2023 Year-in-Review

The retail industry remained in expansion mode, as tenants leased over 250 million square feet of retail space in 2023. Leasing activity followed consumer spending patterns, as retailers increased their space needs in response to rising demand, including food and beverage, fitness, experiential, discount, health and beauty, and medical services. Each of these expanding sectors has benefited from the pivot in consumer spending toward value, wellness, and experiences. Additionally, retailers announced 5,865 store openings in 2023 compared to 4,070 closings, primarily driven by retail bankruptcies.

Continued expansion in the sector drove retailers to absorb 53.8 million square feet of retail space last year, exceeding the 41.1 million square feet of newly delivered retail supply. Most of the demand stemmed from retailers’ desire to be closer to the consumer, with freestanding and neighborhood retail properties collectively accounting for 95% of all retail growth over the past year.

While retail market fundamentals remain strong, persistent challenges of securing desirable locations due to limited space availability caused a notable downshift, leading to more sustainable growth levels in 2023. In addition, minimal development activity over the last decade continued to apply downward pressure on vacancy, dropping the U.S. retail vacancy rate by 20 basis points year-over-year to 4% at the end of 2023.

Trends to Watch in 2024

U.S. National Retail Forecast