Race For Space As Boston, Miami And Raleigh Have Lowest Vacancy Rates

Retailers looking to move into the Boston, Miami and Raleigh, North Carolina areas better be ready to move fast as the three have the lowest retail vacancy rates across over 50 major U.S. metropolitan areas according to a new report.

The retail vacancy rate in the three areas is just 2.9% this quarter, according to findings from broker Marcus & Millichap
MMI
, which has revealed the metro areas with the least store space available.

The findings come just as industry body the National Retail Federation (NRF) on Wednesday forecast U.S. retail sales would rise at a steady, albeit slower pace in 2024 compared with last year.

Retail sales will increase between 2.5% and 3.5% this year, to between $5.23 trillion and $5.28 trillion, the organization predicted. That compares with 3.6% sales growth to $5.1 trillion in 2023. The NRF added that non-store and online sales – which were included in the total figure – are predicted to rise between 7% and 9% year-on-year in the range $1.47 trillion to $1.50 trillion for the year.

In Boston, the new broker report put the low retail vacancy rates down to robust consumer spending in the metro, which has helped bolster prime retail corridors such as Newbury Street and the Prudential Center and has also helped drive traffic to suburban shopping centers around the city.

Boston’s rock bottom retail vacancy rate has also benefited from a limited new supply of store space coming to market in recent years and that trend has continued – at the start of the year less than 260,000-square-feet of retail was in the construction pipeline.

The city’s retail scene is also set for a boost in the Back Bay area, with Dick’s Sporting Goods planning to open a 118,000-square-feet House of Sport store in the former Lord & Taylor department store building at 760 Boylston St., while Google
GOOG
intends to open its first retail store at 149 Newbury St., part of a new five-story mixed-use building.

“Retailers have shown confidence in downtown consumer activity, signaling a promising future. Boston’s retail market continues its strong trajectory, drawing from robust remote work trends and a dearth of new development, keeping the vacancy rate low,” said Thomas Shihadeh, vice president and regional manager at Marcus & Millichap, of the findings.

“Solid retail performance and a favorable investment environment across the Boston metro area, coupled with tight conditions and promising signs for investor engagement, highlight a bullish outlook for 2024,” he added.

Miami Retail Rents Soar

Meantime, no prime shopping district in the U.S. has experienced rents soaring faster than Miami’s Design District, up an incredible 200% since 2019, according to a report by national broker JLL
JLL
.

Tiffany & Co., Fendi and Breitling are among those set to open new locations as the furniture and homewares stores boutiques that once defined the 18-block Design District have largely been replaced by global luxury retailers.

As for the Raleigh-Durham retail market in North Carolina, that again is expected to continue to outperform the national market and will have higher transaction volumes than 2023, according to JLL. However, it may fall short of the record 2022 activity.

Raleigh-Durham is another location where supply is constrained. Most of the current new development in retail is tied to single-tenant assets like quick-serve restaurants and convenience stores. With the limited new development of shopping centers, supply of new space is likely to remain limited this year, propping asking rents up.

Raleigh-Durham is also enjoying strong population growth, keeping demand for consumer goods up.

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