Only two Southwestern markets crack the top 10 for retail rent growth

Article originally posted on CoStar on September 5, 2025

Eight of the top 10 markets for the strongest retail rent growth last quarter were in the Sun Belt, including two that happen to be in the Southwest and at higher elevations: Las Vegas and Phoenix.

While the average asking rent at U.S. retail properties rose 2.4% annually by the second quarter of 2025, Sun Belt metropolitan areas continue to outshine other areas as strong population growth, rising incomes and limited space availability power annual rent growth of more than 4% in many cases.

The ranking compares 53 metropolitan areas with at least 100 million square feet of existing retail inventory.

Southern Nevada outperformed its peers in the mountain region over the past 12 months, with retail rents rising close to 4.3% year over year by the end of the second quarter. This performance secured Las Vegas’ position in the rankings as the ninth-fastest-growing major retail market in the United States for rent growth.

As with many Sun Belt markets over the past decade and a half, retail development has not kept pace with population growth. Among the nation’s 35 largest metropolitan areas, all with at least 2 million residents, Las Vegas grew faster than all but nine between 2020 and 2024, the most recent year for which this data is available from the U.S. Census Bureau.

This speedy growth, which eclipsed that of other Sun Belt markets such as Miami and Atlanta, has expanded the consumer base in Las Vegas. Retailers have been eager to meet southern Nevada’s growing demand for goods and services, generating substantial demand for this property type as they sign leases for space. This is all despite the limited additions to supply over the past few years.

The Sun Belt growth story forms only part of the explanation in Las Vegas, however. The market remains one of the most bifurcated in the nation, as the demand for retail space in Las Vegas is driven by completely different engines between the Strip and the rest of the metropolitan area. Leisure, business conferences and international tourism underpin retail demand on the Strip, while traditional drivers related to population gains, consumption growth and job creation support retail demand elsewhere in Las Vegas.

Harry Reid International Airport set a record in 2024 with 58.4 million passengers. Buoyed by a strong job market, confident consumers flew into Las Vegas for entertainment and vacation, supporting businesses on the Strip and fostering a favorable environment for rent growth in the area.

Now, with both international and domestic traffic down in the summer of 2025 partly because of a weakening national labor market, year-over-year figures may shift during the balance of the year, and Las Vegas’ appearance in the top 10 could prove fleeting.

The average asking rent for Phoenix retail properties rose 4.2% year over year by the end of the second quarter. While that rate of growth marks a deceleration from a year ago, when the Valley notched a 6.7% increase, it was enough to land Phoenix as the 10th-strongest retail rent growth market in the country.

A key factor supporting stellar performance has been minimal supply pressure. In the 12-month period ending in the second quarter of 2025, about 2.2 million square feet of gross new retail space was completed, compared with about 10 million square feet per year from 2006 through 2008.

The lack of new retail space, combined with healthy underlying space demand, has compressed the Valley’s availability rate to just 4.5%. That marks one of the lowest rates on record for Phoenix and is more than 200 basis points below the level seen entering the pandemic.

Limited expansion options have kept competition for available space high, providing landlords ample leverage to raise rents.

Moving forward, the modest construction pipeline and sustained demand should keep annual rent growth elevated over the near term, likely ending 2025 above 4%.