Availability stabilized at ~4.9% in Q3 2025, with the first quarter of positive net absorption (+1.8M sq. ft.) following early-year softness.

New supply remained extremely limited — only 5.1M sq. ft. delivered in Q3 and ~13.8M sq. ft. year-to-date, almost all pre-committed or necessity-driven.

Rents nudged higher — average asking rents rose 0.4% in Q3 and ~1.8% YoY to ~$24.92/sf, broadly keeping pace with inflation.

Tenant mix continued to pivot toward discount, grocery, off-price, QSR, fitness, medical, and experiential uses, absorbing many vacated spaces.

Grocery-anchored centers and top-tier malls outperformed, often reporting high occupancy and strong demand, while weaker centers remained challenged.

Capital markets were selective but active — investors favored necessity-based and high-quality retail, with cap rates for prime grocery-anchored centers in the mid-6% range, while average centers traded in the high-7%–8% range.

Policy focus shifted to crime reduction and adaptive reuse, with enforcement of the INFORM Consumers Act and local incentives to repurpose obsolete retail into housing and other uses.

2026 outlook is cautiously positive, with vacancy expected to edge below 4.5%, rents to grow 2–3%, and further tightening in necessity and experiential segments.

The overall availability rate held at 4.9% in Q3, flat quarter-over-quarter.

Net absorption turned positive in Q3 at +1.8M sq. ft., the first quarter of gains in 2025, following mild negative absorption in H1.

Year-to-date absorption remained slightly negative but improved as Q3 gains partially offset Q1–Q2 downsizings.

Only 5.1M sq. ft. of new space delivered in Q3, with ~13.8M sq. ft. added year-to-date — low by historical standards.

Most projects had been started pre-rate spikes and were heavily pre-leased, often anchored by grocery or necessity tenants.

Speculative retail development remained rare, largely confined to infill open-air centers in high-growth suburban corridors.

Average asking rents increased 0.4% in Q3 and ~1.8% YoY, reaching roughly $24.92/sf.

This pace essentially kept up with inflation, signaling a stable pricing environment rather than distress or outsized growth.

Discount and dollar retailers

Grocery chains and club formats

Off-price apparel

Quick-service restaurants (QSRs) and drive-thrus

Fitness, healthcare/clinics, and service-based uses

Experiential concepts — entertainment venues, immersive experiences, family fun centers

Regional apparel chains

Legacy department stores

Weaker home goods and pharmacy brands (e.g., the final stage of Bed Bath & Beyond’s liquidation; Rite Aid’s Chapter 11 closures)

Big-box players like Target and Walmart continued using stores as logistics nodes for same-day pickup and delivery.

Formerly online-only DTC brands (e.g., Warby Parker, Allbirds) expanded store fleets to enhance brand presence and reduce online customer acquisition costs.

Conversions into self-storage, logistics nodes, schools, churches, or medical uses.

Partial reconfigurations into smaller shop space or mixed-use projects.

Many reported waiting lists of prospective tenants.

Investors and retailers increasingly view necessity retail as defensive — particularly in a potential downturn.

Investment volumes were roughly flat versus 2024, according to MSCI tracking — a sign that price discovery is mostly complete and bid/ask spreads have narrowed.

Investors pivoted away from weak malls and tertiary centers and toward:

Q3 STNL retail transactions were ~$2.4B, appealing to yield-focused buyers seeking long-term corporate leases (drugstores, QSR drive-thrus, convenience, etc.).

Prime grocery-anchored and top-tier centers:

Average retail centers and weaker assets:

Many secondary malls traded at deep discounts to replacement cost and, in some cases, were acquired primarily for redevelopment value, not ongoing retail cash flow.

Financing improved in late 2025 for well-leased, necessity-anchored centers, often provided by local/regional banks and life companies.

Debt costs in the 6–7% range, however, meant buyers remained disciplined on pricing, especially for non-core assets.

The INFORM Consumers Act (effective 2023) continued to be enforced in 2025, requiring online marketplaces to verify high-volume third-party sellers to curb fencing of stolen goods.

Retailers credit INFORM, alongside tougher state laws and task forces, with beginning to constrain organized theft rings and illicit resale.

States like California and Illinois implemented or debated stricter penalties for organized retail theft and smash-and-grab incidents, though results will take time to fully materialize.

Many municipalities incentivized conversion of obsolete retail to other uses through:

California’s earlier legal changes enabling housing on commercially zoned land translated into a visible 2025 pipeline of shopping-center-to-residential/mixed-use plans.

Some suburbs broadened zoning to support small-format and pop-up retail, lowering rent and permitting barriers for local operators.