Vacant Retail Space On The Rise As Tariffs, Closures Leave A Mark
"Store closing" sales are going to become more common in 2025 as leasing activity continues to slow and scores of retailers go out of business.
Leasing has fallen 20% this year compared to this time in 2024, Cushman & Wakefield reports.
Rising rent and design costs started the downward trend in activity last year, and now tariff and trade uncertainty is amplifying the pullback. Retailers are delaying decision-making until the clouds around ever-changing economic policy dissipate.
That has pushed retail vacancy to 5.8%, a 50-basis-point increase over the last 12 months, and Cushman predicts it will reach between 6% and 6.5% in early 2026.
Net absorption was negative 6.5M SF in the second quarter, an improvement over 7.1M SF of negative absorption in Q1. Still, this is the first negative two-quarter streak postpandemic.
Store closures have outpaced openings for the past year as more than a few chains have gone bankrupt or out of business.
Craft retailer Joann shuttered 815 locations after its second bankruptcy in less than 12 months. Party City called it quits and will vacate 738 stores. Big Lots is closing 682 stores this year.
Eleven more retailers are planning to turn off the lights in more than 100 storefronts, contributing to the 5,941 closures announced this year through July 4.
While vacancies are expected to continue climbing, overall available space is still historically tight. Construction starts have also lowered since Q1 to 10.9M SF as rising costs have limited groundbreakings.
Asking rents are on the up as a result of less new supply. They have steadily climbed since 2021 and averaged $24.99 per SF in the second quarter.
Vacancies are led by mom-and-pop shops, while strip malls are holding occupancy the most. Geographically, Northeast areas had the worst vacancy levels in Q2, with an average of 6.1%. Buffalo, New York, at 9.4% and New Haven, Connecticut, at 10.1% are the emptiest markets. The South has the lowest vacancy, at 5.4%.
