Retail Expansion Meets a Space Shortage

Retail Expansion Meets a Space Shortage

 limited ground-up development and cautious builders, expanding brands are expected to rely more heavily on “second-generation” spaces — previously occupied storefronts that can be adapted for new tenants. The trend is especially pronounced as retailers gravitate toward smaller footprints rather than traditional big-box formats, according to a new national trends report from brokerage firm JLL.

JLL tracked almost 17,000 retail lease transactions across the country in the third quarter, with the typical space measuring 3,246 square feet. This stable average size signals that many retailers have honed in on what they consider the ideal footprint — one that balances operational efficiency with a compelling customer experience, according to researchers Keisha Virtue, Monica Mason, and James Cook.

Retail absorption is improving: the third quarter recorded 4.7 million square feet of positive take-up, reversing the first half of the year, when move-outs exceeded move-ins by more than 14 million square feet. Even so, development pipelines remain thin as costs and economic uncertainty keep developers conservative. JLL’s researchers expect limited availability to remain “the dominant force shaping retail real estate over the next several years.”

The strongest demand continues to center on smaller-format spaces, fueled largely by quick-service and fast-casual restaurant brands. Discount retailers such as Dollar General and Five Below are also aggressively hunting for locations as inflation keeps pressure on lower- and middle-income shoppers — a dynamic that is helping drive continued interest in compact, cost-efficient stores.