Retail’s 2025 Outlook: A Tale of Diverging Trends
This year’s outlook for the retail sector and its bricks-and-mortar locations is decidedly mixed, strikingly so across different categories, according to Datex Property Solutions’ latest report.
Retail merchants are by and large paying higher occupancy costs, which have grown to levels not seen in more than six years.
Even as some retail categories, such as grocery, fast food, beauty and sporting goods are “thriving on robust demand,” Datex reports that nearly as many categories, including drug stores, dollar stores, specialty food and pet supplies face rising occupancy costs, inflationary pressures and shifting consumer preferences.
Among secondary retail trends, ongoing progress in “return to office” could reshape some shopping habits, for the better or the worse, depending on the retailer.
Datex reports that cities reliant on weekday office traffic often struggled when workers went remote, while residential areas benefited from increased local spending. “As on-site work rebounds, both markets must adapt again to shifting foot traffic and consumer habits,” the report noted.
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Rent collections have been stable overall, but so far this year have shown signs of weakening, versus both three- and six-month averages. Meanwhile, although leasing rates are rising, leasing deals are slower to get done, “prompted by nervousness as inflation, changing logistics and labor costs pressure margins,” Datex stated.
The retail real estate sector is constantly evolving, shaped by local economic pressures, shifting consumer preferences and fast-paced technological advancements. “Toward that end, the 2025 retail real estate environment remains both resilient and fragile,” according to the report.
Datex based this research on its Datex Tenant Track, which analyzes tens of thousands of shopping centers and retailers across the U.S., in the context of six years of historical data.
Winners and losers
With respect to both tenant leasing demand and rents, the Datex report aligns with what he has been seeing, Garrick Brown told Commercial Property Executive. Brown is the head of research for Gallelli Real Estate and the publisher of The Brown Book, which tracks the plans and real estate decision-makers of more than 13,000 retail space–using tenants in North America.
“While there has been a marked uptick in retail bankruptcies and closures from some select retail categories (drug stores, furniture/furnishings, craft and seasonal stores leading the way), we continue to track outsized growth from grocery (driven largely by ethnic, organic and small format concepts), beauty (everything from cosmetics to salons to Medispas), [and] gyms/health clubs,” he said.
Other strong growth categories have been medical/dental, cannabis, veterinarian and car wash concepts.
“In other words, the future of retail real estate is not necessarily about traditional retailers,” Brown remarked. He continued, “heading into 2025, we see retail at a crossroads.”
Although the economy that the new administration inherited was strong by most measures, the ongoing return of inflation—as well as tariffs and deportations (especially at the scale Trump promised on the campaign trail)—“threaten to send inflation out of control, with retailers bearing the brunt of the impact,” Brown warned. “If the latter is the case, 2025 will likely see greater levels of retail store closures than recorded last year and strong headwinds for even retail’s strongest growth categories.”
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