Boston’s retail market remains tight, with retail availabilities near record lows due to a resilient consumer base and a lack of new supply, mirroring national trends. Economic conditions suggest a positive outlook for the next 12 months, with hopes for an economic soft landing and the lowest level of annual construction starts on record.

In 2023, retail sales excluding automobiles in the Boston metro area increased by an estimated 1.4%, aligning with the national average and exceeding the population growth rate of 0.6%. This demand for retail space has remained positive, though slightly below levels seen in the 2010s. However, limited appropriate supply is restricting further demand growth, a trend seen nationwide.

Boston’s retail space per capita is at 50.6 square feet, lower than the national average, contributing to a tighter local market. The availability rate in Boston is a mere 3.0%, significantly below the national figure of 4.7%. Despite a strong job market and cautious economic optimism, inflation remains a concern, potentially sticking in the 3% to 4% range.

With a small construction pipeline, retailers in Boston will largely have to utilize existing space. Although there was an uptick in square footage in early 2024, total starts in 2023 were just 10% of the 15-year average, indicating a shrinking pipeline. This scarcity should support retail rents, which stagnated in 2023 due to declines in mall rents and shifts toward discount retailers.

Looking ahead, Boston’s retail rents are expected to rebound and align with lower inflation rates as demand and supply stabilize. By mid-2024, asking rents had grown by 1.3% over the previous year, suggesting a positive trend for the future.

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