Economic fundamentals have faltered, but shopping center investment activity has continued to thrive. In the first quarter of the year, retail investment volume grew 2% YOY in Q1 2025 shopping center investment volume grew 26% YOY in Q1 2025, according to Real Capital Analytics.
Shopping center properties benefit from a limited supply compared to demand, and it is helping to fuel strong performance. That’s true even amid broader market concerns over tariffs and consumer spending, says Ben Snyder, EVP of shopping center sales at Matthews Real Estate Investment Services. Shopping centers are well positioned for resiliency through any incoming market turbulence.
Strong Fundamentals
The strong shopping center investment performance is directly tied to strong fundamentals. “The fundamentals side of the business in terms of occupancies and rent growth has been strong,” says Snyder. “That is driving demand for further investments.”
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A retail supply shortage is supporting attractive fundamentals. With limited new retail construction since the 2008 global financial crisis and increasing consumer spending following the global pandemic, retailers are fighting for well-located storefronts where they can reach customers. Shopping centers are providing that opportunity.
“We see no new supply really at all,” says Snyder. “That's driving high occupancies and good rent growth across the board on the operating side.”
In the last business cycle, many investors were focused on retail shops that would not compete with online businesses, like grocery, quick-service restaurants and daily service needs. While those tenant profiles are still popular today, soft goods retailers are also top performers, expanding and signing new leases. Snyder notes brands like TJ Maxx, Ross and Burlington Coat Factory as the types of stores driving retail leasing demand.
Retailers Play the Long Game
For both retail tenants and retail owners, tariffs are top of mind. Tariffs threaten to upend retail spending and derail retailer growth. However, if the first quarter retail performance is any indication, the impact might be nominal.
“Outside of the first couple of weeks of noise and just uncertainty, it seems to have settled down. So far, we haven't seen a major impact yet,” explains Snyder. He again pointed to the retail undersupply dynamic as a factor that will likely help support strength in the sector even through some economic headwinds.
Snyder says that the assumption of Joann Fabric leases following the retailer’s bankruptcy is a perfect example. Burlington Coat Factory is assuming 45 retail leases of Joann store locations. Other big box retailers like Hobby Lobby and Boot Barn are also assuming some of the leases. These retailers are growing, and they are aggressively looking for well-located storefronts to support growth.
“I think that they've seen how tough it is to grow their store base,” says Snyder. “There's just not a lot of vacancy out there. So, when the opportunity to get 45 good locations comes up, I think that they can see through some of this other stuff and take a long term view of it.”
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