Retail recovery continues to gain traction

Q1 2022 retail fundamentals show solid performance

April 27, 2022
  • Keisha Virtue

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Retail demand remains strong

US net absorption for the first quarter totaled 21.8 million square feet, after an already impressive fourth quarter of 2021 at 28 million square feet. Over the last 12 months, net absorption reached 91.6 million square feet – the highest level since 2017.  Leasing activity is approaching pre-pandemic levels with nearly 63 million square feet of signed leases in Q1.  Deliveries tripled from the previous quarter, but at 16.5 million square feet, remains well below the levels seen during the Great Recession which is keeping vacancy low. Furthermore, developers and banks are shying away from most large speculative projects, focusing instead on single-tenant build-to-suits or ground floor retail spaces in mixed-use developments. Vacancy remains low at 4.6%, with malls, power centers and smaller open-air centers showing compression over the quarter.  Strong demand from necessity-based tenants and quick-service restaurants have helped rein in vacancy.

Q1 retail net absorption remains strong at 22 million square feet



In other positive news, fitness demand is back! Fitness tenants dominated move-ins during the quarter. Planet Fitness continues its rollout of new locations, taking more than 250,000 square feet. . Boutique fitness tenants like F45 Fitness, Club Pilates and Hotworx also took new space.

Rent recovery is now a reality for most metros

Retail rents are tracking 3.4% higher than they were a year ago, but the growth remains nuanced. Strip and neighborhood centers continue to show the strongest rent growth among retail property types at 4.1% and 4.0%, respectively. Malls and power centers also saw healthy rent growth. Most major metros are now showing clear year-over-year rent growth although increases remain higher for Sunbelt metros.

Most metros see year-over-year rent growth in Q1 2022



Consumers eschew online for in-person shopping

With the holiday wave of Omicron now in the rear-view mirror, consumers are heading back out to retail centers again. After dipping at the start of the year due to Omicron, shopping center traffic in March was only slightly (3.9%) below its level in 2019. Fitness center and beauty tenant visits are up considerably both from 2019 and from February levels, as everyone rushes to look their best for expanded social activity.  Restaurants and bars also saw more action in March, with restaurant traffic climbing 14.2% month-over-month and bars jumping 18.1%. People are hungry for the social scene indeed.

As a result of increased store purchases, the share of e-commerce sales is dropping – down almost 300 basis points since the quarantine period in Q2 2020. I took my daughter shopping for clothes at Nordstrom and bath bombs at Lush in the Town Center mall in Boca Raton for the first time in a long time. When she saw the expanded kids play area and the shiny glass storefronts, she exclaimed “This mall is amazing, Mommy!” Couldn’t agree more, kiddo. Couldn’t agree more.

E-commerce share of sales continues to decline since mid-2020




Contact Keisha Virtue

Sr Analyst, Research - Retail