This article originally appeared on CoStar Insight. It has been republished here with permission.
Retail owners across Fairfield County, Connecticut, are seeing annual rent growth slow to 2.2% this month from a peak of 3.7% posted in last year’s third quarter, which marked the highest pace of rent increases since early 2007.
The slowdown is expected to accelerate throughout this year, owing to pockets of outsize weakness in certain property types and lackluster demographic data. CoStar’s forecast, incorporating recent availability trends as well as tame demographic data, points to a sharp deterioration in the rent outlook in the second half of 2024.
Beyond more retail space listed as available, the prospect of weak payroll growth and a notable decline in the overall population over the next 12 months also are weighing on the rent outlook. Oxford Economics predicts that payroll growth will drop almost 70% to 1,700 this year, while the population at large will decline 0.12%, far below growth nationally at 0.48%.
The Fairfield County availability rate hit a post-pandemic low of 5% in the first quarter of 2023, but it has edged up about 50 basis points since, keeping it above the national average of 4.8%. The main culprits have been the mall and midsize shopping center segments, or those between 30,000 square feet and 100,000 square feet, which together comprise 29% of Fairfield County’s total retail inventory.
Malls here have the highest availability rate of all property types at 8.6%. The largest blocks of leasable mall space can be found at the Trumbull Mall, where brokers are marketing nearly 198,000 square feet across two properties, the majority of which remains unoccupied following the closure of a Lord & Taylor store in 2021.
Midsize shopping centers, meanwhile, feature a pair of 50,000-square-foot-plus spaces: one at the Wilton Campus on River Road and one at Danbury Square.
The high availabilities will have an adverse effect on future rent increases for malls and midsize shopping centers. Both are likely to lag overall rent growth in Fairfield County this year, with all but one retail node expected to see increases slow. Greenwich and Norwalk may be the laggards, where rent growth is expected to slow by 580 basis points and 460 basis points, respectively, from last year’s levels.
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