United States Retail Outlook Q2 2023

Executive summary:

• Month-over-month retail sales growth showed moderate increases in April, May and June. June sales growth for home furnishings, electronics, apparel and nonstore retailers is a possible indication that Back-to-School shopping has started in earnest, and sales at retailers selling school-related merchandise should continue to see growth for the rest of the summer.

• Parents plan to spend 15.7% more on Back-to-School shopping this year, considerably more than the year-over-year inflation rate. What’s more, parents in every major income bracket plan to spend more than they did last year, with wealthier households upping their budgets the most, by 21%.

• Retail net absorption increased 12.6% quarter-over-quarter to 10.8 million square feet. In contrast, deliveries – already low – decreased 5.1% from the previous quarter. Retail construction starts have also been falling over the past year, with just 11.9 million square feet of projects started during the first quarter – the lowest level since 2005.

• There is now less space available for lease in shopping centers than at any other time since before the Great Recession of 2008. Availability within non-mall multi-tenant retail centers dropped to 7.5% in June, a precipitous drop from 2020 when pandemic measures caused availability to spike to double digits.

• As recent retail bankruptcies like Bed Bath & Beyond bring more space back into the market, retailers have been snapping up these vacated boxes because they are generally in top-notch locations. Discounter Burlington has scooped up 50 such spaces, while other retailers like craft store Michael’s and furniture store Havertys have also taken multiple locations

• Grocery-anchored retail retained its position as the most heavily transacted multi-tenant retail sub-type by volume ($3.6 billion) followed by unanchored strip centers ($2.6 billion) and then neighborhood centers ($1.7 billion).