Retail Investment Benchmarks 2025: Sales, Vacancy & Rent Trends

Introduction

The U.S. retail real estate sector enters 2025 with historically tight fundamentals and rebounding investment activity. Despite a recent uptick in store closures and retailer bankruptcies, overall vacancy remains near record lows and rent growth, while moderating from post-pandemic highs, is still positive. Investor sentiment has improved alongside these solid fundamentals – retail property sales volumes are rising again and cap rate expansion is slowing, reflecting a more stable pricing environment. This report analyzes national trends in retail investment sales, vacancy rates by asset type, rent growth performance, development pipeline constraints, and profiles five top markets positioned for investment outperformance in 2025 (based on combined sales growth, rent gains, and supply-demand tightness). All data are sourced from the MMCG database (derived from the 2025 U.S. Retail National Report).

Investment Sales Trends

Retail investment sales volume regained momentum through 2024 and early 2025. Total sales reached $59 billion in 2024, an 8% year-over-year increase, with each quarter outperforming the last. Deal activity accelerated into 2025: Q1 2025 investment volume rose 11% compared to Q1 2024, and preliminary April 2025 figures were 45% higher than April 2024. This resurgence in deal flow indicates investors’ growing confidence in the retail sector’s stability and upside.

Pricing and cap rates: The sharp cap rate expansion seen in 2022–2023 has tapered off. Since mid-2024, cap rates have largely flattened with only a slight upward bias. Notably, the composition of trades is influencing average yields – a wave of higher-yield transactions (e.g. dollar store and pharmacy properties trading at 7%+ cap rates) has skewed overall averages upward. These deals, often in smaller markets as chains like Dollar General expand and some drugstore portfolios re-trade, do not reflect the broader market for prime assets. In fact, pricing for top-quality retail remains strong: well-located, long-leased single-tenant properties (especially essential retailers) still command sub-5% cap rates, as evidenced by recent ground-lease QSR deals priced below 5%. Most private buyers of net-leased assets are transacting in the 5%–6% cap range, indicating sustained demand for stable income.

Investor preference has also favored necessity-based and grocery-anchored centers. After a period of price discovery, grocery-anchored neighborhood centers have stabilized – for example, a Kroger-anchored center traded in early 2025 at a 6.1% cap rate, reflecting renewed buyer confidence in this segment. Larger format retail centers (power centers and community centers) are trading at higher yields (around 7%), as illustrated by a 507,000 SF Arizona power center sale at a 7.0% cap. These higher cap rates partly compensate investors for the perceived risk in big-box retail and value-add opportunities, but also often reflect deals with favorable in-place financing or other unique conditions.

Outlook: By mid-2025, the investment market’s outlook has shifted from negative to neutral-to-positive. The combination of minimal new construction, low vacancy, and steady tenant demand should prevent any drastic decline in asset values. Meanwhile, rising deal volume is leading to more loan payoffs and freeing up lending capacity, which adds liquidity and could help firm up pricing going forward. In summary, retail asset values appear to be stabilizing, supported by improving capital flows and resilient property fundamentals.

Vacancy Rates by Asset Class

Despite widely publicized store closures (e.g. in department store and specialty chains), retail space availability remains extremely tight by historical standards. As of early 2025, the national retail vacancy rate is about 4.3%, only a slight uptick from all-time lows. Just 4.8% of total retail space was available for lease at the end of Q1 2025, a mere 15 basis points above the record low, underscoring that new vacancies are being backfilled very quickly. Robust tenant demand – particularly from expanding discount, grocery, fitness, and service retailers – has led to intense competition for second-generation space, mitigating the impact of move-outs. Even after a quarter (25Q1) that saw a surge in vacancies from bankruptcies, most quality spaces were re-leased in short order, the fastest backfill pace in nearly 15 years according to MMCG data.

Vacancy by retail property type: Different retail subsectors show divergent vacancy levels, largely reflecting structural trends and new supply dynamics:

• Malls: Vacancy is highest in the mall segment at 8.9%. Enclosed regional malls continue to grapple with department store closures and challenges in backfilling large anchor spaces. Even well-located malls face headwinds from changing consumer behavior and competition from open-air formats, keeping mall vacancy elevated relative to other types.

• Power Centers: Power centers (big-box anchored open-air centers) have a vacancy around 4.7%. This mid-range vacancy reflects improved absorption of big-box spaces by off-price retailers, grocers, and entertainment uses, although some legacy vacancies remain in older centers.

• Neighborhood & Strip Centers: Neighborhood and community shopping centers (often grocery-anchored) have roughly 6.4% vacancy, while strip centers (smaller unanchored retail clusters) are about 5.0% vacant. These convenience-oriented centers benefit from steady demand by necessity retail and personal services. Grocery-anchored centers in particular are a favored format, enjoying high occupancy as grocers draw consistent foot traffic; many vacancies here are quickly leased by junior anchors or specialty tenants. Strip centers, typically occupied by local shops and restaurants, also see healthy occupancy in most markets, though tenant turnover can create short-term vacancy upticks.

