With the holidays just around the corner, a new report from Newmark suggests some retailers may find themselves hunting for space and coming up dry.

The national retail availability rate remained at a “decades-low” 5% in the third quarter and has held steady since Q4 2023 due to strong demand and a shortage of available space. Only 5.8M SF of new retail space came online in Q3, Newmark said.

Leasing activity was down 33% from the 10-year average and down 31% year-over-year, with just 29.3M SF leased in the quarter. While that is “largely due to limited availability in high-demand trade areas, particularly for prime retail assets,” the report also says that figure reflects fewer openings of dollar and discount stores, a sector that drove leasing activity in the last couple of years.

Some retail REITs touched on the tight market for retail space last week in earnings calls, with executives saying they expected tenants to struggle to secure high-quality space this holiday season. The year-end shopping season is anticipated to be better than last year and more similar to spending seen in prepandemic shopping seasons, The New York Times reported.

Demand hasn't been equal for all types of retail. Open-air neighborhood, community and strip centers are in demand and largely responsible for that sticky 5% availability rate. But malls and lifestyle and outlet centers are still posting availability rates higher than their prepandemic levels, Newmark reported.