- Net lease retail sales hit $5.7B in H1 2025, up 9.6% from H2 2024, as investors prioritized high-credit tenants.
- Median cap rates fell to 6.8% while price per square foot rose 8% to $309, driven by smaller, more liquid asset formats.
- Store closures increased vacancy, but demand stayed strong for Class A assets in prime locations.
- Convenience and discount stores outperformed, while full-service and drugstores struggled with traffic declines.
Investment Trends Shift Toward Quality
Despite economic headwinds, the retail net lease market remained resilient in the first half of 2025, reports GlobeSt. Investors increasingly gravitated toward tenants with strong credit and operational stability. According to Colliers’ mid-year retail review, STNL sales reached $5.7B in the first half of 2025. This marks a 9.6% increase from the second half of 2024. The rise signals renewed confidence in well-leased retail assets.
The median cap rate dropped to 6.8%, and prices rose to $309 PSF, reflecting a market-wide shift toward smaller, more liquid formats. As footprints shrink, deal sizes grow — a trend that aligns with retailers’ omnichannel strategies and investors’ push for capital efficiency.
Vacancy Rises As Retail Landscape Evolves
Store closures, particularly among underperforming legacy brands, put upward pressure on vacancies. This trend deepened the divide between Class A and B/C properties. Still, demand for prime-located, high-quality assets remained strong.
Developers largely held back on speculative new builds, favoring repositioning of existing inventory. Categories like fitness, discount retail, and experiential dining remained growth engines for the sector.
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Sector Highlights: Winners And Losers
- Convenience Stores: Total sales declined 2.6%, largely due to lower fuel prices. However, in-store sales hit record highs, and investor appetite remains strong given consistent low cap rates.
- Drugstores: Aging demographics are boosting demand for prescriptions, but operators face headwinds from reimbursement pressures and soft front-end sales. Store closures continued to drag down visits, which dropped 3.6%.
- Discount & Dollar Stores: Foot traffic rose 2.9% as budget-conscious shoppers prioritized value. But Colliers warned of tariff-related risks for import-reliant retailers like Dollar Tree and smaller chains.
- Full-Service Restaurants: Hit by tighter consumer budgets, visits fell 1.6%. Operators are fighting back with loyalty programs and value menus to regain traffic.
- Quick-Service Restaurants (QSRs): Also saw foot traffic decline, tied to reduced commuting and travel. To counteract rising labor costs, QSRs ramped up automation and AI-driven ordering systems.
Why It Matters
The STNL retail market’s performance in H1 2025 shows that credit quality and location are increasingly non-negotiable for investors. As the retail landscape continues to evolve, especially post-pandemic, smaller-format, tech-enabled, and experience-driven models are proving most resilient.
What’s Next
With capital markets expected to remain tight, speculative development is likely to stay limited. As a result, the STNL retail sector may continue to favor stabilized, Class A assets with credit tenants. Colliers anticipates continued bifurcation of the market, where high-credit, high-traffic locations command premiums while weaker assets struggle to find footing.
As retailers navigate shifting consumer behavior and macroeconomic headwinds, expect more focus on repositioning, automation, and data-driven site selection through the remainder of 2025.
