Urban Retail Poised to Make a Comeback Following the COVID-19 Pandemic

The coronavirus pandemic has had a sweeping impact on the real estate industry. During the initial shutdowns, both residential and commercial real estate suffered. Historically, urban retail centers have thrived due to the higher traffic from nearby office space and tourism. However, the pandemic has taken a significant toll on these industries, leaving urban retail in an unusual position. Although suburban retail has bounced back more quickly, urban retail is poised to make a comeback. Here, we discuss the impact of COVID-19 on urban retailers and how these trends are reflected in net lease property sales.

Urban vs. Suburban Retail Statistics

When the pandemic first began, urban retail was the most heavily impacted. As hotels, offices, and other public spaces shut down, many retailers closed their doors. Urban vacancies grew more quickly than their suburban counterparts.

Although both urban and suburban shops were forced to close for several months, suburban retailers began to bounce back in the last quarter of 2020. Urban retail’s slower comeback is no surprise, as many offices are still operating remotely and tourists are just beginning to resume regular activities.

Prior to the pandemic, urban retail rent prices were consistently outpacing the growth of suburban retail rent. According to CoStar, the average annual rent growth for urban business districts in 2020 was just 0.4%, compared with 2.9% the previous year. For the first time, suburban rents increased more than urban areas, coming in with 1.1% annual rent growth.

What to Expect in the Coming Months

While urban retail has been lagging since the onset of the pandemic, there may be good news ahead for investors. As recently as June 2021, urban business districts have enjoyed growth in the amount of space leased that outpaces the five-year average. In addition to this encouraging news, the U.S. hospitality industry is making a recovery. With the current hospitality demand at approximately 90% of pre-pandemic levels, it’s expected for the industry to continue its upward demand trajectory. This is great news for urban retail and signals a strong opportunity for investors.

The COVID-19 pandemic has taken a toll on many industries, and urban retailers have felt the pinch. Despite the challenges posed by the onset of the shutdowns, both urban and suburban retail leasing are steadily recovering. If you’re interested in net lease property sales, now could be an excellent time to invest. Whether you’re ready to start your search or you’d like to learn more about net lease properties, our team would love to speak with you. We take a comprehensive approach to helping our clients achieve their goals and aim to provide best-in-class customer service. Ready to learn more? Contact us today for a consultation.