The retail sector has recorded its first quarter of negative net absorption since 2020, marking a slow start to the year that has seen new space demand continuing to lag. So far, retailers have announced more store closings than openings in 2025, according to a Marcus & Millichap research brief.
However, years of underdevelopment have emphasized well-located floorplans, which creates backfill potential, the report said.
The pace of consumer spending at physical store locations has been slowing since March, increasing 2.9% year-over-year in May. This and other sales metrics are likely to have implications for retail properties, the report said.
Recommended For You
Personal and health products vendors – including drug, beauty supply and eyeglass stores – have captured the most growth, with sales up 7.7 percent year over year. This could prove beneficial for unanchored strip centers, where many of these vendors reside, said the report. Vacancy at these properties stood at 4.8% in March, which is below the vacancy rate they have been for almost two decades.
Meanwhile, industrial is benefitting from digital shopping tailwinds, according to Marcus & Millichap. Online sales increased 8.8% year-over-year in May, and e-commerce comprised 22.1% of total core retail receipts in April. That is 70 basis points below its peak during lockdowns in 2020.
Additional direct-to-consumer shopping bolsters the need for distribution space, said the report. The overall industrial vacancy rate is rising following an elevated pace of development, but it is advancing by the smallest margin since 2022. The report said total net absorption should pass 100 million square feet this year.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation 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.
