Austin is the top market for retail’s comeback, according to a new report from CrowdStreet, followed by Charlotte, Nashville, Orlando, and Raleigh-Durham.
Retail was the second-hardest hit asset class after hotels, as most retail operators—except grocery stores—continued to reel from the effects of COVID-19 shutdowns and slowed foot traffic. Further consolidation is also expected for the industry, especially as brick-and-mortar retail reimagines its future in the wake of the pandemic. CrowdStreet predicts the best-located centers will continue to backfill vacancies wrought by COVID-related store closures, and those tenants who remain will likely look to upgrade their physical footprint.
But there’s also some good news afoot for retail: according to Green Street, total retail sales were up 10% year-over-year in the third quarter (with the exception of restaurants, cars, and gas). Rent collections increased from 70% to 90% in the third quarter, while leasing activity continues to accelerate. And the Biden Administration’s new round of stimulus is likely to positively impact the sector, particularly small businesses.
CrowdStreet based its ranking on factors including muted supply, which makes grocery-anchored centers relevant, the comparison of current prices to relative historical prices and macroeconomic issues like above-average population growth rates and below-average US unemployment rates.
The top 5 markets for retail include:
- Austin: The city boasts “unfair number of competitive advantages” like strong job growth, a thriving tech sector, proximity to the Texas state capitol, a major research university, and its location within a tax-free state.
- Charlotte: Banking powerhouse Charlotte is also home to nine Fortune 500 HQs, including Honeywell, Nucor, and Duke Energy, and CrowdStreet deems it a “quintessential 18-hour city market with above-average population and job growth rates.”
- Nashville: Nashville ranks as one of CrowdStreet’s top markets from a 10-year growth perspective, with the firm predicting Music City will recover and reach record levels of visits in the near term. Multifamily rents continue to grow at 4% year-over-year.
- Orlando: The Florida city’s status as the #1 tourist destination in the U.S. was hampered by COVID-19, but CrowdStreet expects recovery to begin in the second quarter. The city is also home to one of the nation’s largest universities, the University of Central Florida.
- Raleigh-Durham: The city was CrowdStreet’s “clear #1 market” for 2021 and ranks third or better across four criteria. CrowdStreet cites its proximity to top universities, world class research facilities, a highly educated workforce, relative affordability, and its increasingly walkable urban center as reasons to be bullish about the city’s future, “arguably one of the nation’s hottest ‘work from anywhere’ markets.”
“We believe we may find value in markets that have been hard hit during 2020 but have an outlook of rapid improvement—Orlando is a great example of this type of market,” the report states. “As the number one tourist destination in the US, its retail has suffered disproportionately during the pandemic. However, we believe that once Disney is fully reopened, people will flood back to the market and its retail sector will surge in per foot sales.”