Tourism Giving Urban Corridor Retail a Boost

Consumer spending growth and the return of international and domestic tourism in 2023 drove prime urban retail demand — and net leasing strength — “with foot traffic recovering to pre-pandemic levels in half of the prime corridors surveyed,” said the City Retail 2024 report from Jones Lang LaSalle.

The report focused on the prime urban corridor, “a nationally recognized shopping district that is noted for its mix of high-street, national, and international tenants,” JLL wrote. They are a result of organic growth, not a single developer, and have boundaries that include the “most prominent retail spaces, as well as current and future points of interest.”

The cities that JLL highlighted were Boston; Chicago; Los Angeles; Miami; Montreal; New York City; Philadelphia; San Francisco; Toronto; Vancouver; and Washington, D.C. Cities can have more than one urban corridor, typically named for a street or area. Only Montreal had a single corridor, Sainte-Catherine Street.

Apparel retailers were the biggest prime corridor space leasing in 2023, according to JLL, with athleisure the biggest part of the expansion. The whole category comprised 48% of the leasing activity, compared to 35% in 2022. Almost every corridor had “strong absorption from luxury apparel and jewelry brands, as well as luxury boutiques.” Additionally important were food retailers “catering to consumers’ desires for experiences.” They represented about 15% of total leases.

There were winners and losers within the same city. “Prime corridors with nearby residential populations recovered much faster, attracting retailer interest as they sought to relocate existing stores and open new ones,” they wrote. “In Chicago, luxury retailers have left Michigan Avenue for the Gold Coast, seeking to capitalize on the affluent residential base and strong existing luxury co-tenancy in the area. A similar story has been seen in New York, where retailers who had opted for SoHo in recent years have set their sights on an old favorite with ample available space – Madison Avenue.”

The firm thinks that, going forward, experiences will “dictate the demand profile in retailer corridors” as a lack of supply presents “a challenge to overall leasing velocity.”

Foot traffic had fallen “by nearly 100%” in “almost every city” because of mandated store closures and shelter-at-home orders JLL, wrote. As the economy reopened, foot traffic came back swiftly. “Miami’s lenient COVID restrictions led to its full recovery by early 2021, but pre-pandemic levels of foot traffic have also been observed this year in Chicago, Boston, and Washington D.C.”

A return of international tourists helped boost retail. “Boston’s Logan Airport has seen international passenger levels up to 27% higher than pre-COVID levels,” they wrote. “Meanwhile, New York is expected to welcome 63.2 million visitors this year, just shy of its 2019 mark of 66.6 million, which the city is forecast to exceed next year.” The international visitors have spent $156 billion — 31.6% over 2022 and 183.7% over 2021.

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