Retailers leased more space in the U.S. in 2021 than they vacated, absorbing some 99 million square feet, according to CBRE. That’s the highest total since 2016 and followed negative net absorption in 2020.
“The retail recovery is in full swing,” said CBRE retail advisory services senior managing director Bill Wright. “We are seeing strong demand coupled with scant new supply, which has brought a real balance back to the market. All signs point to activity remaining very strong in 2022, as many retailers look to capitalize on the market to address increased consumer demand for physical retail.”
Expanding chains will have a difficult time finding suitable space, according to CBRE’s fourth-quarter U.S. retail report. Strong leasing action has driven the rate of available space down to 5.6%, a 10-year low. Construction completions are the lowest in a decade, pushing rents up 1.6% from 2020 to 2021, to $21.87 per square foot.
Retail developers delivered about 23.5 million square feet of new space in 2021, a 36% decrease from 2020. And power centers performed well, tying a four-year-low availability rate, at 6.4%. Lifestyle centers and malls form the only category with negative absorption in 2021, according to CBRE. Although Class-A malls remain strong, Class B and C malls are beginning to lose tenants to open-air centers, the firm reported.
Occupancy Costs Are Still a Pain Point for Many, Though
As retail rents rose and retail sales fell, U.S. landlords collected only 89.3% of rent owed in 2021, down from 91.8% in 2019, according to Datex.
The largest jumps in occupancy cost as a percentage of total retail sales were movie theaters, department stores, drugstores, fitness centers and specialty restaurants. Sales declines were a contributing factor for many tenants. According to Datex, the largest percentage drops in sales per square foot from 2019 to 2021 were movie theaters, department stores, drugstores, craft stores, fitness centers and specialty restaurants.
The biggest drops in occupancy cost as a percentage of total retail sales were for home goods, sporting goods, supermarkets, specialty retail and fast-food tenants, which largely track the categories whose sales per square foot rose the most.
Portuguese Developer Funds Growth with Sustainable Green Bonds
Sonae Sierra became the first real estate company in Portugal to issue sustainability-linked bonds. The mall owner has refinanced part of its corporate debt, around 50 million euros, through the issuance of bonds linked to its sustainability performance, namely greenhouse gas emissions and the recycling rates of the retail centers managed and owned by the company. Sonae Sierra aims to be carbon neutral by 2040. In 2020 alone, energy, water and waste management measures saved the company around 15 million euros in operating costs. From 2002 to 2020, Sonae Sierra reduced its electricity consumption by 66% and increased the percentage of waste recycling by 223%, it reported. Since 2003, it cut water consumption by 32%, and since 2005, it cut carbon dioxide emissions by 84%.
Poag Links with Mixed-Use Developer to Reimagine Urban Memphis Sites
Poag Shopping Centers and KRN Development, which focuses on mixed-use, formed KPS Development Partners to turn downtown and midtown Memphis sites into mixed-use properties. The JV could expand to other markets where Poag is active. KRN Development president Scott Kern will serve as president of the new company. Poag president and CEO Josh Poag and CFO David Selberg will be KPS board members.
$50 Million for Company That Helps E-Commerce Brands Open Physical Stores
Leap, which helps brands open physical stores and online shops, scored $50 million in Series B financing. The round was led by BAM Elevate with participation from new and existing investors like Simon, Harbor Spring Capital, Northern Trust, Costanoa Ventures, Hyde Park Venture Partners and Equal Ventures. Leap will invest the funds in its platform and store network. More than 30 brands use Leap for 50 stores across eight markets. In 2021, Leap worked with brands like Naadam, Something Navy, Thirdlove, Mack Weldon, Lunya, Birdies and Ring Concierge to open stores in New York City, Chicago, Los Angeles, San Francisco, Florida, Texas and Scottsdale, Arizona.
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