Reichle Klein Group’s 2024 Year-End Retail Market Overview

The closure of Rite Aid stores and those of several other distressed retailers is the dominant story of the second half of 2024 for the Toledo, Ohio retail space market. The resulting vacancies abruptly ended a five-year run of consistently positive market performance and came as a bit of a shock.

Since Rite Aid declared bankruptcy at the end of 2023, they have closed 23 stores in the Toledo market area, comprising over 324,000 square feet. Additionally, Big Lots has closed one 40,000 square foot store and plans another while American Freight has also closed a 25,000 square foot store and plans a second store closing. Family Dollar has also indicated that it will close stores, though as of this report none have closed. Concerns exist about the financial health of Walgreens and CVS, both of which have stores in the Toledo market, and the possibility that they too could close stores, though, again, none have been announced. Finally, in mid-December, Party City, which has two area stores, announced that it was going out of business and would be closing all its stores.

The sheer volume of vacant Rite Aids is a daunting problem made worse by the fact that there are no obvious or immediate replacement users or uses for all the sites. The characteristics of these properties present some unique challenges. Thankfully, these characteristics also lend themselves to some non-retail uses which might ultimately be part of the solution. That most are free standing rather than embedded in and perhaps anchoring a larger strip is a bit of a blessing in that it contains the damage rather than each vacancy negatively impacting the retailing environment of a larger center. Not being part of a larger retail center will also make it easier to repurpose the buildings to non-retail uses.

Looking at the numbers, the overall market vacancy rate increased to 8.3% at year end 2024 up from 7.6% in June, 2024 the result of significant negative net absorption in the second half of the year. The amount of space under construction fell over the last six months of the year as several projects were delivered and the pace of new projects launching declined. In what might come as a surprise, the average asking rental rate for the market increased from $10.13 per square foot in June, 2023 to $11.18 per square foot at year end 2024. The Rite Aid vacancies are having an outsized impact on the average asking rate because so many of those coming on the market are doing so with asking rates at or near the relatively high rates previously being paid by Rite Aid. There is reason to doubt, however, that these owners will ultimately be able to entirely replace the rents they were receiving from Rite Aid in most cases.

Quick service restaurants remain active in the market and demand for in-line and free-standing sites is strong. New construction in the highest demand locations is commanding $40 per square foot for in-line tenants. Among the active users is Qdoba, committing to its first store in the market. Chicken is still big with Dave’s Hot Chicken, Raising Cane’s, Roosters, and Chick-fil-A all in the market. And Coffee purveyors are emerging as the next big thing with Starbucks, 7 Brew and Scooter’s all pursuing sites. C Store/gas station users are very active with Sheetz, the first mover among new market entrants, having opened its first stores in the market in the second half of the year. QuikTrip and Casey’s are also pursuing sites.

Activity among larger users tapered off as the last year progressed. Harbor Freight remains active while Aldi, Ross Dress for Less, HomeBuys and Five Below all opened new stores in the market in 2024.