The U.S. retail sector faced mounting challenges in the first quarter, with rising vacancy rates, negative net absorption, and modest rent growth highlighting a market grappling with store closures and constrained new development, according to a report by Colliers.
It found that the national retail vacancy rate increased 10 basis points to 4.2% during the first quarter. Retail closures are expected to accelerate over the near term, but limited space availability, steady demand across diverse sectors, and minimal new supply should mitigate further vacancy expansion.
Of the nation’s top 10 markets by inventory, vacancy was highest in Los Angeles at 5.8% for the first quarter, followed by Detroit at 5.7% and Houston at 5.1%. Chicago and Dallas both had a vacancy rate of 4.7%, which rounded out the top five markets by vacancy. The following five markets in Colliers’ report were Washington, D.C., at 4.4%, Philadelphia at 4.1%, Atlanta at 4%, New York at 3.8%, and Boston at 2.5%.
Recommended For You
Mall vacancy across the country remained unchanged at 8.7% during the first quarter, while it rose in shopping centers by 20 bps to 5.1% compared with the fourth quarter.
About 7.2 million square feet of retail space was delivered during the first quarter, and the retail construction pipeline stood at 44.8 million square feet. Colliers said construction activity has continued to fall due to higher financing rates and elevated construction costs, challenging new development across locations and formats.
Dallas leads the nation in retail under construction, with 4.7 million square feet in progress, followed by Houston with 3.5 million square feet, Phoenix with 2.5 million square feet, Austin with 2.2 million square feet, and New York with 1.8 million square feet.
Net absorption of retail square footage was negative during the first quarter at -3.5 million square feet, according to Colliers. This is the lowest annual level of absorption in more than a decade, except in 2020. A surge in store closings and limited prelease deliveries is driving a slowdown in demand.
Shopping centers had the largest negative absorption at -7.7 million square feet during the first quarter while mall absorption was nearly -600,000 square feet. Overall retail net absorption was -3.5 million for the quarter, said Colliers.
Asking retail rents rose modestly to $25.56 per square foot, a 0.27% increase, for the first quarter. Rising availability and flat sales have dampened rent growth. Rent spreads remain high, which benefits landlords but puts pressure on tenants, and inflation and softer spending continue to weigh on rent growth, said Colliers.
For the quarter, shopping center rents were up 0.32% to $25.15 per square foot, while mall rents rose 0.38% to $34.42 per square foot. The average retail rent was highest in Honolulu, at $52.08, followed by $48.22 in Miami and $47.98 in New York.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
