2024 Retail Real Estate: Wellness, Community, and Space Trends

The retail real estate landscape in 2023 set the stage for notable trends that are expected to continue shaping the industry in 2024. Influenced by changing consumer preferences and the availability of quality retail spaces, the types of tenants driving demand and the locations supplying it have evolved. Several key trends emerged from discussions with industry experts, including the rise of wellness as a significant tenant category, the increasing popularity of neighborhood centers and streets for leasing and investment, and a competitive market driven by a limited supply.

Wellness Emerges as a Key Player

The wellness sector is experiencing significant growth, reflecting a broader societal shift towards holistic health and well-being. Consumers are not only choosing health-conscious products but also seeking experiences in retail stores that align with their wellness goals. McKinsey reports that around 50 percent of US consumers now prioritize wellness in their daily lives, up from 42 percent in 2020. This trend is evident in retail real estate, with wellness-oriented brands becoming essential additions to portfolios.

Jason Maurer, Executive Vice President of National Urban Retail for Brookfield Properties, notes the booming wellness category, highlighting recent additions like Clean Market at Brookfield Place and Reset by Therabody. The demand for these experiences and brands underscores their importance in consumers’ routines.

According to ChainXY data, the number of wellness retail openings increased by 2.8% in 2023, while luxury and jewelry sectors saw declines. Wellness is not the only industry on the rise, but it is making a significant impact and occupying a notable amount of tenant space.

Embracing Community in Neighborhood Centers and Streets

As top retail malls reach capacity, brands are increasingly turning to neighborhood centers and freestanding locations. Popular streets like Abbot Kinney in LA and South Congress in Austin remain attractive, along with streets in smaller towns that offer alternatives to larger malls. Neighborhood centers like Brentwood Country Mart in LA and Lido Marina Village in Newport Beach are also gaining traction as quality alternatives.

Brandon Svec, National Director of Retail Analytics at CoStar, notes that the majority of tenant demand is flowing into freestanding properties and neighborhood centers. Investors are also focusing on these segments for their relatively stable yields. This shift reflects a move towards community-centric experiences, driven by consumer preferences for authenticity and personalized connections.

The retail vacancy rate in the US was at its lowest level in December 2023, at 4.6%, due to high tenant demand and low supply. Construction of retail space in 2023 was significantly lower than in 2022, largely due to financing costs, reduced capital availability, and elevated input costs.

Svec emphasizes the scarcity of available retail spaces, with the demolition of obsolete retail space further limiting supply. As demand for prime retail corridors remains high, retailers and landlords must adapt to the evolving industry pace. Tenants are leveraging limited spaces to create unique brand experiences, while landlords are supporting them with marketing and events to maintain tenant interest.

The 2024 Retail Real Estate Landscape

The retail real estate landscape in 2024 reflects a dynamic interplay between consumer values, limited supply, and shifting demand. Trends like wellness, community-centric experiences, and the challenge of limited spaces are driving transformation in the retail sector. Retailers and landlords alike must stay agile and innovative to thrive in this competitive environment.