Brick-and-Mortar Retail Shows Resilience in Urban Areas
Despite challenging economic conditions and the rise of online shopping, brick-and-mortar retail has proven to be resilient, especially in urban areas. A new report from JLL, a global real estate and investment management services company, reveals that consumer spending growth and the return of tourism have driven prime urban retail demand. Foot traffic in half of the surveyed prime corridors has recovered to pre-pandemic levels.
Apparel is leading the rebound of brick-and-mortar retail, accounting for nearly half of all retail leases in prime urban corridor locations. This represents a significant increase from 35 percent in 2022. The reopening of the economy has led to an increased retail presence in urban settings, including prominent shopping neighborhoods like Madison Avenue in New York, Michigan Avenue and the Gold Coast in Chicago, and Newbury Street in Boston.
Space Is Limited
While brick-and-mortar retail is experiencing a comeback, there is a scarcity of properties available for new or expanding locations. The average size of new retail leases has decreased to 3,200 square feet, resulting in a 9 percent drop in leased space compared to 2022. The rush to secure prime locations, coupled with high interest rates, has hindered new construction builds for retail in the past two years.
According to CoStar data, only 800 new retail leases of more than 25,000 square feet have been signed in 2023, accounting for just 17 percent of all new retail leasing activity. This is the lowest share on record and well below the prior five-year average of 19.5 percent.
Despite these challenges, brick-and-mortar retail had a successful Thanksgiving weekend, attracting a record-setting 200.4 million consumers. However, spending was relatively flat compared to 2022. The weeks leading into Christmas will be crucial in determining the sector’s overall health.
Luxury brick-and-mortar stores continue to thrive in urban retail. Brands like Lululemon, ALO Yoga, and Vuori have been category leaders and have expanded their presence in major cities like Washington, D.C., New York, and San Francisco.
