- Retail real estate has remained resilient in 2025, with investment volume rising 21.7% year-over-year and leasing activity improving in Q3.
- Tariffs, a weakening labor market, and growing consumer uncertainty are threatening the upcoming holiday season, typically a major revenue driver for retailers.
- Industry experts warn that the brunt of today’s economic stressors may hit in early 2026, with leasing activity and store openings potentially slowing.
Retail’s Good Run Faces A Stress Test
Retail real estate has defied expectations in 2025, reports Bisnow. Investment sales are climbing, leasing demand returned to positive territory in Q3, and limited new construction is helping keep fundamentals solid. National retail investment hit $64.6B in the past year, up nearly 22% from 2024, per MSCI Real Capital Analytics.
But despite the strong showing, cracks are starting to form. Tariff-related delays, a softening job market, and shaky consumer sentiment are creating deep uncertainty ahead of the holiday season.
“We’re a capitalist society that is contingent on consumers,” said retail consultant Kate Newlin. “The relentlessness of change and uncertainty has a corrosive effect on spending behavior.”
Holiday Spending Feels The Pressure
November and December typically make up close to 20% of annual retail revenues, but expectations for 2025 are muted. Deloitte projects holiday sales to rise by just 2.9%–3.4% over 2024—the smallest increase since 2016. Last year’s growth came in at 4.2%.
Consumers are increasingly cautious. They expect to spend nearly 4% less on gifts and 12% less on non-gift items than in 2024, according to The Conference Board. Many cite tariffs and inflation as key concerns influencing their spending.
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Tariffs And Store Closures Cloud Outlook
Retailers are still working through the ripple effects of 2024’s bankruptcies and macro pressures. Net absorption for shopping centers turned positive in Q3, but remains at negative 13.1M SF year-to-date—on track for the first year of negative net demand since 2020.
Store closures are surging. Coresight Research tracked 5,822 store closures through late June. These represent over 120M SF of shuttered retail space, up 65% from 2024.
Companies like Big Lots, Party City, and Joann have been in retreat, driven by pre-existing challenges now exacerbated by rising import costs and delayed shipments tied to tariffs.
Leasing And Investment Still Holding—For Now
Despite closures, investors remain active. Avison Young’s Meghann Martindale believes space that’s been locked down is finally being re-leased. “It’s not necessarily dire,” she said, even if leasing timelines are stretching.
Still, concerns are growing. Tenants are stalling leases due to long equipment delivery times, making it harder to open on time and meet rent-free period deadlines. And with Amazon, Target, and Carter’s all announcing significant job cuts, confidence in the near-term retail labor market is slipping.
Seasonal retail hiring is expected to hit its lowest level since 2009, per Challenger, Gray & Christmas—potentially falling below 500K hires.
What To Watch: 2026 And Beyond
Most industry watchers agree: the real test for retail real estate may come after the holidays.
“We might finally start really feeling the effects of tariffs and pullback in spending heading into Q1,” Martindale warned. Retail demand often gets an artificial boost in Q4. Once that fades, vacancy rates and leasing volume could begin to reflect deeper consumer and economic strain.
Global instability—from trade policy swings to a potential government shutdown—adds further unpredictability. Newlin summed it up: “The reality is people feel the instability, and it’s coming at them from multiple sources.”
