After a volatile few years marked by store closures and shifting consumer behavior, the U.S. retail real estate market closed 2025 on firmer ground. New data from Newmark Research indicates that retail space absorption rebounded decisively in the fourth quarter, a signal that the sector is not only stabilizing but selectively strengthening—particularly in well-located, open-air centers.
The headline numbers tell a story of resilience. Nearly 7.4 million square feet of retail space were absorbed in Q4 2025, while rents for open-air neighborhood, community, and strip centers climbed 1.3% quarter over quarter. For landlords and investors, this combination points to renewed pricing power in the most functional segments of brick-and-mortar retail.
A Market Digesting the Fallout From Big-Name Closures
This rebound did not happen in a vacuum. Throughout 2024 and early 2025, major retail chains—including Party City, Joann, Forever 21, and 99 Cent Only Stores—announced widespread closures. Historically, waves of store shutdowns tend to push vacancy higher and pressure rents. This cycle played out differently.
According to Newmark, the vacancy created by these closures—particularly in strong suburban and high-traffic markets—has been rapidly backfilled. That dynamic underscores a key structural shift: while weaker retail formats are disappearing, demand for the “right kind” of space remains strong.
Availability Stays Tight, Supporting Rent Growth
By year-end 2025, overall retail availability held steady at 5.3%. While that figure is up 30 basis points year over year, it remains well below the long-term average of 6.5%. In plain terms, the market still has less empty space than normal, which limits tenants’ negotiating leverage and helps explain why rents continue to rise even amid uneven leasing activity.
This tightness is not accidental. Since 2020, more than 191 million square feet of obsolete or underperforming retail space has been demolished nationwide. Combined with limited new construction, these removals have effectively “defended” the market from oversupply at a time when retailers are rethinking store footprints and omnichannel strategies.
Leasing Slows, but the Explanation Is Structural—not Cyclical
Retail leasing activity totaled 29.8 million square feet in Q4 across U.S. properties of 20,000 square feet or larger. That represents a slowdown compared with earlier quarters and sits roughly 33% below the long-term quarterly average of 44.6 million square feet.
At first glance, that drop may appear concerning. Newmark’s analysis suggests otherwise. The primary constraint is not tenant demand, but the scarcity of high-quality, well-located retail space. In other words, retailers want to lease—but there is less prime product available to lease.
From an editorial perspective, this distinction is critical. Slower leasing caused by weak demand would signal trouble ahead. Slower leasing caused by supply constraints often precedes further rent growth.
Sales Productivity Signals a Healthier Retail Core
Another underappreciated data point from the report reinforces this view. Indexed retail sales per square foot of occupied space rose 4.2% year over year in Q4 2025 and are up 45% compared with the fourth quarter of 2019. Over the same period, asking rents have increased a much more modest 20%.
That gap suggests retailers, on average, are generating significantly more revenue per square foot than they were pre-pandemic—giving them greater capacity to absorb higher rents, particularly in high-performing centers.
Long-Available Space Remains a Structural Challenge
Not all corners of the market are thriving. Retail space that has been available for 24 months or longer still accounts for nearly 47% of all available retail inventory. This highlights a growing divide: modern, well-located properties are in demand, while outdated or poorly positioned assets continue to struggle.
For owners of legacy retail real estate, the implication is clear. Repositioning, redevelopment, or demolition may be the only viable paths forward.
What This Means for 2026 and Beyond
Looking ahead, the Q4 2025 data points to three clear trends. First, retail real estate is no longer in a broad-based recovery; it is in a selective expansion favoring open-air and neighborhood formats. Second, constrained supply is likely to keep upward pressure on rents, even if leasing volumes remain below historical norms. Third, the market’s ability to absorb large-scale closures suggests a level of underlying demand that was absent in previous retail downturns.
For retailers, landlords, and investors alike, the message is nuanced but optimistic: retail is not “back” everywhere—but in the right places, it never really left.
This article references data and reporting from[ChainStoreAge]