In the eyes of the international media, San Francisco has become the poster child for “the death of urban retail.” The media’s obsessive focus on Downtown San Francisco, however, masks nuances in the broader Bay Area retail market.

For the first time since 2006 the retail availability rate across America’s central business districts (CBD) today is higher than in the suburbs. Chalk it up to another enduring effect of the rise of remote work.

Had retail space been overbuilt in previous cycles? Is it just now reaching supply-demand equilibrium?

Hardly any new retail space has been constructed during the past decade. Meanwhile, brick-and-mortar retail sales have risen as Americans spend more on experiences at places like restaurants, cafes and breweries. We expect a continued fall in the ratio of absorption to new stock.

Inflation’s deleterious effect on consumer spending means investors should take into consideration both CBRE EA's baseline forecast, which envisions a near-term moderation of inflation, and downside forecast, which assumes high inflation persists for longer.

CBRE EA’s market analysis shows that a one percentage point increase in e-commerce sales has only a slightly negative impact on 5-year brick-and-mortar rent growth.

Consumer spending is likely to increase this year and next and shift from goods to services, assuming COVID-19 remains under control. This could give a boost to lifestyle retailers in affluent trade areas and popular leisure travel destinations.

Changing fundamentals, a shifting population and stable cash flow lead the retail sector to once again catch investors' attention. Read more in our latest report.