As we enter the new year, we look ahead to what the retail real estate industry will look like in 2024. To gain some insights, we spoke to three trusted Rappaport brokers, Executive Director of Brokerage Mike Howard, Executive Director of Leasing and Brokerage Susan Bourgeois, and Senior Director of Brokerage Pat O’Meara, to learn their predictions and opinions on what we can expect from the market in the upcoming year. Read on to find out what they have to say.
Suburban vs Urban Market Strength
Across the board, brokers agree that the suburban market will remain strong
Mike Howard predicts that Suburban grocery-anchored shopping centers will continue to see great leasing activity, with a reduction in leasing concessions.
Susan Bourgeois believes that the suburbs will also see little vacancy in the upcoming year as suburban communities continue to grow in popularity. With more people living and working in the suburbs, demand for retail spaces will increase, keeping vacancy rates low.
Pat O’Meara notes that suburban demand has far outpaced urban demand, but he predicts that urban demand will start to recover once more people go back to the office and crime rates lower.
In terms of market demand, Howard believes that it’s not an “urban versus suburban” debate but rather residential-driven markets versus office-driven markets. Since the DC Metro market is the slowest to get back to the office, office-driven market retail will continue to struggle, while retail in strong residential markets will continue to thrive.
Consumer Confidence
When it comes to consumer behavior, our brokers are optimistic about 2024.
O’Meara sees inflation is slowing down, leading to increased consumer confidence and more spending on retail.
Howard and Bourgeois see spending remaining consistent in the new year, with Howard explaining that the “Washington D.C. Metro market has a stable job market, which translates to consumer confidence. Customers will continue to shop and dine out at a higher percentage compared to the rest of the country.”
Innovative Design and Consumer Experience
In terms of design and management, Howard believes that we will continue to see a focus on creating engaging and inclusive spaces. Retail properties that foster community engagement and gathering places will be more attractive to consumers.
Bourgeois predicts that there will be more emphasis on “green” design, with retailers looking to create inviting spaces that promote sustainability.
Consumer convenience remains top of mind for O’Meara, who thinks new developments will need to account for delivery service pickup and drop-offs, as well as carry-out parking for restaurants.
Shifting Tenant Mix
Changes in the composition of tenant mixes are already in motion, and our brokers agree on this trend’s continuation.
Howard expects to see fewer banks in the new year citing technological advances lowering demand for brick-and-mortar branches. “We will see the financial services sector continue to dispose of bank branches and these sites converted to quick service food or ‘med-tail’ type uses.”
O’Meara echoes this sentiment, expecting fewer true retail concepts and more medical and quasi-office/service users to appear in retail centers. (Check out Gary Rappaport’s break-down of Med-tail concepts here)
Overall, it is clear that the retail real estate industry is in for some changes in the upcoming years. The predictions of these three Rappaport brokers indicate that suburban communities will continue to be popular and consumers will be looking for engaging and convenient retail spaces. By taking these predictions into consideration, retailers and real estate professionals can stay ahead of the curve and adapt their strategies to meet the changing needs of consumers. We look forward to seeing how these predictions will come to fruition in 2024 and beyond.
