In the third quarter, major brokerage firms reported continued resilience in the retail sector. However, a decrease in space delivery is putting pressure on absorption.
The Cushman & Wakefield MarketBeat U.S. National Shopping Center Report for Q3 2023 revealed that strong tenant demand and consumer spending are supporting solid fundamentals in retail. On the other hand, the JLL United States Retail Outlook Q3 2023 stated that limited supply is hindering leasing activity.
According to JLL’s report, there is a shortage of available space in desirable locations due to high construction costs and destruction of obsolete buildings. The CBRE Q3 2023 U.S. Retail report also noted that overall retail availability has reached an 18-year low due to lack of space and fewer construction deliveries compared to previous years’ growth rates.
With less available space and increased demand from retailers following pandemic-related closures, asking rents have risen according to Lee & Associates’ Q2 2021 Retail Review analysts primarily driven by discounters but also quick-service restaurants, fitness companies,and experiential tenants.
CBRE analysts predict a moderation in rent growth as landlords anticipate potential easing of demand with slower economic growth ahead while acknowledging challenges facing consumers such as rising gas prices,resuming student loans,and increasing credit card debt .
Despite these challenges,Cushman & Wakefield remains optimistic about the future outlook for retail stating “While there may be some softness ahead,the disruptions seen over recent years are unlikely.” They add,”If a global pandemic couldn’t destroy it,a recession certainly won’t either.”
