Retailers looking to expand their footprints have gone from having their pick of prime real estate to searching for the needle in a haystack, according to CBRE's newest retail report.

Retail availability nationwide fell to 4.8% in the third quarter, at least an 18-year low. That number, a 10-basis-point drop from Q2, is the lowest level reported since CBRE began tracking the market in 2005.

The limited volume of available space can be attributed to construction costs and financing difficulties continuing to limit development. Deliveries fell by 28% quarter-over-quarter to 5.5M SF. CBRE predicts 2023 will be the fourth consecutive year of record lows for new construction.

With less new space to move into and retail demand persisting, net absorption in Q3 was 9.8M SF, up 34% quarter-over-quarter. After reporting a downturn in Q2, the lifestyle and mall sector experienced a positive turnaround, leading to its availability rate falling 20 basis points year-over-year to 6%. The Sun Belt was the most popular area for grabbing space, gaining 1.2M SF of absorption overall.

Malls have seen a particularly strong resurgence. Their positive shift in Q3 can be attributed in part to the number of luxury retailers moving into that type of space over the last few months. JLL reported these high-end brands leased 400K SF more than last year across property types, nearly 40% of it in malls, as demand wasn't strongly affected by the pandemic retail lull.

As vacancies have shrunk, rents have risen across the country, but CBRE reported the pace of growth is slowing. Average asking rent hit $23.42 in Q3, up 2.1% year-over-year but only 40 basis points above Q2. That is the first time quarterly retail rent growth has dipped below the long-term average of 0.5% since Q4 2020.

“Asking rent growth moderated on a quarter-over-quarter and year-over-year basis, suggesting that landlords believe demand could ease in coming quarters as the U.S. economy slows,” CBRE wrote in its Q3 retail report.