements, said Greiner. “The landlords would love to recapture these boxes versus going to the auction so that they can bring in great credit tenants and help to bridge the gap with a tenant allowance and construction costs,” she added.
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