CoStar Q3 Review Shows Retail’s Challenges
October 16, 2023
CoStar Group’s Q3 2023 review reveals a challenging period for retail, multifamily, hospitality, and office property sectors. Retail leasing activity has notably declined throughout the year, projected to have had its worst performance since 2020 in Q3. Although a total of 13.7 million square feet was occupied net in Q3–the 11th consecutive quarter with positive net filling–it’s still down year-on-year.
Year-to-date leasing activity recorded 176.9 million square feet, down 16.5% compared to 211.9 million square feet over the same period in 2022. The net positive space occupied year-to-date is 42.3 million square feet, compared to 74.8 million square feet during the same period last year.
A lack of available space and historically low construction starts are further depressing leasing and absorption activity. The retail space availability dropped to a historic low of 4.65% in Q3 2023, down 0.13% year-on-year and 1.5% over the past three years.
High interest rates are impacting the capital markets, negatively affecting retail transactions which have dropped to $45.9 billion year-to-date from $95.4 billion in the same period last year. Deals under $5 million have gained traction mostly due to the feasibility of all-cash or 1031-style tax-advantaged transactions.
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