U.S. consumer confidence rebounded in December despite growing anxiety over a recession and the combination of high inflation and rising interest rates that have made credit cards and mortgages more expensive. The consumer confidence index rose to 108.3 in December, rebounding sharply from 101.4 in November. In addition, retailers enjoyed a strong holiday shopping season as total holiday-related spending grew by 6.73% over the last year, per GlobalData analysis. This growth rate is well above the 3.73% average holiday rate in the pre-pandemic period from 2015 to 2019.
The national retail vacancy rate dropped ten basis points during the fourth quarter of 2022 and stood at 4.2%. Availabilities continued to decline in 2022 as demand rose and new supply remained minimal. Average retail asking rents rose to $23.70 per square foot in the fourth quarter, an increase of 0.8% over the quarter. Annual rent increases rose by 4.5% in the fourth quarter and discounts on asking rent dropped nearly 34%. Above-average inflation will continue to weigh on the real rate of rental growth.
Retailers signed over 15,000 individual leases spanning 51 million square feet in the fourth quarter of 2022. The growth of quick service restaurants and cellular retailers drove the leasing activity for smaller spaces, while discounters, fitness, and off-price retailers remained active in medium to larger spaces. In the fourth quarter, Dallas, New York, Houston, Los Angeles, Chicago, Atlanta, and Phoenix accounted for a quarter of all retail leasing activity in the United States. 20.4 million square feet of space were absorbed in the fourth quarter, with more than half of the absorption flowing into shopping centers. At the same time, mall space availabilities remain higher than pre-pandemic levels.
Retail space under construction stands at 63.2 million square feet, with 7.3 million square feet of new retail space delivered in the fourth quarter of 2022. With concerns of over-supply still in developers’ minds, most new retail space consists of build-to-suits or smaller freestanding properties, as nearly 85% of new retail space delivered over the past year was leased before delivery. Consistent with recently delivered supply, under construction retail projects primarily comprise freestanding general retail properties preleased to national tenants.