• General Retail: The broad **“general retail” category – including single-tenant standalone stores and free-standing retail – has the lowest vacancy at just 2.7%. This reflects the strength of single-tenant net lease properties (drugstores, fast food, banks, etc.), which are often backed by long-term leases. Many new retail developments in recent years have been build-to-suit single-tenant buildings, which open fully pre-leased and keep vacancy in this segment minimal.

  
  

Overall, today’s vacancy rates are well below long-term averages in nearly every retail category. Even mall vacancy, while higher than other types, is low compared to mall-sector history. These tight vacancy conditions give landlords leverage to maintain or modestly increase rents and provide a cushion against the impact of any future retailer shakeouts.

Rent Growth and Rent Performance Variations

Retail rent growth has moderated from the rapid pace seen in 2021–2022, yet remains positive in most markets. Nationally, asking rents grew roughly 1.9% year-over-year as of mid-2025, in line with the sector’s pre-pandemic historical average (~1.5–2% annually). This marks a deceleration from the 4%+ annual rent spikes observed at the peak of the post-pandemic rebound (late 2021 through 2022). The cooldown is attributable to a plateau in consumer spending growth and the normalization of demand after the pandemic-era surge. Real retail sales have continued to rise over the past year, but in a “choppier” fashion across sectors, as consumers grow more discerning and some face pressure from inflation. In essence, retailers have less ability to push aggressive rent increases now that consumption has stabilized and competition (including e-commerce) has resumed.

Importantly, current rent levels appear sustainable relative to retail sales. Occupancy cost ratios (rent as a percentage of retailer sales) remain near historical norms, which suggests that today’s rents are supported by tenant revenues. Since 2019, core retail sales (excluding e-commerce, gas, and autos) have risen over 30% in nominal terms (over 10% in real terms), while total occupied retail space grew less than 2% in the same period. This divergence means retailers are generating much more sales per square foot on average, underpinning their capacity to pay rent. The MMCG data confirms that retail space efficiency (sales per SF) has increased substantially in recent years, which bodes well for landlords’ income streams even if rent growth is modest.

Market-level rent variations: Rent growth is far from uniform across the country – there is significant dispersion by metro and region. According to the MMCG database, 47 of the 57 largest retail markets (each with over 75 million SF of inventory) saw positive rent growth in the past year. The strongest gains have concentrated in metros with robust population and income growth, primarily in the Sunbelt. High-growth markets in the South and West – benefiting from in-migration, job expansion, and newer housing development – are posting above-average rent increases as tenant demand outpaces limited space availability. By contrast, markets with stagnant or declining populations and heavy legacy retail supply have underperformed the U.S. average. Many of these slower-growth markets are in the Northeast and Midwest, where much of the retail stock is older and less aligned with modern retailer requirements. Additionally, a subset of high-cost coastal markets (with flat population trends and high operating costs) have also lagged, as retailers are cautious on expansion in those locations.

This trend is evident in individual market statistics. For example, fast-growing Sunbelt metros such as Raleigh, NC (≈7.5% YOY rent growth) and Tampa, FL (~4.7% YOY) are among the top performers, whereas an older market like Cleveland or Chicago saw much lower or even flat rent growth. Even within the same region, differences emerge: in California, Orange County’s rents rose ~3.6% YOY (a solid gain), while the East Bay (Oakland area) saw a rent decline of 2.6% over the year, reflecting the challenges in some urban cores. Broadly, Sunbelt and Mountain West markets (Southeast, Texas, Southwest, and portions of the West) continue to outperform, whereas many Northeastern and Rust Belt metros are trailing.

Looking ahead, rent growth is forecast to continue decelerating in the near term as the recent wave of store closures (from 2024 bankruptcies) works through vacancies. The MMCG house forecast projects national rent growth of roughly 1.7% in 2025, which is a return to the 2010s average pace. Rent gains in the next few quarters may be modest – some markets could see flat or slightly negative effective rent growth until backfills absorb newly vacated space. However, rent declines are not expected to be widespread or long-lasting, given the dearth of available space and lack of new supply coming online. In fact, much of the space vacated by closures is anticipated to be backfilled quickly due to landlords’ ability to tap a queue of prospective tenants and the limited alternatives those tenants have. By late 2025 and beyond, rent growth is expected to stabilize at roughly inflationary levels, with continued wide variation between high-growth and low-growth markets. Fast-growing metropolitan areas in the South and West (and prime retail corridors in other regions) are likely to keep outperforming in rent gains, while markets with soft demographics or oversupply will see more muted growth. Notably, even if the overall pace moderates, the rent spread on long-held spaces remains very high – tenants renewing or replacing leases from five or more years ago are often facing significantly higher rates, a dynamic that will persist into 2026. This points to strong embedded rent upside for well-located properties as below-market legacy leases roll to current market rates.

