U.S. retail property fundamentals just keep improving. In the first quarter, retailers opened more stores than the units they closed, occupancy levels tightened and rents climbed at prime properties, according to CBRE.

Retailers absorbed 32 million square feet of retail space during the quarter. That’s twice the amount absorbed during the first quarter of 2021. It’s the sixth consecutive quarter retailer demand has outstripped supply, as retailers open more stores to meet consumer demand, according to CBRE.

Most new stores opened at neighborhood, community and strip centers and in high street and freestanding locations. But the mall and lifestyle center segment also performed better than it has in 10 years, absorbing 5.8 million square feet.

Expanding chains will have a difficult time finding suitable space, according to CBRE. The overall retail availability rate in the U.S. fell to 5.3% in the first quarter, down by 40 basis points quarter over quarter and 1.2% points year over year. Availability is now at its lowest level in a decade.

Construction completions fell to 5.3 million square feet in the first quarter, the second-lowest quarterly total in a decade. New supply as a percentage of total inventory is less than 1%, even in Atlanta; Austin, Texas; Houston; and Jacksonville, Florida, which were some of the most active development markets over the past year.

The average asking rent grew by 2.2% year over year in the first quarter to $22.17 per square foot, the highest annual rate since the first quarter of 2017. With little new retail development, available prime space has attracted multiple potential tenants, pushing up rents. CBRE expects the trend to continue in coming quarters as announcements of new developments remain few.

If Brookfield and Simon Buy Kohl's

Simon and Brookfield Asset Management reportedly have bid $8.6 billion for Kohl’s. If the board approves, Simon and Brookfield could achieve economies of scale by consolidating the operations of Kohl’s and JCPenney, which they already own, according to according to Axios’ Richard Collings. The combined cash flow also could allow the owners to secure better financing for loans.

Canadian Pension Fund Invests $300 Million in Gordon Brothers

Gordon Brothers — which provides disposition and appraisal services and short- and long-term capital to retailers and other companies undergoing bankruptcy proceedings, downsizings and other transformations — has received $300 million in financing from CPP Investments through its Credit Investments subsidiary. The funds increase Gordon Brothers’ capital base to more than $1 billion, fueling the continued growth of the firm’s lending operation, which generated over $700 million in originations worldwide in 2021.

Secondary and Tertiary Cities Will Get a Good Chunk of Investment Coming into U.S.

Global commercial property investors are favoring multifamily, life science and industrial assets in secondary and tertiary U.S. cities this year, according to the 2022 AFIRE International Investor Survey Report. AFIRE, an association for international real estate investors that are focused on U.S. commercial property,in February surveyed its members, which include nearly 175 organizations from 24 countries with approximately $3 trillion in assets under management.

These investors perceive that U.S. consumers are coming out of the prolonged pandemic with altered live-work preferences and lifestyles that will drive real estate development and use. Three-quarters expect their investment activity in the U.S. and rate of revenue growth to increase over the coming year. And 81% agree that the pandemic has permanently altered cultural attitudes in the U.S. toward consumption and live-work preferences.

Austin, Atlanta, Boston and Dallas rank as the top U.S. cities for planned investment this year. Six in 10 respondents plan to increase their investments in tertiary cities over the next few years, and seven in 10 plan an increase in secondary cities.

Sustainability and Social Issues

Environmental change, housing and market affordability top the social concerns among foreign investors in U.S. commercial property. Eighty-one percent said environmental, social and governance criteria would be very important over the next five years, up from 69% in 2021. Eighty-nine percent said actionable climate change strategies are among the most important ESG priorities for U.S. real estate investments in the near future, and 90% cited carbon footprint-reduction measures among the most important.

Seventy-four percent named diversity among the top ESG priorities and 75 percent cited talent attraction/development. Almost nine in 10 recognize the future financial benefit of taking ESG action now. Notably, 55% would accept a lower than-expected rate of return if it meant realizing other social or environmental benefits.

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