Bright Spot in Commercial RE: Retail Shops


The death of in-person shopping has been exaggerated. A drop in construction around 2009 coupled with post-pandemic demand lowered available space to 4.8%.

NEW YORK – Retailers are on track to open 1,000 net new stores in the United States this year as retail availability hits record lows, in fresh signs of the sector’s resilience despite turmoil in commercial real estate.

Building owners say demand for retail space has remained robust this year, defying inflation pressures and high interest rates.

The retail sector’s strength largely results from a deep drop in retail construction since the 2008-2009 financial crisis, which allowed the oversupplied sector to digest its existing real estate. Since then, retailers have started using online sales data and analytics technology to pinpoint locations for successful stores.

Meanwhile, digital companies are starting to expand into bricks-and-mortar locations after reaching the limits of online customer acquisition.

As of mid-August, retailers announced plans to open nearly 4,500 new locations while shutting about 3,500, according to Coresight Research.

Nationwide, the rate of available retail space fell to 4.8% in the second quarter, the lowest level in the 18 years the data has been tracked by real-estate-services firm CBRE.

“Office is in the crosshairs,” says Conor Flynn, chief executive of shopping-center owner and operator Kimco Realty. “But retail is outperforming.”

The overall average asking rent for retail space in the United States has increased 6.3% since the second quarter of 2020. Asking rents now average more than $23 a square foot, according to CBR – the highest level in at least a decade.

Source: Wall Street Journal (08/21/23) King, Kate

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