Vacancy rates for U.S. retail real estate dropped 50 basis points over the course of 2021 to end the year at 4.6 percent, according to JLL. This has allowed landlords to push rents by 3 percent over the course of last year.
Len Erickson, senior director at Franklin Street, says that there’s something of a bidding war for the best-in-class availabilities among retailers, especially in high-growth markets in the Sun Belt.
“Competition for space in the right markets is very strong, sometimes fierce,” says Erickson. “There are always new-to-market brands looking for market share and they’re battling for space. The established operators understand their sales in the market while the upstairs are making smart and analytical, data-drive decisions to penetrate a market.”
Erickson with Franklin Street says that today, consumers are demanding and supporting the new wave of restaurants opening around the country, whether it’s in-person, takeout or via ordering on DoorDash or other delivery apps.
“Consumers’ spending patterns and off-property behavior, as well as technology, are changing the way many brands relate to the consumer and their real estate requirements,” says Erickson. “Restaurants continue to find success and returns in the fast-casual formats popularized by the likes of Chipotle Mexican Grill, Panera Bread, Gusto and Cava, and these restaurants have reduced overall restaurant GLA [gross leasable area for many centers that would have typically had larger, full-service operators.”