Retail CRE Mid-2025: Resilient, Redefined, and Regionally Driven
As we near the second half of 2025, the US retail CRE sector is standing firm—resilient in the face of market disruption, redefined by experience-driven and mixed-use formats, and regionally-driven, with growth clustered in suburban and Sun Belt markets.
Despite pockets of sluggish markets and a growing list of store closures, the broader picture is more nuanced—and more promising. Across resilient metros and Class A properties, retail demand remains strong. Here's where the market stands:
Leasing Activity: A Measured Slowdown
Retail leasing posted its first negative net absorption in four years in Q1 2025, dipping by 2.7 million square feet. High-profile closures—among them Big Lots, Joann, and Party City—have contributed to the drag, as landlords tread more cautiously in the current environment.
Yet this doesn’t signal a collapse. Vacancy rates remain low—just 4.1% overall, and an even tighter 2.5% for general retail spaces in newer Class A centers. While demand hasn’t disappeared, it’s become more discerning.
Regionally Driven Strength: Suburbs and Sun Belt Outperform
The retail recovery is unfolding unevenly, with some regions surging ahead:
- Suburban Strength: Retail centers in suburban markets continue to outperform. In San Antonio, The Rim Shopping Center is now 99% leased, buoyed by demand from tenants like Marshalls and Sierra.
- Sun Belt Momentum: In cities like Salt Lake City and Phoenix, retail rents are rising by more than 7% annually—fueled by population growth, job creation, and attractive lifestyle offerings.
This regionally driven momentum shows where capital and creativity are converging.
Urban Retail: Facing the Reset
By contrast, some urban centers remain under pressure. Downtown San Francisco, for example, has seen its occupancy fall to just 25%, following major anchor exits including Bloomingdale’s. High-street and mall locations are grappling with shifting commuter patterns, hybrid work, and evolving consumer behavior.
These markets aren’t obsolete—but they are being forced to adapt.
Redefining Retail: Mixed-Use and Experience Take Center Stage
Forward-thinking landlords are rewriting the script on what retail can be:
- Repositioning in Action: Walmart’s acquisition of a Pittsburgh-area mall is being transformed into a mixed-use lifestyle destination, combining retail with gyms, wellness services, and entertainment.
- Experience Sells: Today’s consumers want more than merchandise—they crave engagement. According to ICSC, 85% of shoppers are more likely to visit retail destinations that host events or offer immersive experiences.
Retail CRE is no longer just a place to shop. It also represents a space to connect, unwind, and explore.
Investors: Selective but Engaged
Caution remains the watchword for retail investors, who are navigating a landscape of bankruptcies and shifting demand. Still, there’s clear appetite for stable, well-located assets—particularly suburban strip centers with reliable tenant mixes.
Median asking prices have begun to level, suggesting the early stages of a market reset. The focus now is on resilient properties—those positioned to evolve, adapt, and endure.
The Road Ahead: Adaptive Retail Wins
Retail CRE in mid-2025 isn’t what it used to be—and that’s a good thing. The sector is being reshaped by innovation, grounded in regional performance, and strengthened by adaptability. Properties that embrace experiential formats, mixed-use design, and smart site selection are leading the way. In short, retail is not in retreat—it’s being reborn.
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