2024 Retail Fit Out Cost Guide

CURRENT CONSTRUCTION PIPELINE

Average construction inventory in 2023 outpaced the previous year by roughly 1 msf but continued to lag the pre-pandemic era, down nearly 2 msf when compared to 2019. Limited retail inventory, historically low vacancy rates and increasing rents have tempted developers to increase retail construction. However, developers are being faced with a series of hurdles, including higher interest rates, and higher material and labor costs. The shift in retailers’ commercial real estate strategy is reflected in the composition of space under construction. Companies are largely transitioning from relatively limited locations with larger footprints, to a greater quantity of smaller stores that are located closer to consumers. Power and strip centers share of construction declined 2.8% and 2.7%, respectively, when compared to 2021. Meanwhile, neighborhood centers have increased their share 5.5% over the last eight quarters. Despite a limited construction pipeline, previously occupied retail space will become available, helping offset demand, after several high-profile bankruptcy announcements by retailers such as Bed Bath & Beyond, Tuesday Morning and Rite Aid.

SEGMENTED RETAIL SPACE UNDER CONSTRUCTION POWER CENTERS HAVE LOST NEARLY HALF THEIR SHARE OF DEVELOPMENT SINCE 2017

80

70

60

50

40

30

20 Millions SF

10

0

2011

2017

2012

2021

2015

2013

2018

2016

2019

2014

2010

2022

2023

2020

2008

2009

UC (msf) - Power Center UC (msf) - Strip Center

UC (msf) - Neighborhood Center

Historical Average (msf)

Source: CoStar, Cushman & Wakefield Research

18

Cushman & Wakefield