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Seattle’s Retail Market Outlook Is Cautiously Optimistic
While economic uncertainty remains a key market indicator, a positive sign for the retail sector recently is the growing confidence consumers have in the U.S. economy. However, the market is in a relatively strong position with low vacancy rates and pent-up demand across the region, especially in suburban markets.
Despite relatively flat leasing activity, averaging 635,000 square feet in 2023, the Seattle retail market continued a run of low and healthy vacancy rates, ending 2Q 2023 at 2.7%, according to a new Kidder Mathews report.
Rising interest rates and a lack of inventory have decelerated retail investment, dropping from $2.5 billion in 2021 to $2.0 billion in 2022. At the end of 2Q 2023, there were 148 transactions totaling $450 million and an average cap rate of 6.0%, up from the mid-5% cap rates in 2022.
Overall, activity is expected to increase moderately during the second half of 2023, and the retail sector is expected to slowly gain velocity as the economy strengthens and consumer confidence remains high.
