News release

Strong retail fundamentals fuel continued rent growth and long-term value for investors

According to JLL, retail occupancies are over 95%, and anchored shopping centers are currently trading at 55% replacement costs

September 27, 2023

Jenna Sharp

Property Management and Capital Markets
+1 214 438 6450

CHICAGO, Sept. 27, 2023 – Due to the retail sector’s high levels of occupancy and its undersupply of new development, current owners and investors are poised to capitalize upon the sector’s strong fundamentals and long-term rent growth.

According to JLL’s U.S. Q2 2023 Retail Outlook, net absorption increased 12.6% quarter-over-quarter up to 10.8 million square feet, and deliveries decreased 5.1% from the previous quarter, driving the current year-over-year rent growth to 3.6% across all retail asset categories. This sets the overall average occupancy for retail centers across the country at 95.4% and development at less than 0.3% of total inventory.

While the Sunbelt markets, such as South Florida (7.9%), Las Vegas (7.8%) and Austin (7.3%), are experiencing significant rent growth, the secondary and tertiary markets in many cases are leading the pack in terms of rent growth with Jacksonville up 12.6%, Phoenix up 9.8% and Omaha up 9.0% year-over-year (CoStar).

“The impressive rent growth seen in secondary and tertiary markets, in addition to the primary markets, really indicates the strength of the retail sector as a whole, across varying geographies,” said Senior Managing Director Danny Finkle, co-lead for JLL Retail Capital Markets.

Despite the significant rent growth in retail properties over the past decade, cost of capital and competing uses for land has hindered the justification for new development within the asset class. This high replacement cost puts additional upward pressure on rent growth going forward due to a lack of redevelopment.  As a result, anchored shopping centers specifically are trading at 55% of replacement costs, on average. 

Retail construction starts have also decreased over the past year, with just 11.9 million square feet of projects started during the first quarter, the lowest level since 2005.

“The persisting high occupancies, the lack of retail product deliveries over the past decade and the challenges preventing future construction starts have created the perfect storm for retail’s meaningful rent growth, as well as long-term value for investors,” added Senior Managing Director Chris Angelone, co-lead for JLL Retail Capital Markets.

Within the overall retail sector, grocery-anchored centers retain their position as the most heavily transacted multi-tenant sub-type by volume at $3.6 billion YTD. However, this growing confidence in the retail sector has led to an escalated interest from investors in power, lifestyle and other formats, according to a recent JLL survey.

“Despite the volatility in the capital markets environment, investor interest across all open-air product types within the retail sector has remained strong,” said Senior Managing Director Barry Brown, co-lead of for JLL Retail Capital Markets. “We look forward to seeing the value generated for both owners and investors in the years to come.”

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm's in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether investment sales and advisory, debt advisory, equity advisory or a recapitalization. The firm has more than 3,000 Capital Markets specialists worldwide with offices in nearly 50 countries.

For more news, videos and research resources on JLL, please visit JLL's newsroom.

About JLL

For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage and invest in a variety of commercial, industrial, hotel, residential and retail properties. A Fortune 500® company with annual revenue of $20.9 billion and operations in over 80 countries around the world, our more than 105,000 employees bring the power of a global platform combined with local expertise. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit