How about some good news? U.S. shopping center vacancy rate falls to lowest level since 2007

Resilient. That’s how Cushman & Wakefield described the U.S. retail sector in its fourth-quarter 2023 Shopping Center report. Why? Because because the average shopping center vacancy rate fell to its lowest point since 2007 as last year drew to a close.

Officials with Cushman & Wakefield said that shopping center owners have adapted, bringing in retailers that cater to the specific needs of local consumers.

“Shopping centers have shown incredible resilience and adaptability, continuing to attract a diverse range of businesses,” said Barrie Scardina, president of Americas Retail Services for Cushman & Wakefield, in a statement. “Healthy demand for retail space can be traced to surprisingly strong economic growth in 2023, particularly from the consumer sector.”

The national vacancy rate for shopping centers stood at 5.3% as of the end of the fourth quarter of 2023, a decline of 10 basis points from the previous quarter. In the fourth quarter, demand surged, too, with net absorption reaching 6.1 million square feet, a 71% increase from the third quarter.

Part of the reason for this low vacancy rate? Developers haven’t added much new retail construction since the onset of the COVID pandemic. In 2023, retail completions totaled just more than 8 million square feet, with 20% of this space delivered in the fourth quarter.

A resilient macro environment prompted retailers to expand their store counts, resulting in 769 net retail store openings in 2023. Although this represented a 50% decrease from 2022, it marked the first two-year stretch of net store openings since 2013-2014.

The wave of openings translated into positive net absorption for 11 consecutive quarters, driven predominantly by discount and grocery, with other segments like apparel, footwear, luxury and beauty also witnessing a resurgence in net store counts.

“Despite numerous headwinds—inflation, rising interest rates, reduced savings —spending has been largely unimpeded from a macro perspective as of now,” Scardina said. “This could potentially change in 2024 as many shoppers are spending more of their budget on essentials like groceries, personal care and rent.”

In the fourth quarter, the retail market absorbed 6.1 million square feet of space, a 33% increase compared to the average over the first three quarters of 2023. However, the Cushman & Wakefield report indicates a slowing trend in absorption levels over the longer term, slipping from 38.8 million square feet in 2022 to 19.7 million square feet in 2023.

Given the favorable outlook for retail tenant demand, the pullback in absorption is likely due to limited shopping center space available to lease. With vacancy rates in many markets already below historical norms, tenants face increasingly limited suitable options. The low construction pipeline of 13.9 million square feet suggests this imbalance will persist.

Asking rents continue to rise in response to a tight market, reaching an average of $23.70 per square foot in the fourth quarter, a 4.1% increase from a year earlier. Asking rents have cumulatively risen 16.9% since 2019 and 41.1% over the past decade.

It’s difficult to envision vacancy rates going much lower, even if the economy remains resilient,” Scardina said. “Layer in our baseline expectation for slowing household income growth, tighter consumer credit and weaker corporate earnings, and the real estate demand outlook seems poised to throttle back in 2024. Consumers will be more cautious, and retailers will follow suit.”

Cubicles? They’re out. Bedrooms? They’re in planned office-to-apartment conversions hit record level

It’s no secret that the office sector continues to struggle, with Class-B and -C buildings especially battling soaring vacancy rates. Many of these buildings, though, might become multifamily housing.

A January report from RentCafe says that the pipeline of apartment units scheduled to be crafted from old office spaces stood at a record 55,300 as 2024 began.

Developers aren’t targeting any office building, though. They’re going after older ones, with the average age of office buildings scheduled to be transformed into rentals standing at 72. What’s interesting, though, is that this age, though high, is 20 years younger than the average office building that has previously been converted into multifamily, according to RentCafe.

This conversion trend is most prominent in Washington, D.C., which had 5,820 apartment units scheduled to be developed from former office spaces in the pipeline at the start of 2024. New York came in second with 5,215 units, while Dallas came in third with 3,163 units.

In the Midwest, Chicago came in fourth with 2,822 units set to transform from office to multifamily space. Cleveland came in sixth, with 2,012 units, while Cincinnati pulled up in the seventh spot with 1,563 and Kansas City, Missouri, claimeed the eighth spot witth 1,510 units.

Rounding out the Midwest were 11th-ranked Minneapolis with 1,334 units set to transform from office to multifamily space as 2024 began, Detroit with 1,070 units and Columbus, Ohio, with 1,006.

Renters Bill of Rights: Housing Industry Expresses Concern About One-Size-Fits-All Legislation


Recently, the White House unveiled its proposal for a Renters Bill of Rights, a set of principles which aim to “increase fairness in the rental market and further principles of fair housing.” The document addresses a range of issues including eviction, rent control and fair housing. While some advocates for renters have welcomed the initiative, there has been opposition from the housing industry, with some arguing that the federal government should not be involved in regulating the landlord-tenant relationship.

Nicole Upano, AVP of Housing Policy & Regulatory Affairs at the National Apartment Association, said she’s concerned about federal involvement in this area. She argued that state and local laws are better suited to regulating the landlord-tenant relationship as they are tailored to the particular market.

“We would be disappointed in any sort of one-size-fits-all policy around landlord-tenant operations because that just doesn’t align with the reality of the industry and the markets,” Upano told REDnews.

Upano also noted that the principles outlined in the Renters Bill of Rights are non-binding and do not represent any immediate changes to federal policy. She suggested that the focus should be on advocating to federal agencies that are responsible for implementing existing policies, rather than on creating new policies at the federal level.

“We look forward to working with the White House in areas where we align, such as the Housing Supply Action Plan,” said Upano. “We agree that there are both short and long-term solutions to resolving the housing affordability challenges that renters are facing, but we just disagree on the path to get there.”

David Mintz, VP of Government Affairs for the Texas Apartment Association, echoed Upano’s concerns about federal involvement in landlord-tenant relations.

“Policies affecting the landlord-tenant relationship should be dealt with at the state level, not in Washington, D.C,” said Mintz.

Mintz also expressed concern that any new regulations could have unintended consequences.

“Anything that increases regulatory barriers and compliance costs ultimately impacts housing quality and affordability,” he pointed out.

Mintz also raised questions about the impact of an artificial limit on rent, which he believes would be a flawed policy that would hurt the ability of rental housing providers to maintain existing properties and deter new development.

“With Texas’ continued population growth, we need to make sure there aren’t any artificial barriers that impede the market’s ability to keep up with demand,” he said.

Rent control could impact property values and, therefore, public services.

“Texas school districts and local governments rely heavily on property tax revenue,” said Mintz. “Any policies, like rent control, that lower property values, will end up hurting tax revenue.”

Finally, Mintz said he worries about the impact of potential new regulations on small, independent rental property owners. He notes that many of these owners are already facing challenges due to pandemic-era policies that make it difficult to seek legal remedies when residents fail to pay rent.

“Rising property taxes, insurance premiums and other operating expenses are also a concern,” Mintz said. “With potential new and costly regulations, we’ve heard from members, particularly small, independent owners, about how these new policies may make it even more difficult to own and manage rental property.”

While there is opposition to the Renters Bill of Rights, there are also those who support the initiative. For example, Diane Yentel, President and CEO of the National Low Income Housing Coalition, has praised the principles outlined in the document, stating that they would provide much-needed protections for renters who are struggling to afford housing.

In conclusion, though the proposed Renters Bill of Rights has generated both some support from renter advocates, opponents argue that it represents unwarranted federal involvement in landlord-tenant relations. Ultimately, the success of the initiative will depend on whether it is able to strike a balance between protecting renters’ rights and the needs of the housing industry

Hung-over at work? Clocking less than 20 hours a week? Survey suggests quiet quitting is on the rise


Has the COVID-19 pandemic changed the way we think about work forever? A new poll of U.S. workers suggests that the pandemic has led to a surge of quiet quitting.

What’s that? It’s when employees who are dissatisfied with their jobs do the bare minimum at work, typically just enough to not get fired.

Clever Real Estate recently polled full-time U.S. workers and found that about 33% admitted to quiet quitting at work. And Clever says that the actual number of employees who do this is probably much higher. According to the company’s poll, 78% of workers have taken actions that could be considered an example of quiet quitting.

Why are so many employees doing less at work? The pandemic and the rise of working from home might have changed many workers’ attitudes about their jobs. Then there is this result from Clever’s poll: 86% of employees polled said that they cared about the success of their companies, but 39% said that their companies don’t care about them.

A total of 56% of workers told Clever that they are underpaid while 40% say they are underappreciated at work.

Then there’s disillusionment. A total of 55% of poll respondents told Clever that they don’t believe hard work will help them get ahead in today’s workplace. It’s not surprising, then, that 57% of survey respondents said that they have not increased their efforts at work in the past year.

How do workers quiet quit? Clever listed these top examples:

  • A total of 29% of respondents said they are socializing more with co-workers during the day.
  • 19% say they distract themselves at work by staring into their phones or watching TV.
  • 18% say they are taking longer breaks.
  • 17% say they call in sick when they’re healthy.
  • And, in a surprising result, 9% of employees say that they have started the workday hungover.

Quiet quitting might be here to stay, too. That’s because workers who quiet quit often avoid consequences. Clever reported that 29% of poll respondents said that their managers don’t track the work they do. And 39% of those who have reduced their output during the last year say that their managers haven’t noticed.

And in one more surprising result from Clever’s poll? A total of 68% of respondents said that they spend less than 40 hours a week working. After breaks, socializing and distractions, the average number of hours employees surveyed actually worked dropped to 34 a week. One in eight full-time employees log 20 hours or fewer a week.

Fear of making a mistake: is this what’s behind the slowdown in multifamily deals?


The multifamily market remains a darling of commercial real estate investors. Even with rising interest rates, the fundamentals of the sector remain strong. And investors are increasingly broadening their search to sink their dollars in Class-B apartment buildings.

Those are some of the key points from the sixth annual Powerhouse Poll Outlook released this February from Berkadia.

Berkadia surveys investment sales advisors and mortgage bankers two times a year. This most recent Powerhouse Poll included the opinions of 144 respondents and was conducted from December of 2022 through January of 2023.

The results of this most recent poll reflect the struggles that multifamily investors are facing because of higher interest rates.

But Ernie Katai, executive vice president and head of production for Berkadia, said that the multifamily sector, despite the higher interest rates, remains a strong one.

“People are lamenting and gnashing their teeth because of interest rates,” Katai said. “But apartment buildings are still 95% occupied across the county. We are seeing rent growth of just a little less than historical norms, 3.3% versus 3.5% on a year-over-year basis. And we just came off a period of amazing rent growth. The market is fundamentally strong. We are just seeing a pause in investment activity and multifamily sales because rates have bounced up.”

Katai said that he expects investors to return in greater numbers to the multifamily market once interest rates stabilize. When that happens, though? That’s uncertain.

Katai said that the market might not even see interest rates stabilize in June of this year. It all depends on when the Federal Reserve Board decides to stop boosting its federal funds rate. Many economic analysts are predicting that this will happen in the second half of this year. But no one knows for certain if this is true.

Part of the issue investors are facing? People are spoiled by interest rates of 2% or 3%. Historically, though, even today’s higher rates would be considered low, Katai said. And it was unreasonable to expect those historically low interest rates to stay in place for much longer.

“The one thing the market hates is uncertainty,” Katai said. “It paralyzes activity. At some point, the national players will start transacting again. Then I think we’ll see a bit of a herd approach. Investors have money they want to get out into the market. Someone must be brave enough to get things started again. It’s not FOMO, or fear of missing out. It’s fear of making a mistake.”

Here’s how Katai’s “fear of making a mistake” works: If investors don’t make any deals now, they won’t get into trouble. But if they close a transaction and that deal ends up in a loss? They could damage their bottom lines. Many investors, then, prefer to play it safe and wait out the uncertain interest rate environment.

