The rise of remote work has resulted in a surplus of empty office spaces, particularly in downtown areas. According to a recent report from CBRE Economics Advisor, the availability rate for retail space in U.S. downtown markets was 88 basis points higher than suburban rates during Q3 2024 – the largest difference since CBRE EA began collecting data on retail trends.
However, it is important to note that generalizing about commercial real estate can be misleading. In fact, after conducting an analysis of downtown retail performance across 19 cities using a hexagon model, CBRE EA found some interesting insights:
– Retail thrived when located near prime or trophy office buildings within what are known as “Prime Business” districts. These areas saw the strongest growth in rent compared to their overall market.
– Prime Districts outperformed “Vibrant Mixed-Use Districts,” likely due to already high rent levels (74% higher) and consumer spending habits.
– Even non-prime business districts performed better than average due to limited space availability and proximity to suburban office parks where consumers tend to spend more money.
Based on these findings, experts at CBRE EA suggest that retailers should not overlook opportunities within downtown districts – especially those close by prime offices which are showing signs of improvement. As they put it: “Retailers situated near prime offices may have potential for success now that we’re seeing positive changes in office fundamentals.” So while there may be challenges facing retailers operating within city centers right now, all hope is not lost just yet according Connect CRE’s latest report titled Downtown District Retail: All Isn’t Lost .
