The retail sector exhibited great improvement through the first half of the year as strong consumer spending boosted retail sales and the easing of restrictions has helped to slow the pace of store closures and bankruptcies. Retail sales in June increased by 18.5% over the prior year and 21.8% over the same period in 2019. With a reopening economy, consumers have begun to shift their spending from goods to services. Retail goods posted a 2% decline, while restaurant rose by 6% in the second quarter.
Retailers signed over 22,000 individual leases spanning more than 68 million square feet in the second quarter which dropped the national vacancy rate down to 5%. Over 19 million square feet of retail space was absorbed in the second quarter as retailers rapidly expand their store counts, bringing the year-to-date absorption total to 23.5 million square feet. Sectors such as grocery, discount, home décor and beauty drove the positive demand.
The average store size recently fell to 3,100 square feet as retailers such as Target, Macy’s and Bloomingdale’s announced growth plans focused on opening smaller formatted stores. Additionally, retail openings are outpacing store closures as the amount of space retailers plan to close in 2021, 44 million square feet, is on pace to be the lowest annual total in more than a decade.
Overall retail rents increased 1.1% during the quarter and stand at $22.07 per square foot as retailers continue to expand their store counts. Nearly 10 million square feet of retail space was delivered in the second quarter. Meanwhile 46.1 million square feet remains underway, 19% lower than what was under construction at the beginning of 2020 and 4% less than the previous quarter.