Sun Belt markets, particularly those across the Southeast, are experiencing strong rent growth.
Retail real estate registered a slight uptick in conditions in the fourth quarter of 2020, according to a new outlook on the sector from JLL, and a few major markets across several key US regions are poised to come out on top.
When it comes to retail’s recovery, location is king. JLL notes that the pandemic has created winners and losers: “essential retailers continue to be crucial for day-to-day life, and discretionary retailers struggle with closures and consumers’ tightening budgets,” the report says. “But there is another bifurcation taking place—one of location.”
Sun Belt markets, particularly those across the Southeast, are experiencing strong rent growth, while markets hard-hit by COVID restrictions in the Northeast and California have seen declines. Nashville posted a 6.5% rent increase in the fourth quarter, while Raleigh saw an increase of 6% and Atlanta clocked in up 1.9%. Meanwhile, New York saw a decrease of 5%, San Francisco registered a 4.5% decline, and Boston posted losses of 3.1%, according to Costar data.
The Sun Belt also posted growth in transit mobility, which translates into more shopping, JLL says. In Miami, which saw 0.1% rent growth in Q4, transit mobility is recovering at a pace well above most metros and is now only 7% lower than pre-COVID levels. In dense urban cores, where indoor gatherings remain heavily regulated, transit use remains low. But in less concentrated metros in the South and in the suburbs, retailers are increasingly reporting more foot traffic in stores.
Similarly, consumers are flocking to these Sun Belt regions and cities across the West as the pandemic continues to upend normal physical office demands and WFH becomes more mainstream. The top state for inbound migration was Idaho; other top spots include Arizona, Oregon, the Carolinas, and Florida. The top states for outbound moves, the report notes (citing a United Van Lines study) included densely populated and expensive New York, Illinois, and California.
The office markets in Sun Belt and Western cities have also benefited from these migration patterns: in another recent report JLL predicts that the real winners over the next 36 months will be Sun Belt and Mountain West submarkets, which the firm estimates will outperform gateway cities in office absorption and rent growth as companies relocate offices and adopt more distributed work models.
Source: “The Sun Belt and American West Will Be Retail’s Big Winners This Year”
