Retail Hits a Wall as Store Closures, Inflation, and Tariffs Stall Recovery

Retailers vacated 6M more square feet than they filled in Q125—the weakest quarter for shopping center leasing since early 2020.

Jordan B.
May 14, 2025

Together with

Good morning. Store closures surged past openings in 2024, ending a two-year growth streak and signaling rising pressure on shopping centers as bankruptcies and caution stall leasing momentum.

Today’s issue is sponsored by Warespace—the next generation of small-bay industrial.

👉 CRE is shifting fast—from tariffs to foreign investment. How are you adapting? Share your take in our Q2 2025 Fear & Greed CRE Survey.

Market Snapshot

S&P 500

GSPC

5,886.55

Pct Chg:
+0.72%

FTSE NAREIT

FNER

760.14

Pct Chg:
-0.12%

10Y Treasury

TNX

4.453%

Pct Chg:
-0.046

SOFR

30-DAY AVERAGE

4.34%

Pct Chg:
-0.00

*Data as of 05/13/2025 market close.

EMPTY SPACES

Retail Hits a Wall as Store Closures, Inflation, and Tariffs Stall Recovery

After two years of momentum, the retail property market is stalling amid rising store closures, economic uncertainty, and tariff-driven caution from retailers.

What happened: Retailers vacated nearly 6 million more square feet than they occupied in Q1 2025, marking the weakest shopping-center leasing quarter since the pandemic's onset, per Cushman & Wakefield. Big-box chains like Big Lots, Party City, and Joann shut down hundreds of locations, contributing to a net loss of 1,300 stores across the U.S. in 2024, ending a two-year streak of expansion.

Slowing momentum: Inflation fatigue and economic instability have retailers hesitant to sign new leases, says James Bohnaker of Cushman & Wakefield. Despite steady foot traffic, shopping center sales have stagnated, especially in sit-down restaurants. Additionally, concerns over tariffs have pushed potential lessees to delay commitments, according to Brandon L. Singer of MONA Retail Holdings.

Landlords lose leverage: Landlords are less optimistic about filling vacated big-box spaces, with high reconfiguration costs in states like California cutting into profitability. Tenants are leveraging market uncertainty to negotiate concessions, signaling a power shift in lease talks after years of landlord dominance.

Not all is bleak: Off-price chains like Burlington and Five Below continue to expand aggressively. Burlington acquired 45 Joann leases during bankruptcy proceedings, and Five Below plans 150 new stores in 2025. Enclosed malls, slowest to recover post-pandemic, now report better stability and record leasing activity, according to CBL Properties CEO Stephen Lebovitz.

➥ THE TAKEAWAY

Rethinking retail space: Retail’s post-pandemic revival is losing steam. Without a pickup in consumer confidence or a resolution to trade uncertainties, shopping centers may face a slow grind ahead, with landlords needing to get creative to fill space and hold the line on rents.

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✍️ Editor’s Picks

Exclusive webinar: Learn from real-world success stories and take the first step toward increasing investor conversions and raising capital faster. (sponsored)
Mega deal: Kite Realty Group and Singapore’s GIC have acquired Plano’s Legacy West for $785M, marking one of the largest retail real estate transactions of 2025.
Carbon countdown: NYC’s landmark climate law is forcing landlords of large buildings to start reporting emissions by June 30, triggering a wave of costly upgrades or fines.
Sluggish season: The spring home-selling season is falling flat as high mortgage rates, economic uncertainty, and excess inventory continue to dampen buyer demand across much of the US housing market.
Strategic consolidation: KKR has merged its underperforming real estate unit with its thriving infrastructure division under Raj Agrawal’s leadership, creating a $171B “Real Assets” platform to scale the firm’s footprint.

🏘️ MULTIFAMILY

Loan lift: A new bipartisan Senate bill aims to dramatically raise FHA multifamily loan limits to spur affordable housing development amid rising construction costs.
Migration shift: South Carolina and Idaho lead in population growth as domestic migration slows in 2025, with affordability and job opportunities still driving movement.
Rust Belt rising: Rust Belt and Southern tertiary markets like Allentown, Columbia, and Lexington are leading rent growth, while former boomtowns such as Austin and Denver slide into negative territory.
Workforce expansion: Atlantic Pacific Companies is planning a 375-unit affordable and workforce housing development in Miami’s Overtown neighborhood on county-owned land it leases.
Inn trouble: NYC has filed its first lawsuit under Local Law 18, targeting a Greenwich Village “inn” for allegedly operating illegal short-term rentals and violating safety codes.
Holy home: A century-old nursing home site owned by the Little Sisters of the Poor is hitting the San Francisco Inner Richmond market for $59M.

🏭 Industrial

Liquidity strategy: Prologis CFO Tim Arndt has detailed a $6B multi-line credit strategy designed to weather economic disruptions and take advantage of future opportunities, leveraging the REIT’s high-grade credit status for long-term flexibility.
Growth plan: WareSpace expands its North Richland Hills location, highlighting rising demand for small warehouse spaces in Texas.
Buyer revealed: The mystery buyer behind the $51M purchase of a Lake Forest warehouse has been revealed as a unit of French energy giant Engie, marking one of Orange County’s largest industrial deals this year.
Inventory constraints: Industrial demand is rising on the San Francisco Peninsula, but limited space and a construction slowdown could leave tenants scrambling for options.

🏬 RETAIL

Wellness retail: Alo Yoga is expanding its footprint with a proposed flagship store and private health club on Miami Beach’s Lincoln Road, aiming to breathe new life into a long-vacant retail space.
Distress deal: Delshah Capital has agreed to sell a distressed Meatpacking District property for $21M to oil billionaire-backed BNF Capital, aiming to reduce its debt amid bankruptcy proceedings.
Deal of the day: Carmel Village, a 91%-leased shopping center in Charlotte, NC, has sold for $19.9M in a transaction brokered by C&W.

🏢 OFFICE

HQ comeback: After a two-year lull, US corporate headquarters relocations surged in 2024, with companies eyeing states like Texas and Tennessee for their business climate, lower costs, and workforce advantages.
Class A commitment: Casey Family Programs has signed a 79,189 SF lease at 800 Fifth in downtown Seattle, marking a significant win for EQ Office’s recently modernized trophy tower.
Office collapse: A major office building in downtown St. Petersburg may be demolished following severe hurricane damage, potentially eliminating 12% of the submarket's inventory.

🏨 HOSPITALITY

Urban uptick: Hotel REIT executives report a first-quarter rebound in urban markets like San Francisco, New York, and Washington, DC, with group travel and citywide events helping offset challenges from wildfires and soft international demand.

📈 CHART OF THE DAY

Markets like Cleveland, Detroit, and D.C. are nearing peak supply with stable rent growth, while high-growth metros such as Austin and Phoenix still face rent declines as massive inventory waves loom.