FARGO — At least 12 businesses in Fargo’s downtown corridor either closed for good or set up shop elsewhere in 2024, including
Zandbroz Variety
and
Scan Design,
stores with deep downtown roots.
During the same period, at least 19 businesses opened shops, or expanded existing operations in downtown last year.
Such ebbs and flows lead some to wonder about factors that drive those kinds of decisions, including the role lease rates may play.
Retail lease rates do vary across Fargo, but they may not always tell the whole story of why a business closes, or moves elsewhere.
That’s according to Andy Westby, president and managing broker at Goldmark Commercial Real Estate.
Comparing different parts of Fargo during a period from just before the onset of COVID in March 2020 to the present, Westby said the retail rental rate picture looked something like this:
- Downtown corridor: pre-COVID, about $23.10 per square foot per year. Today, that number is about $21.64
- West Acres area: pre-COVID, about $20.64; today, about $22.16
- Southwest Fargo, an area generally south of Interstate 94 and west of Interstate 29: pre-COVID, about $22.80; today, about $28.69
Westby said the newness of much of the retail space in southwest Fargo makes it generally more expensive than other parts of Fargo, “but also more appealing.”
According to Westby, on average a retail lease is about five years and he said retailers who struggle to make rent are probably going to exit before their lease is up.
“Others get to the end of the lease term and realize they might do better in a different location,” Westby said.
Chris Flynn / The Forum
According to Westby, real estate watchers in Fargo are seeing a higher level of vacancy connected to new construction and older buildings that have gone through a complete remodel.
He said that’s because the cost structure of such buildings is higher than existing properties that have been on the market a long time.
“If their cost structure is higher, their rents have to be higher,” Westby said, noting that many of Fargo’s retail vacancies are in brand new retail complexes that have gone up in far south Fargo.
That said, Westby noted there always seems to be a smattering of businesses moving around in Fargo — either from an area like downtown to southwest Fargo, or visa versa.
“You might have the impression downtown is the highest-cost retail, overall it’s not,” said Westby, whose company, Goldmark, will host its annual Commercial Connect get-together on Thursday, Feb. 27, at Drekker’s Brewhalla complex.
Chris Flynn / The Forum
The event explores the metro-area’s economic picture across property classes — office; retail; industrial; land; multi-family; investment sales; and farm land.
Participants, Westby said, are people connected to the commercial real estate industry, “the ones who are developing, loaning, insuring, appraising, inspecting. We want them in the room to let them know what’s happening.”
When it comes to retail spaces available for rent, Westby said the current number of properties are similar for downtown, West Acres and far south Fargo at about 29, 27, and 30 properties, respectively.
Westby also shared the number of retail leases signed over the past year for the three areas of town, with 15 leases signed in the southwest quadrant; six in the West Acres area and five in the downtown corridor.
According to Westby, the area of town with the most square footage leased in the past year was the West Acres area with 47,000 square feet of space. He said that was largely due to the leasing of the building formerly home to Gordmans.
By contrast, Westby said newly leased space in the downtown area this past year totaled about 10,000 square feet.
Westby said when it comes to the “universe” of all retail space in the three areas of Fargo mentioned above, downtown Fargo has about 804,000 square feet, the West Acres area has about four million square feet and southwest Fargo has about 1.7 million square feet of retail space.
He added that the vacancy rates for each of those areas is 14.2% downtown, 2.5% in the West Acres area and 5.2% in southwest Fargo.
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