The Western US Retail Market in Q4 2024: Retail Space, Population, and Housing
The Western US Retail Market in Q4 2024: Retail Space, Population, and Housing
1. Executive Summary
What's the story with retail in the Western US? This report dives into the connection between retail square footage, population changes, and housing supply from Texas to the West Coast in the last quarter of 2024. We're looking at whether there's a sweet spot for retail space in growing areas. Our initial look suggests that fast-growing cities might have less retail space per person, while slower-growing areas could have more than they need. The big question we're exploring: How do population shifts impact the need for retail, and are housing and retail keeping pace? We think the answer involves a mix of local economies, building limitations, and the ever-growing world of online shopping.
2. Q4 2024 Retail Market Snapshot: Regional Overview
Nationally, the retail market felt pretty stable in the last part of 2024, with about 4.7% of space available.1 But dig a little deeper, and you'll see things look quite different across the Western states.
In Texas, Houston saw a slight bump in empty storefronts, hitting 5.4% availability.2 Even though more businesses moved in than out for the year 3, it seems like Houston might be building retail space a bit faster than demand. This could be a sign of things to come in Texas or just a local blip in Houston.2 Looking at the bigger Texas real estate picture, the industrial sector in Dallas-Fort Worth and Austin was doing well 4, but Houston's office market wasn't so hot.6 These wider trends could be influencing how people feel about investing in Texas retail.
New Mexico, especially Albuquerque, was a different story. Retail availability there actually dropped to 3.5%, even though a few more businesses closed than opened.7 This odd situation suggests that there wasn't much new retail space being built. So, even with some businesses leaving, the lack of new construction could be why it was so hard to find retail space in Albuquerque.7 The stable national availability rate doesn't really show how tight the market was in Albuquerque.
Heading west to Arizona, things seemed to be cooling down. Phoenix had more retail space empty (5.7%) as more businesses moved out than in.8 This suggests that Phoenix might have more retail space than it currently needs. Tucson also saw a slight increase in empty storefronts (5.8%), mainly because some big stores closed.9 The fact that both Phoenix and Tucson had more empty retail spaces could mean that Arizona's retail sector is slowing down, possibly due to the economy or changes in how people are spending their money.
In Nevada, Las Vegas was a bright spot in Q4 2024. The city had less empty retail space than the national average (4.2%), and more businesses were moving in.10 This indicates a strong need for retail space in Las Vegas, likely boosted by tourism.10 Plus, rents in Las Vegas went up quite a bit compared to the year before, showing that demand is high and good locations are scarce.11 Meanwhile, Reno's industrial market had more empty space 12, but the retail market in the Reno area remained strong, with very few empty storefronts.11
California's retail market in Q4 2024 was a mixed bag. Los Angeles stayed steady with 5.9% vacancy 13, while San Diego saw more businesses move in but a slight dip in average rent, with 4.2% availability.14 The Inland Empire had more businesses moving in and less empty space (6.5% availability).15 Notably, Orange County was very strong, with more businesses moving in and a tight 3.8% availability.16 However, Northern California's Sacramento retail market struggled, with more businesses moving out and an overall vacancy rate of 5.4%.17 This variety shows the different local economies and consumer habits shaping California's retail scene.
Up in Oregon, Portland's retail market in Q4 2024 seemed to be stabilizing, with a sense of cautious optimism. Even though not much new retail space was built, there was a more realistic outlook among those in the market, and investors might become interested again.18 However, Portland still had a relatively high vacancy rate of 5.8%, which could be due to specific local issues or ongoing redevelopment.18
Finally, we didn't find specific Q4 2024 retail market data for major metropolitan areas in Washington in the provided information. However, a report for Seattle indicated a fairly strong retail market with a low vacancy rate of 3.2%, but it also reported that more businesses moved out than in for the year due to some large tenants leaving.19 This suggests a tight market with potential shifts in who's occupying the retail spaces.
