Retail property is showing positive signs in the wake of the pandemic, with record low availability in the third quarter.
Retail availability fell nearly a full percentage point year-over-year across the country to 5 percent last quarter, Bisnow reports. This is the lowest level of availability recorded by CBRE since it began tracking the benchmark 17 years ago.
The lack of empty spaces is linked to one of the biggest talking points in real estate: interest rates. New development in the sector has slowed amid rising interest rates and high construction costs, keeping supply in the market limited.
That dynamic benefits retail landlords and mall operators, who can take advantage of the lack of space to demand higher rents from option-hungry tenants.
There is a growing body of evidence supporting the survival of the retail sector after lockdown measures and an e-commerce boom that spelled dark days during the pandemic.
As of November, store openings so far this year have kept pace with 2021 levels, but closings have fallen 55 percent, according to Coresight data reported by Bisnow.
Cushman & Wakefield, which publishes its own retail market report, recorded its lowest vacancy rate in 15 years in the second quarter. Asking rents at shopping centers were 16 percent higher in the second quarter than five years earlier.
An analysis of CoStar data in August also found that retail availability was below par at the start of the pandemic and even the Great Recession.
However, the fortunes of retail real estate can change on a dime. Concerns about inflation and recession could have a negative impact on shopping activity going forward, affecting shopping trends and performance across retail outlets.
– Holden Walter-Warner