- Retail centers benefited from resilient consumer spending, fueling demand for retail space.
- Move-ins and leasing activity surged in the second half of 2025 despite early-year closures.
- Retail development remained historically low, limiting new supply across the US.
- Shopping center pricing hit a record high as investor appetite strengthened.
Consumers Bolster Retail Centers
Despite predictions of a downturn, retail centers performed strongly in 2025, reports CoStar. Resilient consumer spending, particularly among higher-income groups, supported retail sales and in turn, demand for retail space. US retail sales rose 3.5% year-over-year, with personal consumption expenditures up 2.8%, helping retail fundamentals remain stable even as inflation cooled to 2.8%.
Store Closures Quickly Backfilled
The year began with negative absorption due to bankruptcy-driven store closures, but the sector rebounded sharply. By midyear, leasing and move-ins accelerated, pushing the median lease-up time for vacated space at retail centers down to a historic seven months. This dynamic underscores how overall demand held firm even as closures surged earlier in the year, reflecting a market where occupancy losses were quickly offset by expanding tenants.
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Development Remains Limited
Even with robust demand, new retail centers and expansions were rare. Only 43M SF of new construction started—the lowest on record—and newly completed supply stood just below 55M SF, the smallest since 2007. With just 52M SF under construction nationally, the pipeline remains constrained due to development and finance hurdles.
Investment and Rent Trends
Retail rents increased 1.9% to a record $25.69 PSF, led by Southern US markets with 2.3% rent growth. Investor demand for retail centers surged, driving over $66.2B in retail property sales in 2025. Average pricing climbed to $142.23 PSF—up from $125.11 the year before. Strong fundamentals and limited supply will likely keep competition high into 2026.
