CoStar: Asking retail rent growth slows in Q3
Retail asking rent growth slowed to its lowest pace in nearly a decade in the third quarter.
That’s according to new data from CoStar, which revealed that during the period, national annual asking rent growth slowed to 1.6%, marking the slowest pace of growth since 2017. Asking retail rent growth was down from 2.3% in the second quarter, and 2.9% a year prior.
Power and neighborhood centers posted an annual rent growth of roughly 2.4%, while strip centers and malls recorded a gain of about 1.7%. General retail properties, which account for the largest share of inventory, slowed to roughly 1.0%.
[READ MORE: Colliers: National retail vacancy rate hits 4.3% in Q3]
“The continued moderation in asking rent growth comes despite a second consecutive quarter of solid demand,” said Brandon Svec, national director of retail analytics at CoStar Group. "Tenant economics have increasingly set the ceiling on rent growth. With elevated operating costs and retailers becoming more selective with expansion plans, tenants have grown increasingly resistant to additional rent increases, particularly in discretionary categories where sales growth has not kept pace.”
Among markets with at least 100 million square feet of retail inventory, CoStar found that Cincinnati recorded a strong annual rent growth (6.2%), followed by Nashville (5.3%) and Charlotte (5.0%). Pittsburgh and San Diego posted declines, at -1.4% and -1.3%, respectively.
Earlier this month, CoStar revealed that retail construction activity slowed in the third quarter as high costs continue to impact development. Roughly 58.3 million square feet of retail space was under construction in the U.S. in the period, down from 60.6 million square feet in the second quarter and 63.3 million square feet in the first quarter. Despite being unchanged from a year prior, the metric remained roughly 4% below its prior 10-year average of 60.7 million square feet.
CoStar noted that new construction starts fell to their lowest quarterly total since at least 2016 in the third quarter. Developers broke ground on about 7.7 million square feet of retail space during the period.
CoStar’s full report on asking rents can be found here.