3. Retail Square Footage and Population Analysis
To really understand the link between retail space and population, we need to look at the big metropolitan areas in our study and compare how much retail space they have with how many people live there.
3.1 Major Metropolitan Areas: We're looking at major cities from Texas all the way to Washington.
3.2 Population in Q4 2024: We've gathered population estimates for the end of 2024 for major cities like Houston (7,796,182) 20, Dallas-Fort Worth (8,344,032) 22, San Antonio (2,763,006) 24, Austin (2,550,637) 25, Albuquerque (967,000) 26, Phoenix (5,186,958) 27, Las Vegas (2,398,871) 28, Los Angeles (12,927,614) 29, San Diego (3,298,799) 30, Sacramento (2,463,127) 31, Portland (2,537,904) 32, and Seattle (4,145,494).32
3.3 Total Retail Square Footage in Q4 2024: We also looked at the total amount of retail space in square feet for cities like Houston (406,481,958) 3, Dallas-Fort Worth (428,828,186) 33, San Antonio (125,694,747) 34, Phoenix (491,489,084) 35, Las Vegas (102,093,700) 35, Los Angeles (964,398,357) 35, San Diego (213,183,548) 35, Sacramento (155,010,837) 35, Portland (222,000,000) 36, and Seattle (329,137,868).35 We couldn't find this data for Austin and Albuquerque in the provided snippets.
3.4 Retail Square Feet per Capita:
To see how these numbers stack up, imagine a graph where the horizontal axis lists the metropolitan areas and the vertical axis shows the retail square feet per person. You'd see bars of different heights, representing the amount of retail space each city has for each of its residents.
3.5 Ranking by Retail Square Feet per Capita (Lowest to Highest):
Let's visualize this as a bar chart. The horizontal axis would list the metropolitan areas in order from lowest to highest retail square feet per capita. The vertical axis would show the amount of retail square feet per person. The bars would then clearly show which cities have the least and most retail space relative to their population. Las Vegas and San Antonio would have the shortest bars, while Phoenix would have the tallest.
4. Demographic Shifts and Housing Supply (2020-2024)
4.1 Population Migration Trends:
Texas: Houston, Dallas-Fort Worth, San Antonio, and Austin all saw more people moving in than out.37 Houston added 198,171 residents 21, and Dallas-Fort Worth gained 177,922.22 San Antonio's growth was mainly from people moving within the US 39, and Austin also had a lot of people moving in.40
New Mexico: Albuquerque's metro area grew overall, but the city itself saw a slight decrease in population.41
Arizona: Phoenix and Tucson both had more people moving in, with the Phoenix area being one of the top gaining areas in the US.37
Nevada: Las Vegas experienced rapid population growth, adding 71,098 residents since 2020.42 Reno also grew.
California: Los Angeles County saw a population decline, though the wider metro area grew slightly.43 San Diego had more people moving out to other parts of the US but gained from international migration.45 Sacramento and Riverside-San Bernardino both grew.37 San Francisco gained population due to international migration after some losses at the start of the pandemic.37
Oregon: Portland initially saw a population decline but then had a slight increase between 2022 and 2023.46
Washington: Seattle, Spokane, Tacoma, and Vancouver all showed population growth.32
Imagine a series of line graphs, one for each metropolitan area. The horizontal axis would represent the years from 2020 to 2024, and the vertical axis would show the population. The lines would then illustrate the population trends in each city over this period, showing which areas have grown, declined, or stayed relatively stable.
4.2 Increase in Housing Supply:
Texas: Houston, Dallas-Fort Worth, and San Antonio all had more homes available.48 Austin saw increasing listings, but there were hints of a potential oversupply.51
New Mexico: Albuquerque had limited new home construction.53
Arizona: Phoenix saw more homes being built 54, and Tucson had increasing construction.9
Nevada: Las Vegas and Reno both had more homes available and more under construction.12
California: Los Angeles, San Diego, and Sacramento all saw increasing housing supply.56 Portland had limited new construction.59
Washington: We didn't find data on housing supply increases for Washington in the provided snippets.