“That’s what leads to paralysis,” Katai said. “It’s just the mindset right now.”

When will we see more multifamily investment sales? Katai said that interest rates need to stabilize and owners need to accept that their multifamily properties might not be worth as much as they were one or two years ago.

“People might have thought there their property was worth $100 million a year ago but maybe it is only worth $80 million today,” Katai said. “Real estate is just math. It’s not overly complicated. Look at it from the perspective of owning a house: Maybe your house was worth $350,000 last year and now it is worth $275,000. You might think, ‘I’m not going anywhere now.’ Take that to the multifamily level. That’s what multifamily owners are thinking now. The industry is a little spoiled. It had a great run.”

The numbers

What were some of the more interesting results from the most recent Powerhouse Poll?

  • Not surprisingly, respondents were concerned about interest rates. According to Berkadia’s poll, 54% of respondents said that interest rates, inflation and fears of a recession would have an extreme impact on investment activity this year. An additional 45% said that these economic concerns would have a moderate impact on multifamily investment activity in 2023.
  • A total of 51% of respondents said that they believed that the country will fall into a recession in the next 12 months, while 36% said that the country was already in one. A total of 12% said that the country would not see a recession during the next 12 months.
  • In another interesting result, 59% of poll respondents said that Millennials will make up the highest percentage of multifamily renters during the next two years, while 31% said that members of Gen Z will lead the rental market.
  • What about want renters want? The Berkadia poll found that 66% of respondents said that location and security were the most important factors to renters looking for a multifamily property. Only 26% said that interior and common-area amenities were the most important factors, while only 2% said that renters are focused first on smart-home technology.

An evolving mindset

When investors are ready to close multifamily transactions again, what will they be looking for?

Katai points to the growing popularity of Class-B apartment assets.

Not too long ago, investors considered Class-A multifamily properties to be the best home for their investment dollars. Today, though, investors realize that a far greater number of renters can afford Class-B apartment units.

“It’s a bigger pool of potential renters,” Katai said. “Most renters live in Class-B apartments. Why not invest in something like that? It’s hard to argue against that mindset.”

The Class-B apartment market looks especially inviting today when you look at inflation, Katai said. As the price of so much continues to rise, many renters will look to Class-B spaces to save money on rent. These properties might not feature the latest amenities such as rooftop pool decks or concierge services. But if the units are safe, secure and clean, renters are eager to snap up Class-B space, Katai said.

And that makes these more modestly priced apartment properties attractive to investors.

A recession on the way? Already here?

One of the more interesting results from the Powerhouse Poll was the high number of respondents who said that the United States will see a recession during the next 12 months and the respondents who said that the country is already in a recession.

Katai, though, said that he wasn’t entirely sure how deep any recession will be.

“It feels to many in this business that we are already in a recession because our business in the fourth quarter of last year fell off a cliff,” Katai said. “There were minimal transactions. Everyone was down double-digit numbers. A recession is when it hits your house. A lot of producers feel that way. But are we really in a recession already? That is harder to decide.”

And when investors are making multifamily transactions, what kind of deals are closing? Katai said that bigger deals are not necessarily better today. Today’s multifamily transactions are more commonly smaller deals closed by private investors, while larger institutional investors are mostly waiting out the uncertainty.

“We are actually very busy at Berkadia,” Katai said. “People are trying to figure out what the values of their properties are. There is a lot of conversation about deals, but there aren’t as many fish on the hook. Owners want to know what the market thinks their properties are worth. When they see the numbers, they step back. No one is sitting around staring at the walls. But the execution is not there yet.”

The importance of safety

Another interesting response in the Berkadia survey was the importance of security for renters. Katai says that this is the first time he’s seen safety pop up as what investors think renters are most concerned about.

Katai said that this isn’t surprising, though. After COVID, the streets of many major downtowns feel less safe than they did before the pandemic.

Katai sees this firsthand. He lives in Chicago and notices that downtown still isn’t as busy as they were before the days of the pandemic.

