The balance of supply and demand for retail properties has improved to the point where the sector’s outlook is more cautious than dire, a Moody’s Investors Service commercial mortgage-backed securities report released Sunday shows.
The composite score for retail rose to 35 in the fourth quarter of 2020 from 32 in 3Q20, which moves it from the “red” zone into the “yellow” category; even though the composite score for commercial real estate overall fell to 45 from 46 due to persistent hotel and office market concerns. (Scores up to 33 are red, 34-66 are yellow and 67-100 are green.)
While Moody’s analysis of CBRE Econometric Advisors’ data is in line with other reports showing that retail mortgage
Hotels have been at a score of zero for the past two quarters. Conditions worsened in both central business district and suburban office markets in the most recent period Moody’s analyzed, falling from 55 to 41, and from 49 to 39, respectively.
Only a smattering of local markets were on “supply-demand watch” in Moody’s latest report. Supply may exceed demand by 5% or more over the course of the next year in these areas.
Retail markets in this category include Cleveland, 6.1%; Indianapolis, 5.4%; Detroit, 5.3%; and Los Angeles, 5.1%. There’s one central business district office market in that category, San Antonio, at 8%. There’s also just one suburban office market on supply-demand watch: New York, at 5.6%. Two hotel markets are on watch: Jacksonville, Fla., 11.5% and Austin, 9.1%.
