Philadelphia's retail slowdown hits city rents harder than the suburbs

 By Brenda Nguyen CoStar Analytics

Philadelphia's retail rent growth has slowed in recent quarters, matching a nationwide pattern. A wave of store closures has swept through the metropolitan area, with Rite Aid, Party City, Walgreens and Big Lots shuttering multiple locations. The slowdown has hit the city and suburbs differently, driven by changing shopping habits and contrasting population trends.

The city's retail rents have fallen more steeply than in suburban areas. By October, asking rents declined 1.7%, weighed down by sluggish population growth that has depended heavily on international immigration.

While pedestrian foot traffic has improved downtown, recovery is still hovering between 80% and 85% of 2019 levels, according to the Center City District's analysis of Placer.ai data. As a result, more area residents are redirecting their spending to the suburbs, a shift that has propped up suburban retail rents in recent years.

Suburban asking rents also dipped, falling 0.5%. However, steady population growth has kept suburban rent performance ahead of the city's decline.

Grocery chains have claimed the largest suburban retail leases. Giant, Whole Foods Markets, Sprouts Farmers Market, Grocery Outlet and others lead the list. Fitness operators have also expanded, with Club Studio Fitness, The Picklr and Planet Fitness committing to spaces exceeding 10,000 square feet over the past year. In the city, experiential venues, healthcare providers and discount retailers have signed the largest leases.

Looking ahead, forecasts indicate that regional rent growth is unlikely to improve until mid-2026, when uncertainty surrounding tariff policies, labor market conditions and broader economic factors dissipates.