Just three years ago, retail commercial real estate was in serious trouble due to COVID-19-mandated shutdowns and stay-at-home orders. Grocery stores and other essential services were the exceptions, doing well despite the challenging circumstances.
Fast forwarding to Q1 2023 reveals a resilient period for retail as lower supply and increasing demand continues to support properties. According to Lee & Associates’ North America Market Report , muted development activity has improved supply-demand fundamentals.
JLL’s United States Retail Outlook for Q1 2023 noted that while fundamentals are slowing down due consumers shifting money away from discretionary purchases towards groceries and necessities; this has benefited discounted retailers as well as those operating online stores .
CBRE’s U.S Retail Report indicated that total absorption exceeded new supply by more than twice in Q1 2023 – marking five consecutive quarters of high demand surpassing new delivery . Cushman & Wakefield’s U.S Retail MarketBeat also reported lowered absorption rates but pointed out eight consecutive quarters of positive net absorption with vacancy rates declining due limited availability of new space .
Analysts forecast continued muted development which could impact future absorptions or vacancies; however any downturn should not be severe like that generated by The Great Financial Crisis given current household debt burdens being twenty percent below 2008 levels along with retailers being financially healthier now than before . Cushman & Wakefield expects vacancy will level off or move modestly higher at year end presenting an opportunity for expansion on the other side in 2024 when conditions improve further .
