During the height – or depth – of the pandemic consumers went crazy ordering online and there were real fears in the retail world about the future of physical stores.
Turns out that fears were unfounded...and then some.
New data from CBRE, the commercial real estate services and investment firm, shows that a recent drop in open retail space during the third quarter sent its availability rate down to 4.8% in the quarter. That’s the lowest it’s been since the company started tracking the market in 2005.
The company said that “street retail, freestanding and other” locations showed the biggest gains in occupied space, jumping 34 percent. “Power center” and “lifestyle mall” locations showed smaller gains but these come after they had been in negative “absorption” positions previously.
While these numbers reflect increased demand for stores by retailers around the country they are also being impacted by record low new construction of retail space, CBRE said. The most recent quarter was the second lowest in the rate of new construction since the firm has been charting this. Still, rents for retail space have shown only modest increases: up just 2.1 percent year over year.
As might be expected given population shifts since the pandemic, southern Sunbelt cities showed the biggest gains in occupancy rates. The top three cities were Orlando, Phoenix and Houston. These southern cities are also bucking the new construction trend, with than five million square feet of retail space having been built so far this year in Houston, Austin, Miami and Orlando.
Leasing departments take note.