The U.S. retail market continues to demonstrate resilience as tariffs and elevated prices test consumer and business confidence. Inflation remains most pronounced in import-heavy categories such as furnishings and electronics, yet steady spending by higher-income households has offset weaker demand elsewhere. Despite these pressures, retail real estate fundamentals remain sound: vacancy is holding near historic lows, new supply is limited, and investment sentiment remains steady. The sector’s performance underscores a market that is adjusting—not retreating—as it finds equilibrium amid shifting trade and economic conditions.
Key Takeaways
Vacancy held firm at 5.8%, near record lows, underscoring the sector’s resilience despite tariff-related cost pressures.
Retail demand steadied in Q3 2025, with modest positive absorption signaling early stabilization after year-to-date softness.
Long-term fundamentals remain intact, supported by limited new supply, selective expansion among established retailers, and steady investor confidence.
Retail Sector Proves Resilient Amid Rising Economic Pressures
Economic conditions remain uncertain, but retail real estate continues to hold firm. Tariff-related inflation and cautious consumer sentiment are influencing spending patterns, yet leasing activity has remained steady as retailers focus on optimizing footprints rather than cutting space. Limited new supply and selective expansion by well-capitalized brands are supporting occupancy, while investment stability reflects confidence in long-term fundamentals. Barring major shocks, the sector is positioned for modest but steady improvement through 2026.
Retail Vacancy Steadies While Rent Growth Cools
National retail vacancy held at 5.8% in Q3 2025, signaling stability after early-year softness. While demand remains subdued and rent growth has slowed to 1.7% year-over-year—now below inflation—the market is gradually shifting toward a more tenant-friendly balance. Top locations continue to command strong rents amid limited availability, even as broader conditions level off across the sector.
Outlook
The retail sector is stabilizing faster than expected as re-tenanting progresses smoothly and expansion plans become more deliberate. While tariff policies and inflationary pressures may continue to temper near-term growth, limited new supply and steady consumer spending—particularly among higher-income households—are supporting occupancy and income stability. The market remains highly segmented, with opportunities concentrated in well-located, high-quality centers and redevelopments aligned with evolving consumer preferences.
Sources:
Monthly Retail Trade - Sales Report
U.S. Shopping Center MarketBeat Reports | US | Cushman & Wakefield
2025 U.S. Real Estate Market Outlook Midyear Review | CBRE
United States Economic Forecast Q3 2025
