Overall retail leasing activity rebounded in 2021, despite the confounding delta variant of COVID-19. Retail leasing activity totaled 216.2 million sq. ft. (msf), which is up from 2020's 187.4 msf and a near-decade low. Retail leasing activity across the peak of pandemic-related mandates—that is, Q2 2020 through Q4 2020—saw increased activity.
With the same vigor, leasing activity continued through the first half of 2021 before peaking at 59.4 msf at the close of Q2. In Q3 2021, leasing activity slipped to 55.2 msf, the first month-to-month decline since the onset of the pandemic, as the CDC indicated that the delta variant accounted for 93% of all COVID cases in early August. Considering the majority of retail leasing activity was front-heavy for the year, the data suggests that peak delta and the omicron variants contributed to what will hopefully be only a short-term disruption in leasing activity.
Leasing in the general retail category represents the most leasing square footage of all retail categories with a 11.4 msf increase in leasing activity from 2020 to 2021. This represents a 17.8% year-over-year increase. Although general retail had the largest difference in the amount of square feet leased, strip centers had the highest year-over-year percent change over the same period (25.6%), while neighborhood centers saw the highest total leasing activity with 86.7 msf across 2021. Malls had a 18.8% year-over-year percent change, while power center leasing activity remained relatively unchanged from 2020 with a 0.9% increase.
Quarterly data provides us with more insight into how leasing activity was affected by omicron. All retail leasing activity square footage declined by 11.2% from the previous quarter in Q4 2021. Leasing activity for strip centers and general retail were the most affected retail categories as leasing activity square feet declined by 15.9% and 14.1% respectively, while neighborhood centers and malls were less affected with drops by 7.7% and 7.9%. As of February 18, 2022, retail leasing activity totals 23.6 msf halfway through Q1 2022.
Of the 390 metros covered by CoStar®, primary markets accounted for the majority of retail leasing activity since Q2 2020 for metros inside the top five. New York, NY accounted for 16.1 msf of retail leasing activity followed by Los Angeles, CA (14.7 msf) and Chicago, IL (14.6 msf). While the primary markets make up a larger share of metros within the top five for retail leasing since Q2 2020, it was actually a metro in the secondary markets that led all—Dallas-Fort Worth, TX (16.4 msf)—while Houston, TX closed out the top five. In 2021, the top five metros by leasing activity square feet did not change, but the order shifted between the top two. Across 2021, New York, NY had the most leasing activity square feet (10.6 msf) while Dallas-Fort Worth, TX totaled 10.2 msf.
Despite the step back in leasing activity in the second half of 2021, which was markedly affected by omicron, leasing activity rebound from 2020. Omicron's effect on retail in general will likely be limited and impermanent. With the improvement produced in 2021, in spite of the delta variant, we are optimistic for leasing as we progress through 2022.