- The average leasing time for shopping centers is down to 8.5 months, the lowest in two decades.
- Demand for retail space is strong, with 80% of shopping center space leasing within 6 months.
- Restaurants are contributing to the demand increase, with a 6% rise in openings nationally.
According to CoStar, leasing activity in U.S. shopping centers has accelerated to its fastest pace in two decades, driven by a surge in demand for retail space after years of limited construction, as reported on Bisnow.
Rising Demand
Post-pandemic demand for retail space has been high, leading to all-time low vacancy rates. It now takes shopping center owners an average of just 8.5 months to find tenants for newly available shopping center spaces.
Up to 80% of shopping center space leases within 6 months of availability, with almost half of the spaces landing tenants within 3 months. A record 98% of space is leased within 9 months of becoming available.
Rents have also been climbing. More tenants are securing spaces before they become available and agreeing to larger rent hikes.
Case Studies
Examples of this rapid leasing include Aldi’s recent lease in an open-air shopping center previously occupied by Big Lots, where owner Brixmor Property Group upped rents by 50% between leases.
The closures of big-name stores like Rite Aid and Bed Bath & Beyond have also provided landlords with opportunities to fill spaces with more attractive retail tenants.
Restaurants are also contributing to the demand for retail space, with 6% more openings nationwide over the past year. However, despite this strong retail demand, consumer confidence has been fluctuating in recent months, which could impact future retail spending.
Potential Challenges
For now, the rapid pace of leasing highlights strong demand for retail space nationwide. But several major landlords, including Simon Property Group (SPG), have acknowledged potential challenges.
“We are not immune to the macro environment,” CEO David Simon recently stated. “If it ultimately led to less consumer spending and more retail client stress, we’re not immune to it. Frankly, it’s realistic to assume we may go through a reasonable slowdown here coming up.”
