Retail space is going fast and pushing out local shops

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Subscribe to enjoy similar stories. When the lease for Alex Macias’ furniture store in Mesa, Ariz., came up for renewal in 2021, his landlord asked for twice the current rent. “In hindsight, they were saying, ‘Well, this is what a national tenant will pay.

Can you pay that?’ " Macias said. Macias balked at the higher cost and closed the store. His landlord replaced it with Five Below, a national discount chain that has been expanding aggressively in recent years and agreed to the higher rent.

A lengthy stretch of scant new construction of retail real estate, combined with demand from expanding retailers, has reduced a longstanding property glut. Retail availability sits near record lows. Landlords, who struggled for years to fill vacant storefronts, now have the upper hand in rent negotiations.

That is pricing out a lot of small businesses that can’t compete with deep-pocketed national chains for limited store space. Nearly six in 10 small businesses said their rent had increased over the past six months, and more than half of independent retailers couldn’t pay their September rent in full, according to a survey by the business-networking platform Alignable. Everything else equal, property owners like the idea of renting to independent shops and restaurants.

These businesses generate loyal local followings and help differentiate their properties from online offerings. But the prospect of higher rent is hard to resist. “A lot of it ties back to valuation," said Conor Flynn, chief executive of the publicly traded shopping-center company Kimco.