CBRE Research is reporting US Retail figures for Q3, the overall retail availability rate fell by nearly a full percentage point year-over-year to 5.0% in Q3—its lowest level since CBRE began tracking this metric in 2005.
Average asking rent grew by 2.5% year-over-year to $22.55 per sq. ft.
Absorption of 14.3 million sq. ft. in Q3 was less than half the level of a year ago, but was 8% higher than Q3 2019.
New deliveries totaling just 25.1 million sq. ft. over the past 12 months represent a record low.
Core retail sales, which exclude gasoline and automobiles, increased by 8.2% year-over-year, while non-store retail sales rose 13.8%—the highest growth since Q2 2021.
The report discusses how employment has surpasses pre-pandemic levels but consumer sentiment remains low after the Consumer Sentiment Index hit a near record low in Q3 while retail remained strong.
Nonstore exceeded core retail sales although core retail sales increased by 1.6% quarter-over-quarter and 8.2% year-over-year to $147 trillion. Nonstore retail, which includes e-commerce, increased by 2.8% quarter-over-quarter and 13.8% year-over-year to $326.9 billion.
While inflation continued to boost total retail sales numbers. All but one retail category, electronics and appliance stores, recorded year-over-year sales growth in Q3 but quarter-over-quarter results were mixed, with four categories recording declines.
The report continues to show absorption falling below the 10-year average. However, with 14.2 million square feet, net absorption was positive for the eighth consecutive quarter, even dipping below the 10-year average for the first time since Q3 2020. Continued positive absorption is notable given the muted level of new development. Neighborhood, community and strip centers topped all formats in absorption for the eighth consecutive quarter with almost 6.4 million square feet. Power centers remained active as well, with 1.7 million square feet of positive absorption.
Availability hit records low as the overall retail availability rate fell to at least a 17-year low of 5.0% in Q3. On a year-over-year basis, power centers have
shown the biggest reduction in availability, down by 1.3 percentage points. Neighborhood, community & strip center availability fell by 1.2 percentage points, with the overall retail availability rate falling by 90 bps year-over-year. High development costs, equipment scarcity and a tight construction labor market have caused many retail tenants to renew leases.
Retail deliveries rose in Q3 but set a record-low rolling 12-month total. Approximately 6.3 million square feet of retail space was delivered in Q3, bringing the
rolling 12-month total to a record-low 25.1 million square feet. The annual completion rate for U.S. retail has remained below 1% since 2010, which has created a scenario where the current supply is resilient to negative economic effects. Western markets remain a primary target for developers, with Dallas, San Francisco,
Houston, San Antonio and Los Angeles among the top six markets for Q3 2022 completions.
In report concludes, rent gains have leveled off. Overall retail asking rent grew by 2.5% year-over-year to a record-high $22.55 per sq. ft. The quarter-over-quarter growth rate of 0.45% was down from the previous three quarters, due in part to a lack of prime space remaining on the market.
Find the full report with graphs here.