US retail reemerges after decades-long structural shift

An elevated 10-year Treasury yield and relatively modest rent growth compared to pre-pandemic trends will keep returns for most sectors lower. Retail is forecasted to be the lone sector to surpass its pre-pandemic average total return due to its smaller cap rate expansion and healthy rent growth.

What you will learn in this report:

• Solid demand, supported by population and spending growth, and a decade of low to no supply growth, will underpin retail’s healthy performance, keeping vacancy rates stable and rents growing, albeit modestly, over the next five years.
• Market selection will remain an important factor in real estate investment decisions, particularly as the income component will drive total returns. Looking ahead, markets with relatively lower supply and solid demand growth, such as Atlanta, Fort Worth, Nashville, New York, San Francisco, and San Jose are projected to outperform their pre-pandemic average rent growth.
• Meanwhile, stronger supply growth in Austin, Houston, Las Vegas, and Orlando will likely hamper retail performance, compared to their pre-pandemic average, despite healthy demand over the next few years.