Report: Less than 5% of retail space available at end of August
Availability of retail property is continuing to shrink to historic levels, according to new data from CoStar Analytics.
The real estate data firm says that just 4.5% of the total amount of retail space was available for lease at the end of August. Of the retail spaces that are available, most of them are concentrated in older properties. Over 75% of the retail space available for lease as of the end of August was located in properties that were built in the prior century, while just 11% of available retail space was built after 2010.
CoStar cites a lack of new construction in the past 15 years as one of the main drivers of low retail availability, fueled by increased interest rates and higher building costs.
“As demand for store space picked up following the pandemic, availability rates in retail properties built after 2010 steadily declined, as tenants expanded into well-located newer store spaces first,” said Brandon Svec, national director of U.S. Retail Analytics for CoStar Group. “But with so little new space being built and steady demand from retailers, these newer spaces are becoming harder to find, with just 3.3% of space built since 2010 available for lease, 120 basis points lower than the national total.”
From a quality perspective, CoStar’s data says that just 6% of available retail space is Class A, while 38% of it is rated as lower-quality Class C space, and most regional and national retailers are unlikely to consider Class C space as they look to expand.
After adjusting for this by removing the over 270 million sq. ft. of Class C space, retail tenants are left with less than 450 million sq. ft. of space available, which equates to just 2.7% of the more than 16.3 billion sq. ft. of retail space tracked by CoStar. More than 60% available retail space is located in areas with a median household income below the national average of just over $75,000 per year.
[READ MORE: Store Expansion News: August update]
“While most segments of the retail market can still perform quite well in lower-income areas, especially those that offer significant population density, most well-known retailers seek to be in areas with higher median incomes and greater buying power potential,” added Svec. “If a tenant is in the market and actively targeting areas with household incomes of over $100,000, 84% of currently available space would be excluded, leaving them with less than 1% of the total retail market as an option.”
