Report Highlights Shifting Consumer Behavior Toward Discount Retailers

JLL, San Francisco, Los Angeles, Dollar General, Burlington, TJX Companies, Five Below, Party City, David's Bridal, Tuesday Morning, McDonald’s, Chipotle

By Catherine Sweeney 

The retail sector is continuing to face changes as inflation persists, causing consumers to adjust their spending habits by prioritizing essential items such as groceries, while reducing discretionary purchases. As a result, discount retailers, grocery stores and fast food establishments continue to perform, according to a first quarter nationwide retail market report from JLL. 

During the first quarter of 2023, the retail market saw an overall decrease in net absorption totaling 9.1 million square feet, compared to the previous quarter’s absorption of 20.1 million square feet. Preliminary transaction volumes reached approximately $16.5 billion during the first quarter. Transaction volume was largely dominated by grocery-anchored and small format retail segments, according to the report, with $1.7 billion and $1.8 billion in total transaction volumes, respectively.

Across the nation, discount retailers like Burlington and dollar stores, as well as quick-service restaurants and fast-casual dining establishments, continue to drive demand. This has caused a record-low availability rate for single-tenant retail spaces, which is currently at just 2.4 percent. 

In fact, the report showed that discount stores are continuing to expand, with approximately 1,300 new locations announced this year, according to the report. Dollar General recorded the most openings, with 1,050 new stores planned across the nation. Burlington Stores and TJX Companies likewise announced 90 and 150 store openings, respectively. 

This held true for many of California’s markets, according to JLL. These trends have emerged throughout Los Angeles, according to Scott Burns, JLL senior managing director for JLL’s Los Angeles office. 

“Discount is most active. Dollar Tree, Five Below and the like are very busy with the increased junior anchor box space caused by the closings of Tuesday Morning, David’s Bridal, Party City and BBB. Burlington and Ross lead the discount apparel category,” Burns said in an email to The Registry. 

According to the report, bankruptcy announcements in the retail sector have accelerated compared to last year, with nine major retailers having already announced bankruptcy this year. Throughout all of 2022, 10 bankruptcies were announced. 

Similarly to discount stores, quick-service and fast casual restaurant concepts continue to thrive, with new openings announced for chains like McDonald’s and Chipotle. According to the report, McDonald’s announced plans for 400 new United States locations and Chipotle following just behind with 285 openings announced.  

“Food and beverage is a bright spot. Several of our clients report sales higher than pre pandemic levels which is encouraging.  No surprise that much of our current negotiations downtown are with food and beverage retailers that are already in the market and that are performing with a similar or different concept. These companies see lower rents and landlord concessions as an opportunity to grow. The best retailers with strong balance sheets and access to capital have come out of the pandemic stronger but unfortunately a lot of local operators did not survive,” said Ben Lazzareschi, managing director for JLL’s Bay Area office. 

Despite the overall trend toward consumers opting to spend less, the report shows that customers are willing to forego some of their discretionary spending on experiences. Fourth-quarter sales data from JLL indicates increased spending on travel and experiences compared to 2021. While food and beverage sales increased, consumers also chose to spend time and money at theaters, arcades and amusement parks, resulting in growth ranging from approximately 20 to 32 percent. Consequently, social entertainment concepts like Puttshack and Topgolf have announced additional opening plans. 

“Entertainment tenant demand remains hot, but is slow to execute deals. Several new concepts around pickleball, golf, virtual reality and social gaming are in the market and pursuing sites.  We expect future 2023 announcements around this as well.” Burns said.