Newmark's Q3 2025 retail report highlights a complex landscape in the U.S. retail sector, characterized by a 7% quarter-over-quarter increase in leasing volume. This growth is largely concentrated in Sunbelt and Midwest metros, indicating a regional divergence in recovery. While national retail occupancy remains stable at 94.2%, the varying performance across metro areas underscores a "two-speed" market dynamic that investors must navigate.

The report reveals that key metros such as Dallas and Tampa have achieved occupancy rates exceeding 95%. However, this positive trend is not universal. Gateway markets like New York and Los Angeles are witnessing muted leasing activity and softer rent trends, contrasting starkly with the robust performance in secondary markets. This polarization highlights the importance of local market insights for stakeholders.

Value-weighted rent growth, indicative of institutional-quality assets, saw an increase of 1.5% QoQ. In contrast, equal-weighted rent metrics remained flat, signaling a disconnect between high-end asset performance and the broader market. This discrepancy suggests that while institutional investors are consolidating their focus on prime locations, the majority of the market is experiencing stagnation.

Private capital and independent landlords are capitalizing on the resilience and affordability of secondary metros. This trend is reflected in stable absorption rates for small-format tenants, which contrasts sharply with the cautious approach taken by institutional investors. Most new deals target prime locations or assets with credit tenants, indicating a selective investment climate that favors quality over quantity.

The Q3 data present

s a clear signal: the retail sector's national stability conceals significant local variability in risk and return. For lenders and investors, this underscores the necessity of differentiating between national trends and submarket conditions. As the market evolves, understanding tenant mix, location quality, and metro-level dynamics will be crucial for informed decision-making.

Looking ahead, the retail sector's trajectory will depend on broader economic conditions and regional demand fluctuations. If leasing momentum continues in high-performing metros, it could signal a renewed confidence in retail. However, stakeholders should remain vigilant to the risks posed by ongoing disparities in performance across different markets.