“It bums me out a bit,” Katai said. “I love the hustle and bustle of the city. But I’ll finish dinner at a restaurant and walk home and not see anyone out. This is Chicago. What’s happening? The cities are still not back at their pre-pandemic activity level yet.”

This doesn’t mean, though, that the multifamily market in downtown areas is dead. Katai says that younger adults are still renting in the middle of bigger cities. In fact, the Berkadia poll found that large metropolitan areas are still seeing the greatest number of multifamily transactions.

The poll listed secondary metropolitan areas as seeing the second-highest amount of multifamily transactions, while suburban areas were seeing the third-highest.

“That caught my attention,” Katai said. “If you remember during the height of COVID, suburban occupancy levels went through the roof. People wanted more space. To see suburban activity drop to number three? That caught my eye. If that holds up in our next poll in June, that will be an interesting trend.”

From Tiny Acorns, Mighty Oaks Do Grow

Sitting in a boring business meeting in 1975, my mind began to wander. How to lease up the new two-story office building I had just completed on Richmond Avenue? Then the idea came: I’d plant a little grove of trees in the long, dull esplanade that lay in front of the building to make it more inviting.

So that’s what we did, my partner John Kirksey and I, with shovels and some young pine and oak trees.

The newspaper did a story on this mini grove, and I was contacted by the late attorney and civic leader Carroll Shaddock, who saw the story and whose organization Billboards, Ltd., was well on the way to reducing Houston’s scourge of tall signs from 15,000 to 1,500, a project which took many years and much hard work.

Carroll was fascinated by the idea of planting trees on a barren Houston street, and he was looking to give birth to an organization focused on adding something to the city, in addition to taking something away (i.e., the billboards). It was noted that although Houston does not have beautiful mountain ranges or other topographical features, it DOES have a climate that can grow luxurious trees, creating neighborhoods like those found in and around Rice University and the Museum District.

Carroll asked me to serve on the board of directors of his redirected organization, and Billboards, Ltd., became Scenic Houston.  Also on the board were numerous other civic leaders from branches of city government and private citizens who wanted our city to be more attractive. I was a member of this board for over 30 years.

Carroll and the young organizations identified candidates for city council and mayor, and took them to lunch before before the elections to tell them about the various efforts on billboards and trees and ask for their support. Most of the candidates got on board with the beautification goals before they were elected and supported them ongoing after they began to serve.

Trees For Houston, a new organization specifically dedicated to planting and maintaining thousands of street trees was spun off, financed by private and corporate contributions.  Trees were not just planted willy nilly and forgotten, but instead, long thoroughfares on all sides of the city were chosen and green corridors were planted to as to make a statement on a given street. Provisions were made for watering trucks to see the young trees through their early months while they were getting established.

Kirby Drive and Broadway from the Gulf Freeway to Hobby Airport are just two of many thoroughfares which have been enhanced by the efforts of Trees For Houston.

In the meantime, various projects by Scenic Houston, including specifications for walkable streets and parks—“Streetscapes”—were being noticed by other Texas cities, and they came to Houston for guidance in setting up their own programs. Scenic Texas was formed, which now encompasses towns and cities across the state. Instead of being the state poster child for haphazard no-zoning growth, Houston’s reputation slowly began to change.

Individual Houstonians, with dreams, energy and money have made a difference.  Other world cities such as Paris, Vienna, Manhattan, and elsewhere, which are known for their open spaces, broad avenues, wooded parks and tree-lined esplanades, must also have been the result of individual citizens, years-or centuries-ago, who dreamed large. Houston and other Texas cities are following their lead, starting with dreams like tiny acorns.

And not only did our building lease up, but over time, other property owners the length of Richmond Avenue have planted this long throughfare with thousands and decorated it with urban sculpture. 

Our original grove was at 6009 Richmond Avenue. Go see it and imagine it without one tree, as it was in 1975.


About the Author: Ray Hankamer is a retired hotel and office building developer, who as general partner of Southwest Inns, Ltd., operated at the peak 14 hotels and five suburban office buildings, mostly located in the Greater Houston market.