Retail space reports issued for Q1 2025 agree on the fundamentals. Specifically, negative net absorption (a switch from the record-breaking positive numbers), a tightening construction pipeline, bankruptcies, and store closures.

Absorption on the Downswing

Absorption and vacancy were top news in all reports, with CBRE U.S. Retail Figures write-up claiming negative numbers that reflect “a cautious start to this year as retailers reconsidered expansion plans amid economic uncertainty.”

At the same time, vacancy increased, though Lee & Associates’ North America Report explained that despite store-closing announcements, vacancies remain at and near record lows. “Availability across U.S. retail space markets remains within 10 basis points of the historic low of 4.8% as new development is restrained,” Lee & Associates’ analysts said.

Speaking of Construction . . .

The reports emphatically agreed that construction has taken a nosedive because of higher financing rates and elevated construction costs, challenging new development across most locations and store formats,” noted Colliers U.S. Retail Market Statistics.

On the other hand, store closures could mean more space give-backs. Cushman & Wakefield’s U.S. Retail MarketBeat indicated that store closures in 2025 are on track to outnumber openings. JLL’s United States Retail Market Dynamics said that the retail formats impacted by closures and bankruptcies include power centers and neighborhood centers.

Will extra space help alleviate some of the demand?  JLL analysts said that retailers are snapping up “freshly vacated space” as fast as it hits the market.

Furthermore, with the volume of space coming online, “an overwhelming majority of tenants continue to report a lack of quality available space, and available space is backfilling at the fastest rate in nearly 15 years,” according to Lee & Associates’ analysts.

Tariffs, and More Tariffs

The reports also unanimously stated that tariffs will impact retail, but it’s unknown to what extent. “Retailers continue to brace for a more challenging operating environment due to far-reaching tariffs, which will likely raise costs and dampen consumer demand,” Cushman & Wakefield analysts commented.

Cooling consumer sentiment could cause “retailers and developers to pull back from current expansionary plans until there is more certainty in the market,” JLL analysts observed. CBRE specialists agreed, adding that “tariffs could have negative impacts on retail fundamentals and retail expansion strategies in coming quarters.”

Furthermore, as construction costs increase, new developments could be difficult to pencil out. “The net result is a market facing a significant shortage of available first-generation space at a time when dozens of large national tenants are looking to expand,” observed the Lee & Associates analysts.

However, the Cushman & Wakefield experts weren’t ready to give up on retail, indicating that lessons learned during the pandemic and following high inflation equipped tenants “with strategies for supply chain flexibility and cost management, tools they will now leverage to negotiate these new hurdles.”