Discount Retailers Expected to Keep Dominating National Leasing in 2023: CoStar

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Discount retailers continued to dominate retail leasing nationwide in 2022 and are likely to keep that momentum into 2023, according to data from CoStar.

Dollar General leased the most of any retailer last year with 1.4 million square feet, while competitor Dollar Tree — which took first place in 2021 — came in seventh with just over 1 million square feet, according to CoStar. 

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At the same time, off-price clothing sellers cracked the top 10 with TJX Companies — which owns T.J. Maxx and Marshalls — taking the third most deals with 1.3 million square feet after failing to make the top 10 in 2021. Burlington claimed fifth place with 1.2 million square feet, dropping from its third-place spot in 2021, according to CoStar.

Home goods stores rounded out the top 10 with At Home clutching the second spot at nearly 1.4 million square feet, compared to its ninth-place finish in 2021. True Value-owner ACON and Harbor Freight took the eighth and ninth positions for 2022, respectively. Planet Fitness claimed the fourth spot, and Crunch Fitness came in at No. 10, according to CoStar.

Overall, retail leasing dipped last year with retailers taking 250 million square feet of new space in 2022, below the 279 million square feet in 2021 and 281 million square feet in 2019, CoStar found.

Demand isn’t likely to wane for discount retailers this year as inflation and worries of a recession have customers looking to save cash flocking to them, said Brandon Svec, CoStar’s national director of retail analytics.

“When [customers] are seeking out value, because inflation is high and they need to stretch their dollar or because there’s economic uncertainty with a potential recession and potential job losses around the corner, all of those factors tend to be positive for discounters simply because their business model is one of value,” Svec said.

This year, Dollar General plans to open 1,050 new stores, Dollar Tree will open another 650 outposts, TJX will launch 150 new stores, and Burlington should bring 80 new locations online, CoStar and Business Insider reported. 

“We’re definitely expecting that expansion to continue here in the year ahead, as they’ve been really the most aggressive in announcing store openings for the upcoming year,” Svec said. 

But 2023 might not be so kind to home goods and hardware stores. As home sales cool in some U.S. cities, people could slow their improvement projects this year, Svec said.

“As we move, we tend to refurnish homes,” Svec said. “Less mobility [and] less home sales typically will always lead to less sales from a home furnishings perspective, which obviously impacts the top and bottom lines of those retailers and then their expansion plans.” 

Still, Svec said overall demand for retail space remains high around the country thanks to a shortage of new storefronts due to construction slowdowns after the 2008 Global Financial Crisis and so-called “retail apocalypse” caused by the rise of e-commerce companies, Svec said.

Celia Young can be reached at cyoung@commercialobserver.com.