Retail Preleasing Running at 75%
With inflation inching upward, consumers may soon might feel more pressure to pull back spending on non-essentials.
Retail space demand continues to run hot, with most available space having been pre-leased, according to a new report from JLL.
Only about 25% of delivered inventory is actually available for lease. JLL says supply is restraining activity.
The percent of available space that has been leased remains elevated, at 35.1% over the past 12 months, compared to 31.9% in Q1 2019.
Meanwhile, consumers continue to spend, but their resilience is being tested by inflation of late. Retail sales rose 0.7% in March, increasing 0.7% over February and 4% year-over-year. The rate of increase slightly tops the inflation rate. The strongest gains were seen for e-commerce retailers, home improvement, and higher-priced gas stations.
Consumer price index (CPI) in March sat at 3.5% above year-ago levels. This marks a 0.4% increase from the previous month.
“With inflation inching upward, consumers may feel more pressure to pull back spending on non-essentials in coming months,” according to JLL.
This is despite the University of Michigan’s consumer sentiment index measuring at its highest level since July 2021.
“While sentiment has been relatively stable for several months, there is some frustration that inflation slowdown has stalled, which may impact buying decisions,” JLL said.
Sun Belt Leads Rent Growth
Sun Belt market rent growth continues to outpace metros in the Northeast and West due to solid population gains and buying-power growth.
Metros with significant proportions of older suburban properties and those with stagnant population totals underperform the US average.
Newly executed leases shrunk by 11.1% from the previous quarter to an average of 3,027 square feet as a predominance of retailers are taking small spaces (under 2,500 square feet).
“More than two-thirds (68.5%) of deals inked in the first quarter were for such small spaces given that quick-service and fast-casual restaurants generally fall within this size category,” JLL said, with nearly 2,000 locations opening in 2024, mostly from QSRs like McDonald’s, Chipotle, WingStop and coffee chain Dutch Bros.