Retail Rent Growth Supported by Drop in New Supply

Executive Summary

• Average retail asking rent increased by 2.4% year over year to $24.59 per sq. ft., supported by historically low construction completions and three consecutive quarters of positive net absorption.
• The retail availability rate rose slightly to 4.9% in Q1, as bankruptcy filings by certain retailers resulted in store closures and space reductions.
• Suburban retail is outperforming downtown retail, as hybrid work continues to drive demand for retail outside of the city center. Since 2022, the overall downtown availability rate has risen by 120 basis points (bps), while suburban availability has fallen by 91 bps.
• Sun Belt markets dominated both new supply additions and net absorption in Q1. Phoenix led all markets in both new construction (744,000 sq. ft.) and net absorption (547,000 sq. ft.) in Q1, while Texas accounted for five of the top 10 construction markets and over 30% of total construction activity.