Retail National Trends Report Q2 2022

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Retail has officially returned. In-person shopping made a surprising comeback, with metrics showing improved foot traffic and online retailers like Amazon reporting first-ever losses in a post-pandemic market. People are shopping, eating out, hitting the gym, and spending their pent-up cash, proving that the novelty of in-person experiences is a human essential.

Table for retail average price per square foot by quarter

As the priciest asset class on Crexi – and by far the most popular – retail pushed through the pandemic with another all-time-high quarterly valuation average. Asking prices hit an impressive $339.07 per square foot average in Q2, up from $313.15 in the previous quarter and $301.41 in the same period last year. Unpriced listings rose slightly, but still make up only 13.19% of total assets added in Q2. This increase signals little reaction to market conditions on the part of retail sellers.

Occupancy on new retail assets has also returned to all-time highs. In Q2, we observed an average of 88.1% occupancy for new retail listings, up from 86.1% last quarter and 83.7% in Q2 2021. We haven’t seen occupancy levels this high since the pandemic was first kicking in in Q2 2020. With rates subsequently increasing over the last three quarters, we’ll likely continue to see space absorbed in the retail sector.

We also observed a significant bump in new retail inventory hitting the market, with a 12.5% increase in overall new assets compared to Q1 2022. A 32% hike in triple-net anchored shopping centers and a 30.4% increase in grocery stores drove much of the inventory growth, likely hitting the market to coincide with a return of the consumer to shopping.

Bar graph for new retail inventory added by subtype by quarter

Retail assets closed in Q2 2022 at an average cap rate of 5.8%, down 50 basis points from the previous year and 10 BPS from the prior quarter. This slow descent makes sense, as retail could only slowly improve following pandemic-induced challenges. It now has, and we’ll likely keep seeing cap rates compress if valuations continue on their trajectory. About 7.8% of the transactions reported on Crexi in Q2 2022 were retail, valued at approximately $28.8B in total.

Line graph for cap rates in 2021 and 2022

Buyers continue to favor retail as the golden choice on Crexi, likely due to the ease of management and reliable ROI found in NNN lease assets. While it remains the most popular asset type, activity decreased about 5.9% compared to the previous quarter. The drop dovetails with the real estate sector’s overall hesitancy over rising interest rates. Given that buyer activity is still clocking in about 25.2% higher than Q2 2021, we can comfortably assert that retail’s made a triumphant post-COVID return.

Bar graph for cities with highest retail demand in Q2 2022

On the leasing side of our marketplace, retail space average asking rates rose just shy of 2%, holding steady alongside overall averages. Despite the slight nudge upward, the average asking rent is still the third consecutive quarter of all-time highs in Crexi’s marketplace. 

Restaurants, notably, presented an interesting case. They were among the heaviest hit during Covid-19, but the sector may have reached the light at the end of the tunnel. While average asking rates for restaurants posted a year-over-year decrease in Q2 2022 (likely to get tenants into empty space), there’s plenty of pent-up demand from summer travelers and cash flow from money that went unspent during the pandemic. Keep an eye on this sector, as Q3 metrics will likely show a resurgence in restaurant tenant demand and asking rents.

Line graph for total tenant activity for restaurants

Some experts anticipate a pause in consumer spending as people worry about inflation and the rising overall costs of goods and services. Summer months may show an improvement in this area, but some markets may risk pricing rent too high and find themselves unable to maintain occupancy.

Bar graph for cities with highest retail lease demand in Q2 2022

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Crexi Insights
Crexi Insights

Marketing Team at Crexi

Crexi makes CRE easy by consolidating the entire commercial real estate process into a single ecosystem.

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