Physical retail locations remain resilient despite ongoing challenges, including store closures and macroeconomic uncertainty. Brick-and-mortar stores play an important role in the success of retailers by powering digital fulfillment, fostering brand engagement, and anchoring omnichannel strategies, according to Colliers’ spring retail report.
The report suggests that physical retail isn’t shrinking but instead is shifting. The only time the value of in-store sales has declined was in 2020 during pandemic disruptions, the report said.
“While e-commerce has often grown faster, physical retail sales have remained remarkably steady,” said Colliers.
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Physical stores still account for the vast majority of core retail sales at more than 76%, and the pace of erosion is slowing as online growth stabilizes, according to the report. E-commerce remained steady at 16.4% of total retail sales at the end of 2024, but rather than threatening brick-and-mortar retail, online sales are proof of a thriving omnichannel strategy, according to Colliers.
However, new challenges are emerging, including elevated construction costs that are now above pre-pandemic levels. This is dampening new retail development, which is expected to drop by 45% this year. Amid this environment, retailers are shifting their focus to optimizing existing spaces, and as a result, vacancy rates remain tight and interest in existing retail properties continues to grow, Colliers noted.
National retail vacancy was just 4.2% as of the first quarter, highlighting an ongoing demand for high-quality retail space. Evolving brick-and-mortar store locations are moving beyond transactions to offer experiences and convenience while blending with digital channels, said the report. In 2024, physical stores supported nearly a third of online retail sales through fulfillment methods like curbside pickup, in-store collection or direct shipping from stores. Colliers expects omnichannel methods to fulfill more than 36% of online orders by 2030.
Retailers have signaled confidence in the enduring value of brick-and-mortar space, with many indicating they plan to expand the amount of physical space they have over the next five years. Despite increasing closures and softening demand, most vacant locations have been backfilled quickly. The median time to lease dropped to just 7.5 months last year, which highlights the urgency among retailers to lock in well-positioned footprints as soon as they become available.
Recent retail failures cannot be attributed to the rise of online shopping, said Colliers. Instead, the core issue has often been a failure to adapt business models or meet evolving customer expectations.
“Notably, most customer defections have been to retailers with physical stores rather than to online-only competitors,” said the report.
Between 2018 and 2023, over 18,900 new stores opened nationwide, with international retailers accounting for more than 5,000. Global brands like Aesop, Aldi, Gucci, JD Sports, Mango, Pandora, and Sephora lead the charge, signaling strong confidence in the U.S. consumer base and long-term market potential.
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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.