Similar to the population trends, we could visualize the increase in housing supply with line graphs for each metropolitan area. The horizontal axis would be the years 2020-2024, and the vertical axis would represent the number of new housing units added. These graphs would show how the housing supply has changed in each market over the past few years.
5. Correlation and Thesis
5.1 Identifying Correlations:
When we compare the amount of retail space per person with population migration, it's not a straightforward picture. Las Vegas, with the least retail space per person, had rapid population growth. On the other hand, Phoenix, with the most retail space per person, also saw a lot of people moving in. Seattle and Portland, with more retail space per person, also grew in population, though Portland's growth was slower. San Antonio and Dallas-Fort Worth, with less retail space per person, also had significant population increases. This suggests that just because a lot of people are moving in doesn't automatically mean there will be a lot or a little retail space per person.
Looking at the increase in housing supply and retail space per person, the connection is even less clear. Many areas with more homes being built, like Phoenix and Seattle, have relatively high retail space per person. In contrast, Las Vegas, which also saw a lot of new housing, has the least retail space per person. This indicates that building homes and retail spaces doesn't always happen at the same rate or in direct proportion to each other.
Generally, areas with more people moving in also tend to have more homes being built, like in Texas, Arizona, and Nevada. However, the amount of new housing varies, and in some cases, like Austin, there are concerns that too many homes might be being built compared to the slowing pace of people moving in.
Some exceptions include Albuquerque, which had population growth but not much new housing, and Portland, which had slow population growth and limited new construction. These markets might have specific local challenges affecting development.
5.2 Developing the Thesis: Our analysis suggests that when people move to the Western US, it definitely drives up the need for both housing and retail. Fast-growing cities, especially in Texas, Arizona, and Nevada, are attracting a lot of new residents, which means more demand for places to live and shop. While the housing market has generally responded by building more homes, the development of retail space seems to depend on a more complex set of factors. These include local economic conditions, how much land is available, zoning rules, and how people's shopping habits are changing (like the rise of online shopping). The different amounts of retail space per person in these growing cities show that retail development might not always keep up with residential growth, which could mean opportunities for new retail businesses. On the flip side, areas with slower population growth or more people moving out might have too much retail space if the supply doesn't adjust. Plus, with more and more people shopping online, the need for physical retail space might not directly follow population growth as closely as it used to.
6. Conclusion and Outlook
The retail market in the Western US in Q4 2024 is a dynamic mix influenced by how populations are changing and how much housing is being built. Fast-growing cities like those in Texas and Nevada tend to have less retail space per person compared to their population, even though they're also building more homes. This could mean there's a shortage of retail space in these areas, which might be a good sign for future retail development. On the other hand, cities with slower population growth, like Portland, tend to have more retail space per person, suggesting they might have more than they need or that their retail sector is adapting more slowly to population shifts.
Generally, when more people move into an area, more homes get built. However, the link between building more homes and having more retail space per person isn't as direct. This suggests that other things, like online shopping and local development rules, play a big role in how much retail space a market needs.
For retailers, the message is that rapidly growing markets with less retail space per person could be good places to set up shop, especially if housing is also on the rise, indicating a growing customer base. Developers should think carefully about balancing home building with retail development in these areas to make sure there are enough places for people to shop. Investors need to look closely at local market conditions, including migration trends, housing supply, and how people are spending their money, to find the best long-term opportunities in the retail sector.
Looking ahead, the retail market in this region seems cautiously optimistic, with a generally stable national economy providing a foundation for growth in many cities. However, the increasing popularity of online shopping and changing consumer preferences will continue to shape the need for physical retail stores. Future studies should look more closely at how different types of retail (like grocery stores or entertainment venues) are performing and how online shopping is affecting the need for physical retail locations in these diverse markets. One limitation of our analysis is that we didn't have consistent data on total retail square footage for all the cities we looked at, which highlights the need for more detailed, market-specific research to better understand these complex trends.