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Retail store openings outpace construction capacity in the U.S.
Retail added a net 127 store openings through Aug. 28, but construction volume remains about 40% below 2016 levels.
A U.S. retail expansion is accelerating as retailers find stronger leasing momentum, but it is running into a supply constraint driven by elevated construction costs, according to Bisnow. Coresight Research data cited by Bisnow shows more stores have opened than closed this year, with a net gain of 127 openings through Aug. 28 and a net increase of 28.6 million square feet of occupied retail space. JLL data also showed 10.2 million square feet of positive retail net absorption in the second quarter, reversing a roughly equal net negative figure a year earlier. Bisnow notes growth is not limited to traditional formats such as grocers and discount chains, pointing to store adds from companies including Whole Foods, Aldi, Ross Dress for Less, and TJ Maxx, as well as specialty retailers such as Fabletics and Warby Parker. Bookstores are also described as rebounding, with 422 new independent openings plus continued activity from Barnes & Noble.
Even with vacancy around 4.4%, Bisnow says rents have not risen fast enough to justify new construction at a pace that matches retailer plans. CBRE data cited by Bisnow puts construction volume at roughly 40% below 2016 levels, with second quarter completions reaching a record low of 5.2 million square feet. Bisnow also cites Associated General Contractors of America data showing average retail rent up 19% from the second quarter of 2020 to just under $25 per square foot, while common construction materials costs are 30% to 60% higher than in February 2020.