Detroit Retail Investment Forecast
Retail Sector Poised to Fully Recover from Pandemic;
Compelling Returns Attract Out-Of-State Capital
Limited development aids retail fundamentals. The injection of government stimulus provided residents with excess savings, while strong performance in the housing and stock markets improved consumer sentiment, contributing to a surge in retail sales last year. Home goods, fitness and discount retailers have been active in leasing space across the metro, which helped boost net absorption to the highest annual total since 2016, and contract vacancy to within 20 basis points of the market's pre-pandemic rate entering 2022. This momentum is expected to continue into this year as the declining rate of store closures, coupled with elevated leasing activity, should keep demand robust in future quarters. Additionally, employment and household income growth are projected to outpace the national average, supporting a further rise in retail spending. Property fundamentals are improving at a time when development activity remains well below the historic average. Only 340,000 square feet is scheduled to deliver this year, with most of this space already pre-leased. The diminished pipeline will allow metrowide vacancy to fall to a 15-year low and asking rents to reach a cycle high in 2022.