In the ever-evolving saga of retail, where headlines often herald the demise of iconic chains, a different narrative unfolds within the confines of shopping centers across the United States. Despite the specter of bankruptcies casting a shadow over the industry, a surprising trend emerges – tenants are opting to maintain their foothold within these retail bastions, defying expectations of mass exodus.
As the curtains draw on 2023, statistics unveil a steadfast resolve among retail occupants, with the retention ratio for shopping centers standing at an impressive 97.4%. This figure not only mirrors recent highs but also surpasses the retention ratios observed during the tumultuous wave of store closings from 2017 to 2020. Behind this seemingly modest percentage lies a monumental shift, equating to approximately 42 million square feet of retail space preserved amidst the churn of market dynamics.
This resilience finds its roots in a confluence of factors. The resurgence of consumer spending over the past three years has injected vitality into retail landscapes, while the purging of underperforming stores pre and post-pandemic has streamlined the market, leaving behind a leaner, more agile retail ecosystem. Moreover, the dearth of new retail developments coupled with sustained post-pandemic demand has precipitated a scarcity of available retail space, compelling tenants to cling to their current locations amidst a landscape of dwindling options.
In this paradigm, landlords emerge as inadvertent beneficiaries, not only in their ability to retain tenants but also in their capacity to swiftly fill vacancies when they arise. The average duration for a retail space to languish unoccupied has plummeted to a mere 9.5 months, marking the shortest interval recorded since the Great Recession. This trend underscores a pivotal shift from an era of oversupply to one where retail space is increasingly scarce, buoyed by robust fundamentals and evolving tenant preferences.
While pockets of oversupply persist within certain segments of the retail market, the broader landscape paints a picture of resilience and adaptability. As tenants opt for continuity over upheaval, shopping centers morph into sanctuaries of stability amidst an ever-changing retail terrain.
Source: CoStar Analytics