North American retail property markets couldn’t be any healthier, the latest quarterly report from Lee & Associates concludes. The U.S. retail real estate is heading into the second half of 2024 with one of its tightest fundamental positions on record thanks to steadily rising demand, a reduction in tenant bankruptcies and store closures and limited new supply, while Canadian retailer profitability, strong merchant demand and operating fundamentals are holding steady, the commercial real estate services company reports.
Some key takeaways from the report:
- Tenant demand for U.S. retail space totaled 6.6 million square feet in the third quarter. The positive net absorption is driven by expansion in numerous sectors with the most significant gains from tenants in the food and beverage, discount, off-price and experiential sectors.
- New retail development activity remains minimal. Net deliveries totaled just 33.7 million square feet over the past 12 months, which is less than half of the prior 10-year average.
- From a geographic perspective, the most significant uptick in demand for retail space has been seen in Sun Belt markets that are experiencing substantial population and buying power growth. Seven of the top 10 markets leading the way in inventory-adjusted demand growth over the past year were in the Sun Belt, including four of the top five (Austin, Orlando, Miami and Phoenix).
- In Canada, merchant demand for space in the third quarter totaled 1.4 million square feet. Canadian retail landlords are facing challenges similar to those of their American counterparts in terms of “rightsize” retail properties to align with the rapid evolution of consumer spending trends. Retail landlords and investors are increasingly attempting to redevelop or intensify existing retail sites by adding office and/or multifamily buildings to accomplish this.
- Miami has the highest market rent/price per square foot in North America ($48.72), followed closely by New York ($47.07). The U.S. average is $25.32, while Canada’s is $23.04 Canadian dollar/$16.62 U.S. dollar.
Click here for more from the study. (Note: the report on the retail market begins on page 17.)
