Remember when the U.S. was an over retailed nation? That was then. Today construction has dwindled and over 130 million square feet of retail space has been demolished in just the past five years, especially in aging malls.
CoStar’s September 2023 real estate update reveals that retail space per capita in the 45 largest markets in the U.S. has hit “a multi-decade low” of 54.3 SF per capita – a 3.9% drop since its 2009 heyday of 56.5 SF per capita.
Within 34 of these 45 markets, supply per capita contracted over 15 years by an average 7.3%, or 4.3 SF.
“Markets such as Austin, Orlando, Nashville, Atlanta and Seattle lead the way in supply contractions per capita, with the average decline amongst the top five being an amazing 15%, or 9.3 SF per capita,” CoStar reported.
Not all markets suffered. In the same period, 11 markets expanded their retail inventory per capita, enjoying a 3.1% or 1.9 SF average increase. Among them, Miami was the only one to have benefited from meaningful population growth. The rest succeeded as the result of “a struggle to grow their local consumer base.”
“The markets seeing the greatest expansion in supply per capita include Rust Belt cities such as Milwaukee, Cleveland, Pittsburgh, Chicago and Detroit,” CoStar noted.
For malls, the picture is complicated. Outlet malls and open-air lifestyle centers saw occupancies rise to near-record highs of 95%.
However, Class B malls are in trouble after appearing to stabilize in 2021 and 2022. Declining occupancy reached a new low of 88.5% in 2Q 2023, and widened the spread from Class A malls to 5.7%. “Falling occupancies will hasten the decline of many Class B malls, setting the stage for eventual repositioning,” CoStar observed.