Reports on the state of the U.S. retail market in Q3 2024 all echoed a similar message: flat or declining absorption, limited new construction, and higher asking rents. According to Lee & Associates’ Q3 2024 Retail Overview, this tight fundamental position is due to increasing demand, fewer tenant bankruptcies and store closures, and minimal new supply.
Lee & Associates reported an absorption rate of 6.6 million square feet for the quarter while Cushman & Wakefield’s Q3 2024 Shopping Center Report showed negative absorption at -257,817 square feet due in part to Hurricane Helene.
All reports indicated a lack of construction starts and deliveries as costs continue to rise. Colliers’ U.S. Retail Market Statistics analysis for Q3 stated that this has led to historically low levels of new development across the country.
Limited space availability coupled with strong tenant demand has caused rents to increase according CBRE’s US Retail Figures report for Q3 which also noted that rising costs have hindered new development.
JLL’s United States Retail Outlook report highlighted fierce competition for quality locations due to limited space coming online while Cushman & Wakefield analysts predicted challenges for prospective tenants looking for available space in high-quality shopping centers within sought-after markets.
The situation is not expected change anytime soon according JLL who forecasted a positive holiday season with shoppers planning on spending more money than previous years and utilizing curbside pickup services at almost twice the rate compared year-over-year data from last year.
Looking ahead into 2025,Cushman&Wakefield analysts anticipate small batchesofnewretailspacescomingonline,resultinginlimitedoptionsforprospectivetenantsthesehighlysought-afterlocations.Meanwhile,theanalystsatJLLnotethatclosuresbyWalgreens,CVS,BigLots,andothermajorretailerscouldcreateopportunitiesfortenantbackfillandexpansion.Cushman&Wakefieldalsosuggestedthatthegreaternumberofstoreclosurescomparedtoopeningscouldbenefitcautiousrealestateexpansionplans.
In summary, the retail market in Q3 2024 showed low absorption rates, limited space availability, and rising rents. This trend is expected to continue into 2025 with minimal new development and potential opportunities for tenant backfill and expansion due to store closures by major retailers.
