Retail Begins to Rebound
Higher-than-expected advances in employment, along with the expanding vaccine rollout, stimulus checks and robust retail sales, are helping to support tenant health and retail fundamentals in the first quarter of 2021. Retail sales surged as the year commenced and grew 30.4% year-over-year in March on a non-seasonally adjusted basis. If we set aside last year’s weak retail sales numbers and compare it to March 2019, overall retail sales are up by $109 billion or 21.1%.
Retail fundamentals remained stable at the beginning of 2021 as performance continues to vary by subtype, location, class and tenant-mix. Retailers signed over 16,000 individual leases spanning more than 50 million square feet, which helped to pause the rise in vacancy, which currently stands at 5.1%. Leasing activity was driven by the expansion of essential retailers throughout the first quarter and was similar to Q1 activity levels registered in 2017, 2018 and 2019.
Over 5 million square feet were absorbed throughout the first quarter of 2021, providing relief from the wave of negative absorption posted in 2020. Some of the major retailers providing positive demand included discounters such as Dollar Tree and Big Lots, sporting goods retailers such as Dick’s Sporting Goods, home improvement stores such as Home Depot and Harbor Freight, and grocers such as Sprouts.
The market rate for all retail spaces averaged $21.72 per square foot in the first quarter of 2021. Malls are experiencing the most significant downward pressure in rent growth, while strip centers and neighborhood centers that feature more essential tenants are posting flat or modest rent growth. A relatively muted supply was well received by landlords as just over 9 million square feet of new retail supply was delivered in the first quarter, with 46.3 million square feet currently underway.
Download the Spring 2021 Retail Report to learn more about the retail strategies that will shape the post-pandemic world.
Download the U.S. Retail Market Statistics infographic here.