A robust demand from tenants and steadfast consumer expenditure are propelling the U.S. retail property market, as highlighted in Cushman & Wakefield’s Q3 2023 U.S. Shopping Center Marketbeat analysis. The retail property vacancy rate in the U.S. declined by five basis points from Q2 to Q3 and by 40 basis points compared to last year, reaching 5.4%, the lowest since the inception of Cushman & Wakefield’s records in 2007. The firm notes that such a sharp decline in nationwide vacancies has driven average rent prices up in sought-after markets.
Despite the uncertainty in other real estate sectors due to rising interest rates, the retail segment remains resilient, stated James Bohnaker, a senior economist at Cushman & Wakefield. “With a surge in consumer expenditure, we’re seeing more store openings than closures,” Bohnaker observed. He also mentioned shifts in demographic and shopping behaviors, leading service-centric businesses to opt for more expansive spaces, especially in Sunbelt suburban areas.
The southern U.S. retains the tightest vacancy rate at 4.9%.
While 2022 saw the lowest retail space completions at 9.8 million square feet, 2023 is on course to surpass this, with only 2 million square feet of new retail space rolled out nationally by the close of Q3. Nonetheless, a revival in retail construction is evident, with Cushman & Wakefield noting an ongoing 13.2 million square feet project.