Every month, we reach out to retail industry leaders in order to gain their perspective on the market. This month, we asked: Are there any retail tenancy trajectories that took you by surprise recently?
Navin Bhutani, Managing Director, Locate
I’m surprised to see suburban retail vacancies staying as low as they’ve been. As office occupancies stabilize around 60% to 70% in many markets (i.e. people in the office three to three and a half days per week), that leaves only one and a half to two days a week when most people are working from home. But suburban rents in 2021 to 2022 were wildly above pre-COVID rates. In many of the strongest suburbs and centers, retail rents increased by 33% to 50%. I expect there will be an increase in suburban retail vacancies — and a drop in suburban rents — that will be driven primarily by escalated rents pushing against the revenues that the post-return-to-office suburban populations can generate. The drop in suburban rents will lag the increase in vacancies, so don’t get your hopes up yet, retailers!
