Colliers: Store openings on pace to surpass closures; vacancy rates down

Marianne Wilson
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Positive trends in leasing and absorption drove average retail asking rents to $22.51 per square foot in the fourth quarter.

Houston ranked as the top metro area for retail space (by square feet) under construction (as of the start of 2021).

That’s according to a new report from Colliers’ fourth-quarter U.S. retail report, which also forecasts that store openings in 2022 will surpass store closures for the first time since 2016.

The national vacancy rate dropped 10 basis points in the fourth quarter from the previous quarter, standing at 4.6% in the fourth quarter of 2021. Vacancy rates in the top 10 U.S. metro retail markets varied widely, from 2.8% in Boston to 4.0% in New York to 6.0% in Chicago.

Colliers’ fourth-quarter U.S. retail report also revealed that retail space under construction stood at 51.0 million sq. ft. in the fourth quarter and that 21.3 million sq. ft. of retail space was delivered in 2021. The top five metros by sq. ft. under construction in the fourth quarter were Houston (3.9 million sq. ft.); Miami (3.5 million sq. ft.); Dallas-Fort Worth (3.2 million sq. ft.); New York (3.0 million sq. ft.); and Atlanta (2.2 million sq. ft.)

Leasing activity fell during the quarter with 18,320 deals signed. But deal size grew to an average of 3,372 sq. ft., with a total of 61.8 million sq. ft. leased in the fourth quarter.

There were 28.3 million square feet of space absorbed in the fourth quarter as the strong pace of demand growth combined with muted levels of new supply has stabilized market fundamentals within the national retail market. For all of 2021, a total of 76.5 million square feet was absorbed, with shopping centers accounting for nearly 45% of the positive absorption. Retail space under construction stands at 51 million square feet, with 21.3 million square feet of retail space delivered throughout 2021.

Positive trends in leasing and absorption drove average retail asking rents to $22.51 per square foot in the fourth quarter, with malls and shopping centers continuing to show modest positive growth. Lease rates have grown by 3% year-over-year, the strongest nominal growth rate recorded in over a decade.

Average NNN asking rates were highest in Honolulu, at $48.44 per sq. ft.; followed by New York, $45.24; San Francisco, $41.87; Miami, $40.66; and San Jose, $39.55. Fast-growing metros in the Southern and Western regions of the U.S., such as Atlanta, Nashville, Las Vegas, Tampa, and Phoenix, are expected to continue to outperform the national average heading into the new year, according to Colliers.