The Glut Of U.S. Retail Space Is Slowly Getting Chipped Away

The amount of retail space per person in the United States has fallen to where it was roughly two decades ago, a sign of a stabilizing market as malls around the country are knocked down or redeveloped into other uses.

There was 56.8 SF of retail space per person in the U.S. at the end of last year, according to a CoStar analysis. By comparison, in 2000 there was 53.8 SF per person.

“We’re not as over-retailed today as what we thought at a macro level ... and are actively working towards a better state of equilibrium,” CoStar National Director of U.S. Retail Analytics Brandon Svec told CoStar News. He added the current environment is showing “the restoration of fundamental balance within the retail sector.”

Last year, just 46M SF of new retail space delivered, the lowest total in two decades, according to Svec, while 26M SF of retail space was demolished.

In fact, some parts of the country could even support more retail, particularly cities that have seen a large influx of population, like San Jose, Seattle, Phoenix, Portland, Oregon, and Austin, all of which have less than 50 SF per person. In the Northeast and the Rust Belt, there are a number of cities that still have too much retail — Milwaukee, Cleveland and Rochester, New York, each have 70 SF or more retail space per person, according to CoStar.

The stabilizing of the market comes after years of overdevelopment leading up to the Great Recession. Retail insiders have said for years the U.S. has too much retail.

“There’s about a billion square feet of retail space that needs to go away, that needs to be converted, for the market to get healthy,” CoStar's then-director of retail research, Suzanne Mulvee, said at a Bisnow retail event in 2017.

And it appears that is now happening, as malls that have dropped in value are knocked down or converted to other uses, such as industrial, medical or even life sciences. In areas hit hard by the pandemic, there are some glimmers of hope for the retail sector. Out of the 17 major Manhattan retail corridors featured in the Real Estate Board of New York’s retail report released last week, nine saw average asking rent per SF grow from fall 2021.