Retail rent growth slowed in the first quarter to its lowest pace since 2014. As a result, the market is gradually returning to more balanced conditions.
National asking rents increased by 1.9 percent over the past year. Consequently, year-over-year growth has fallen below 2 percent for the first time in over a decade.
This trend reflects a steady cooldown that began in 2023. Meanwhile, retail fundamentals have remained relatively stable. However, a slight increase in vacancy has been recorded.
At the same time, tenant sales growth has moderated. Therefore, landlords have faced greater resistance when pushing rent increases.
Previously, retail sales surged following the pandemic. Strong consumer spending and increased store traffic supported rapid growth. As a result, rent increases followed with a delay.
Now, sales growth has leveled off across most retail categories. Consequently, occupancy costs have returned to, and in some cases exceeded, pre-pandemic levels.
With rent-to-sales ratios aligning more closely with historical norms, additional pressures have emerged. Elevated operating costs and interest rates have also remained in place.
As a result, tenants have become more cautious about accepting higher rents. This trend is especially evident in discretionary retail segments.
Ultimately, rent growth is being driven by normalization rather than declining demand. Leasing activity and occupancy levels have remained relatively strong.
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