At Orbis Commercial Real Estate, to best serve our clients, it is imperative that we monitor trends both locally and nationally. There are five national retail trends we see in Q1 2024 that are directly affecting our local Las Vegas area commercial real estate market.
Strong Retail Sales Performance
March retail sales saw a solid uptick of 2.4%, buoyed by an early Easter, which contributed an estimated $7.4 billion to sales. Core retail sales excluding volatile segments like food service and motor vehicles experienced a healthy 3.2% increase. Non-store retail categories, particularly online retailers, surged by 5.6%, reflecting the ongoing shift towards digital consumption habits.
Vacancy, Leasing, and Absorption Challenges
Despite a slight uptick in the national retail vacancy rate to 4.1%, leasing activity plummeted by 27% to 43 million square feet due to limited space availability and rising operating costs. However, the market absorbed 3.1 million square feet, indicating robust underlying demand surpassing supply constraints. Shopping centers maintained stability in vacancy rates, while malls experienced a marginal increase.
Rising Retail Asking Rents
The average retail asking rent climbed to $24.92 per square foot, rising by 0.9% from the previous quarter. Heightened build-out costs, despite strong top-line growth, impacted landlords’ profitability margins. Rent growth is expected to moderate alongside consumption, with fast-growing metros and prime locations likely to outperform. The disparity between older and current lease rates is anticipated to persist throughout 2024.
Construction Activity and Delivery Trends
Construction remained robust with 51.1 million square feet of retail space under development and 9.4 million square feet of newly delivered supply. However, less than a quarter of the newly delivered space was available for lease by the end of the quarter, indicating swift absorption rates and sustained demand for premium retail locations.
Market Outlook
The retail market in Q1 2024 showcased tight fundamentals with limited supply additions, driving challenges in leasing and higher asking rents. Despite these obstacles, robust consumer spending, particularly in online retail, buoyed sales performance. Construction activity remained strong, but the rapid absorption of new supply underscored the ongoing demand for prime retail spaces.
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