Downscaled construction of new retail space led to vacancy rate of just 4.4%.
Retail space is officially hard to get.
JLL’s just-released report on retail real estate activity in the second quarter of 2022 put the retail leasing total at 78 million sq. ft., the highest it’s been since 2017. And over the past 12 months, more than 250 million sq. ft. of retail space has been claimed, lifting net absorption in the category to a likewise five-year high.
Retailers opened 4,432 stores so far this year and closed just 1,954. Putting up the most new storefronts is Dollar General with 1,100 openings in the works. The entire discount segment has been making a run at space, with Family dollar ready to open 400 new stores and Dollar Tree set to add 190.
Food and beverage brands were the next most active sector with 838 new locations engaged. Chipotle leads that class with 250, followed by Popeyes with 200 and Dutch Bros with 125.
Fast-food chains experiencing more delivery pickups than in-store diners continued to open stores with smaller footprints. Leading the way in this group were Starbucks, Taco Bell, and Pizza Hut. Cellular retailers T-Mobile and AT&T scaled down their average store spaces, as well.
Though not high on JLL’s hot leasers list, experiential tenants such as movie theaters, fitness centers, and assorted entertainment venues were the key drivers of traffic in Q2. They drew nearly 40% more customers than they did in Q2 2021—with cinemas benefitting primarily from the release of blockbusters Top Gun: Maverick and Jurassic World Dominion.
Rampant inflation and high gas prices failed to keep consumers away from shopping centers, according to JLL. Retail sales totaled $378 million in June--a 22% rise from pre-pandemic levels.
JLL predicts that retail space will continue to be limited in the months ahead. Net deliveries of new retail space totaled just 4.1 million sq. ft. in the second quarter—a result of both low construction activity and demolished buildings. As a result, the overall retail vacancy rate fell 10 basis points to 4.4% in the quarter with all shopping center types showing compression.