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  • Writer's pictureRealFacts Editorial Team

Retail Leasing Market Shows Significant Shift Amid Population Growth


crowd of people

A recent analysis of the commercial real estate market reveals a notable trend: the average time required to lease retail space has reached a decade low. According to data from CoStar, the average time to lease retail space has dramatically decreased from nearly 18 months in 2016 to about 8 months in 2024. This sharp decline underscores a significant shift in the retail real estate landscape.


From 2014 to 2016, the average months to lease retail space hovered around 16 to 18 months. However, a steep drop occurred around 2017, bringing the average time to lease down to just over 10 months. This reduction remained relatively stable until a slight resurgence in 2022, where the average climbed back to around 12 months. Despite this brief increase, the downward trend resumed, leading to the current record low.


Graph of average time for retail space to lease

This accelerated leasing process indicates a growing demand for retail space, suggesting that businesses are more eager to secure locations quickly. This trend could be driven by various factors, including changes in consumer behavior, economic conditions, and the evolving retail landscape, which increasingly blends physical stores with online shopping experiences.


Population Growth Outpaces Retail Inventory


The second graph provides additional context to the current state of the retail leasing market. It shows the relationship between 10-year population growth and 10-year retail inventory growth across various U.S. markets. The data, also sourced from CoStar, clearly demonstrates that in most markets, population growth has outpaced the growth of retail inventory.


Graph of population growth

Markets such as Austin, Houston, and San Antonio exhibit significant population growth, far exceeding the increase in retail inventory. Austin, in particular, stands out with a 10-year population growth of over 30%, while its retail inventory growth is around 10%. This disparity highlights a potential strain on available retail space, contributing to the reduced leasing times.


Other markets like Dallas, Jacksonville, and Orlando also show notable population increases, with retail inventory struggling to keep pace. On the other hand, more mature markets like San Francisco, Los Angeles, and New York display relatively balanced growth between population and retail inventory.


Implications for the Retail Real Estate Market


The combination of these two trends—the reduction in leasing time and the faster population growth compared to retail inventory growth—paints a dynamic picture of the retail real estate market. As population growth continues to outstrip the addition of new retail spaces, the competition for prime retail locations is likely to intensify.


For investors and developers, this scenario presents both challenges and opportunities. The high demand for retail space in rapidly growing markets could drive up rental prices and property values, making it a lucrative area for investment. However, it also requires careful consideration of market saturation and the evolving needs of retailers and consumers.


Retailers, on the other hand, may need to act swiftly to secure desirable locations and adapt to changing market conditions. The increasing pressure to lease spaces quickly could lead to more competitive lease terms and a greater emphasis on strategic site selection.

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