### Q4 Retail: Continued Lack of Space Despite Bankruptcies and Closures
The holiday season of 2024 proved strong for retailers. However, the retail sector in Q4 was also marked by bankruptcies and store closures. Despite these challenges, reports highlighted low absorption and sub-5% vacancy rates, primarily due to a shortage of usable retail space. Colliers U.S. Retail Market Statistics pointed out that “tenants and brokers cited a lack of quality space as a key market challenge.”
#### Absorption Issues
Three out of four major market reports analyzed indicated sluggish absorption, primarily due to the scarcity of available space. According to Lee & Associates’ Q4 2024 North American Market Report, tenants seeking high-quality space in affluent areas found limited options. CBRE’s U.S. Retail report echoed these concerns, noting that 25 out of the 69 markets it tracks reported negative net absorption, “contributing to the lowest annual total demand since 2020.”
Colliers analysts acknowledged that store closures impacted absorption but highlighted that new vacancies provided much-needed space for tenants looking to expand. On a more optimistic note, Cushman & Wakefield’s Retail MarketBeat reported that Q4 recorded the strongest net absorption of 2024, suggesting that “the retail market is in a healthy spot heading into 2025.”
#### On the Construction Front
The lack of new retail space remains a key factor in subdued absorption. Colliers analysts noted that new development is at a “multi-decade low,” while CBRE economists pointed out that “developers have shelved projects, exacerbating the retail supply shortage.”
Rising material and labor costs, along with tightening lending standards, have contributed to this issue. Lee & Associates’ analysts stated that “developers continue to be challenged to make ground-up retail development deals pencil at today’s costs and rent levels.”
#### Looking Ahead to 2025
Consumer confidence is expected to remain strong, though the impact of tariffs on consumer-facing industries remains uncertain, according to Cushman & Wakefield analysts. Nonetheless, they predict “high-performing brands are likely to go forward with store openings in 2025.”
Despite more expected store closures, the lack of available space will likely persist. Colliers analysts anticipate that construction challenges will continue, while Cushman & Wakefield experts foresee ongoing constraints on market expansion.
Lee & Associates analysts suggest that current market conditions will likely support additional rent increases for landlords, with supply-constrained conditions persisting for the foreseeable future.
About the Publisher:
Steve Griffin is based in sunny Palm Harbor, Florida. He’s an accountant by profession and the owner of GRIFFIN Tax (www.griffintax.com) and REVVED Up Accounting (www.revvedupaccounting.com). In addition, Steve founded Madison Avenue Technology (www.madisonave.tech). With a strong passion for commercial real estate, he’s also dedicated to keeping you up to date with the latest industry news.
