Urban Retail Poised to Attract Greater Share of Investment

Urban retail has reclaimed its prominent position in the market in 2024 with its resilient tenant demand, robust occupancy rates, and steady rent growth, according to a new report from JLL.

Climbing office populations, the re-emergence of international business travel, and the prospects of a more promising investor climate are key reasons for the boost, says Senior Managing Director Chris Angelone, who co-leads the JLL Retail Capital Markets platform.

Additionally, urban hotel RevPAR has exceeded 2019 levels and residential population outflows from major cities have stabilized.

Consumer spending continues to grow, surpassing $705 billion in September, and retail vacancy reached a historic low of 4.2% at 2023 year-end, the report said.

Visitors to the United States had spent $156 billion from January through September, a 31.6% increase over the same period the previous year.

Investment activity is expected to accelerate over the next 12 to 18 months as a function of growing optimism for interest rate cuts this year, JLL said, based on data from Trepp.

It cited private equity fund life expirations and financial stress in the face of over $1 billion in U.S. urban retail securitized debt reaching maturity over the next three years as some of the drivers.

This would come after urban retail transaction volume was just $4.8 billion in 2023, down 39% year-over-year. JLL pointed out that the YoY decline was the smallest relative to all other core property sectors.