The United States is ‘under-retailed’ by 200 million square feet, or the equivalent of five-and-a-half Central Parks in New York City. This is according to CBRE’s latest analysis of the retail market, which examines post-pandemic shifts in shopper demographics and their evolving needs.
From the 1980s into the early 2000s, the country overdeveloped retail space, but development has sharply declined over the past 15 years. Annual retail construction completions were down by more than 80% between 2021 and 2023 compared with the mid-2000s, the report said.
“With ongoing population growth in many markets, this has resulted in a significant undersupply of retail space today," said James Breeze, vice president of global retail research for CBRE. "The retail sector is challenged not only by a shortfall in new development but also a need for new formats that complement online shopping and accommodate product returns and the shopping preferences of younger generations.”
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Optimism among younger Americans – Gen Z and millennials – is expected to drive growth in consumer spending next year. According to a joint CBRE and Morning Consult survey, 36% of Gen-Zers and 39% of millennials are likely to incur debt for spending, compared with lower percentages among older generations.
“Despite being digitally native generations, younger shoppers also show a strong preference for in-store shopping experiences, with 60% of Gen Z and 53% of millennials visiting shopping malls in the past three months,” according to the report.
Retail availability across the country averages just 4.7%, which is the lowest it has been since 2005 when CBRE started tracking. The lack of availability is most pronounced in markets where retail development has not kept up with population growth, including Austin, Orlando and Nashville. In those markets, availability is 2% to 3%.
Major urban centers like New York, Los Angeles and Chicago had relatively stable availability rates of between 5.5% and 8.5%. This provides opportunities for targeted retail development, said CBRE.
Retail has been resilient in vibrant mixed-use districts that include prime office, urban residential, walkable retail, as well as dining and entertainment. This has translated into a resurgence of retail rents in high-demand areas, sometimes up to 74% higher than in prime business districts and 110% higher than in non-prime business districts.
High streets have seen the largest gap between pre- and post-pandemic performance, suggesting a resurgence in consumer interest in urban shopping areas, noted CBRE. Urban high streets are performing particularly well, outpacing all other retail formats in terms of growth in unique visitors since May 2023.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
