What's Happening?
CoStar Group has released a revised forecast for the U.S. retail market, maintaining its projections through 2026. The forecast indicates a rise in vacancy rates peaking under 4.4% in the latter half of
2026, with store closures expected to remain elevated. Net absorption is forecasted to average 3.8 million square feet per quarter in 2026, below the prior five-year average. Retail construction starts have fallen to multi-decade lows due to rising costs, and construction activity is expected to remain subdued.
Why It's Important?
The stability in CoStar's retail projections suggests a cautious optimism in the market, with balanced fundamentals supported by minimal supply additions. Retailers and investors can use this information to strategize their operations and investments, particularly in light of potential tariff-related price hikes that could impact consumer spending. The forecast provides insights into the challenges and opportunities within the retail sector, highlighting the importance of adapting to changing market conditions.
What's Next?
Retailers may need to prepare for potential tariff-related price increases, which could strain household budgets and dampen discretionary spending. CoStar's forecast carries both upside and downside risks, with significant uncertainty around the impact of tariffs on consumers. Stakeholders will need to monitor these developments closely to adjust their strategies accordingly.
Beyond the Headlines
The forecast underscores the importance of innovation and adaptation in the retail industry, as companies navigate economic uncertainties and shifting consumer behaviors. The focus on minimal supply additions and balanced fundamentals highlights a strategic approach to maintaining market stability.
