As store closures slated for 2024 and beyond take effect, previously tight vacancy rates are loosening up, according to a Q2 report from Colliers.
Compared to the previous quarter, the national retail vacancy rate rose 10 basis points to 4.3%, per that report. In all the market saw negative net absorption of 6.4 million square feet and a 5.2% drop in leasing activity.
“Much of the remaining available retail space is lower quality, with less than 25% built after 2000, leaving tenants seeking modern space in affluent areas with limited options,” according to the report.
There is little relief for supply constraints, though, as high costs including financial rates are impeding retail construction, Colliers found. In booming markets like Texas that’s translating into “a shortage of first-generation space.” Some 6 million square feet of retail construction was delivered in Q2.
Average asking rents also declined — not quite 0.4% — to $25.46 per square foot. However, while rent growth will likely continue to ebb somewhat as store closures continue apace, “limited supply and low overall availability” mean that a lot of emptying space will be filled again quickly.
Indeed, availability is 15 basis points above Q4 2023’s low and “well below” the 10-year average.
