Retail Asking Rent Growth Slows

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U.S. retail asking rent growth slowed in the second quarter, according to data from CoStar Group, Washington, D.C.

National asking rent growth decelerated to 1.6% year over year–the slowest pace in more than a decade–the report said.

Brandon Svec, national director of retail analytics at CoStar Group, noted the slowdown in asking rent growth is less a sign of weakening demand than a function of normalization. “While retail fundamentals remain healthy by historical standards, softer consumer spending growth, elevated interest rates and greater tenant cost pressures have reduced landlords’ ability to push rents at the aggressive pace seen earlier in the cycle,” he said.

Despite slower rent growth, property owners continue to realize substantial rent spreads when space turns over, particularly in high-traffic retail corridors where available space remains scarce, the report said.

“While rent spreads have moderated somewhat from the record levels achieved in 2022 through 2024, they remain near multi-decade highs in many markets as rents on expiring leases often sit well below current market rates,” Svec added. “The combination of elevated lease spreads and larger contractual rent escalations is allowing many owners to continue generating meaningful revenue growth even as rent appreciation slows.”

The report found asking rent growth deceleration across most major markets, but noted performance varies considerably by region. Several Sun Belt markets that led rent growth earlier in the cycle, including Phoenix, Orlando, Atlanta, Charlotte and Las Vegas, remain among the stronger performers nationally, posting annual rent growth between roughly 3% and 6%, though many of these markets have seen moderating rent gains.