Retail construction hits record low, squeezing store space availability

Retail construction completions tumbled to 5.7 million square feet in the second quarter, setting record lows for both the quarterly and rolling four-quarter totals, according to commercial real estate firm CBRE. The firm attributed the decline to rising construction costs and labor shortages.

The sharp drop in new supply has kept retail space availability exceptionally tight. CBRE reported that availability held at just 4.9% in the second quarter, a level that has made it difficult for retailers in expansion mode to secure desirable, well-located properties.

"It has made it very difficult for retailers trying to find desirable, well-located space," said Ebere Anokute, CBRE's Americas head of retail research. He noted a "major flight to quality" in the industry, with retailers increasingly reluctant to consider older or lower-cost locations.

The trend extends beyond CBRE's data. JLL is also tracking record-low retail construction levels, according to its global head of retail research, James Cook. He pointed to the high cost of labor, materials, and land, adding that retail rents are growing in most U.S. markets as a result.