Retail Demand Remains Strong Despite Limited Available Space

Executive Summary

• The overall retail availability rate remained at 4.7% in Q4 despite many store closures and a decrease in net absorption. Limited new development continued to support stability in retail market fundamentals. 
• Net absorption fell by 14% quarter-over-quarter to 5.7 million sq. ft., the fourth-lowest quarterly total since 2020. This deceleration reflects typical seasonality as retailers focused on the holiday season and year-end operations. 
• Rising construction costs driven by labor shortages and tight lending conditions have sharply reduced the pace of new development, with completions dropping by 52% quarter-over-quarter to just 4 million sq. ft.
• Average asking rent increased by 0.4% quarter-over-quarter and 2.5% year-over-year to $23.80 per sq. ft., driven by strong competition for limited space and high demand for prime locations. 
• Demand surged in secondary markets, with 13 of them recording over 1 million sq. ft. of positive absorption in Q4, including five in the West.