Retail Real Estate in 2024: Key Trends to Watch
Driving the news: The retail real estate landscape continues to evolve, shaped by shifting consumer preferences and a limited supply of quality retail spaces. Key trends include a rise in wellness-focused tenants, the popularity of neighborhood centers, and a competitive market driven by scarce supply.
Wellness takes center stage:
- The rise: Wellness is booming, with a 2.8% increase in retail openings in 2023, translating to about five thousand new stores. This sector’s growth contrasts with declines in luxury (-3.9%) and jewelry (-1%).
- The shift: Consumers are increasingly prioritizing holistic health, driving demand for wellness-oriented brands and experiences. McKinsey reports that 50% of US consumers now consider wellness a top priority, up from 42% in 2020.
- Expert take: “Wellness is still in its early innings and not slowing down. Recent additions like Clean Market and Reset by Therabody at Brookfield Place show consumer demand for these experiences,” says Jason Maurer, EVP of National Urban Retail for Brookfield Properties.
Community in streets and neighborhood centers:
- The trend: As top retail malls fill up, brands are turning to neighborhood centers and freestanding locations. Popular spots include LA’s Brentwood Country Mart and Newport Beach’s Lido Marina Village.
- The why: Limited space in high-quality malls and a consumer desire for local, community-centric experiences are driving this shift.
- Expert insight: “Tenant demand is flowing into freestanding properties and neighborhood centers. Investors also focus on these segments for their stable yields,” notes Brandon Svec, National Director of Retail Analytics at CoStar.
Navigating a competitive market:
- The numbers: Retail vacancy rates hit a record low of 4.6% in December 2023, driven by high demand and low supply.
- The challenge: New construction dropped to 46 million square feet in 2023 from 82 million in 2022, while 18 million square feet of obsolete retail space was demolished.
- Market outlook: “The US retail space market will remain tight in 2024,” says Svec. The limited supply intensifies the competition for prime retail corridors.
The bottom line: The retail real estate landscape in 2024 is marked by the rise of wellness, a shift towards community-centric shopping experiences, and a competitive market driven by scarce supply. As retailers and landlords adapt, the sector is set for a dynamic year ahead.
