Retail wrapped up the year on a high note, delivering a stronger-than-expected finish. Overall sales grew by a solid 3.8% in December, with inflation-adjusted volume up 1.6%. Core retail sales (excluding auto, gasoline, and foodservice) outperformed the broader sector, rising 4.2% overall and 2.3% in volume. Holiday sales in November and December were exceptionally robust, climbing 4.1% overall and 4.0% for core retail—well above most retailers’ expectations.
Despite a notable increase in retailer bankruptcies and store closures, U.S. retail space remained historically tight as 2024 ended. The national retail vacancy rate held steady at 4.1% throughout the year, highlighting the sector’s resilience. This stability is primarily attributed to limited new development since the Great Financial Crisis and sustained post-pandemic demand, reflecting the retail market’s strong fundamentals.
The market recorded 7.0 million square feet of net absorption in the fourth quarter, with leasing volume reaching 40.8 million square feet, a 23% decline compared to the previous year. Despite this slowdown, leasing discussions are starting earlier than ever, and available spaces are filling quickly. The scarcity of quality retail space continues to fuel strong interest, underscoring the enduring demand in the market. Retailers and landlords report exceptionally robust backfill demand for spaces as they become vacant, with some locations achieving rent increases of 40% or more.
Retail construction totaled 44.9 million square feet in 2024, with 5.4 million square feet delivered in the fourth quarter. However, new development has reached a multi-decade low due to rising construction and financing costs, with these constraints expected to persist into 2025. The declining volume of retail projects under construction further highlights the shortage of quality available space. Developers report ongoing challenges in making new ground-up projects financially viable under today’s cost environment. This imbalance will likely drive further rent increases for landlords and sustain supply-constrained conditions for the foreseeable future.
Average retail asking rents rose to $34.47 per square foot in the fourth quarter, a 1.6% increase year-over-year, driven by strong backfill demand. Markets with significant population and buying power growth continue to outperform, as rising consumption fuels tenant demand and enhances sales efficiency. While rent growth has slowed compared to earlier post-pandemic highs, it remains steady, supported by resilient retail sales and limited new space. Since the end of 2019, nominal retail sales (excluding e-commerce, gasoline, and automobiles) have surged by over 30%, with inflation-adjusted sales still nearly 10% higher than pre-pandemic levels. Despite these gains, the total retail space occupied has grown by only 1.7% during the same period, highlighting the constrained supply.
Constrained supply, persistent demand, and rising rents are expected to shape the retail market further in 2025. Retailers who can secure prime locations will likely benefit from sustained consumer interest, while developers face ongoing challenges in delivering new space. The retail market’s resilience signals a promising, albeit competitive, year ahead.
Download the U.S. Retail Market Statistics infographic here: 4Q24 Retail Stats