Retail space is in demand, and prices are rising. Net absorption of retail space during the third quarter reached the highest level since the fourth quarter of 2017, the National Association of REALTORS® reports. The biggest demand has been for general retail and neighborhood space.
New retail supply has been low throughout the year. That has led to higher prices due to strong demand. Retail asking rents climbed 2.7% over year ago amounts. Strip retail centers have posted the highest year-over-year increase of any retail property at 3.4%, NAR reports. “Power centers”—shopping centers that are usually anchored by tenants like home improvement, discount departments, and warehouse clubs and then have smaller tenants mixed in—have seen significant growth. Also, smaller shopping centers such as neighborhood and strip centers have seen increasing demand throughout the year, Brandon Hardin, an NAR research economist, writes at the association’s Economists’ Outlook blog.
The markets with the strongest year-over-year gains in asking rents were mostly centered in the Midwest, Southwest, and Southern metros, according to CoStar commercial data. The standout markets include Akron, Ohio; Las Vegas, Nev.; Tulsa, Okla.; Salt Lake City, Utah; Fort Lauderdale, Fla.; Jacksonville, Fla.; Atlanta, Ga.; Nashville, Tenn; Tampa, Fla.; and Cincinnati, Ohio.
Still, malls remain vulnerable, Hardin notes. Net absorption had been improving in the third quarter but started to reverse as of Dec. 9 as a new strain of COVID-19 sparks fears across the country. Mall vacancies have increased by 8.4% over the past year, and asking rents have risen 2.3% year-over-year, NAR reports.