Development Pipeline and Supply Constraints

One of the defining features of the retail real estate landscape over the past decade – and a key reason for tight vacancies – is the historically low level of new construction. The current development pipeline is extremely constrained, the result of economic and structural factors that have drastically curtailed new retail supply.

New supply at record lows: Since 2020, the U.S. has added only about 81 million SF of new retail space annually. This is a fraction of the pre-Great Recession construction pace – for context, from 2000 to 2009 the country delivered roughly 300 million SF per year, and even during the 2010s recovery new retail averaged ~128 million SF/year. In other words, current annual retail completions are running at roughly one-quarter of early 2000s levels. Moreover, developers have simultaneously been removing obsolete space: over 165 million SF of older retail (mainly dead malls and vacant anchor boxes) have been demolished since 2018. The net expansion of retail inventory in recent years has therefore been negligible – total retail stock grew less than 2% from 2019 to 2024. This lack of new supply is unprecedented in modern times and is a deliberate market response to shifting conditions.

Several forces are responsible for the pullback in development. After the one-two punch of the Great Financial Crisis and the rise of e-commerce, developers became far more cautious in building new retail, focusing on only the most viable projects. In the past few years, surging construction costs, higher financing costs, and rising cap rates have made ground-up retail development “difficult to pencil” economically in many locations. Construction materials and labor costs have been increasing much faster than rents, compressing developer profit margins. At the same time, alternative property types (such as apartments, industrial warehouses, and mixed-use projects) often yield better returns, so many sites that could host retail are being used for other product types. The result is that few developers are willing to take on speculative retail projects. Most new retail construction that does proceed falls into niche categories where costs and rents align, for example: small freestanding pad sites pre-leased to national tenants (e.g. a fast-food drive-thru or bank branch built for a specific tenant), or ground-floor retail in mixed-use developments where high-rise residential or office components subsidize the retail portion. Outside of these scenarios, big shopping center projects are exceedingly rare today.

Shrinking pipeline: Entering 2025, the amount of retail space under construction nationwide is at its lowest level since 2011. For perspective, many major markets have virtually no large retail projects underway relative to their inventory. Deliveries in recent quarters primarily consist of build-to-suit single-tenant stores and a handful of grocery or discount-anchored centers. The MMCG data indicates that as of mid-2025, only about 21 million SF of newly built retail space (since 2020) is currently available for lease across the entire U.S. – that represents less than 5% of total available space on the market. In other words, 95%+ of retail availabilities are in older, existing properties, not brand-new space. This dearth of new first-generation space puts expanding retailers in a bind: they must either compete for second-generation vacancies or repurpose non-retail spaces, since freshly built options are scarce. Geographically, such limited new development that is occurring tends to cluster in the fastest-growing areas – Texas markets account for nearly one-third of all new first-gen retail space available, for instance, reflecting where population growth necessitates some retail expansion. But even in high-growth Sunbelt metros, the pipeline is modest relative to demand.

Implications: These supply constraints serve as a backstop supporting occupancy and rent. With supply additions projected to remain well below historical averages for the next five years, any demand growth translates quickly into absorption of existing space. Developers are unlikely to ramp up building until rents rise enough (or costs fall enough) to make projects feasible – a dynamic that could take years, given the current cost vs. rent mismatch. In the meantime, the retail market is effectively in a supply-starved equilibrium: even if economic growth slows, the lack of new space should keep vacancy from rising dramatically. Landlords in many markets face little competition from new centers, allowing them to maintain pricing power on renewals and backfills. For tenants, however, the scarcity of modern space can be a challenge, as it limits expansion options and can lead to bidding over quality locations. On balance, the “new supply drought” is a positive for owners and investors – it underpins the strong fundamentals (low vacancy, steady rent growth) seen in 2025, and it is a key reason investors are gravitating toward retail assets again. Many are betting that these tight conditions will persist, providing a favorable backdrop for income stability and future rent appreciation.

Top 5 Markets for Retail Investment in 2025

Considering the trends discussed – rising sales volumes, rent growth patterns, and supply tightness – certain high-growth metropolitan areas stand out as especially attractive for retail real estate investment heading into 2025. These markets combine strong economic and demographic growth, robust retail demand, limited new supply, and healthy investment activity. Based on the MMCG database metrics (sales growth, rent performance, vacancy rates, etc.), five top markets to watch are:

• Dallas–Fort Worth (Texas): The Dallas–Fort Worth metroplex offers a potent mix of scale and growth. It boasts one of the largest retail inventories in the nation (over 468 million SF), yet continues to see above-average demand. Rents increased about 4.4% year-over-year – placing DFW among the top 10 markets for rent growth – even as developers delivered significant new space. Vacancy sits around 4.9%, roughly on par with the U.S. average, which is impressive given DFW’s high construction volume (over 7 million SF under construction, the most in the country). Strong population and job growth (DFW is adding tens of thousands of residents annually) fuel retail spending and tenant expansion. Investors are drawn to DFW’s diversified economy and its retail sector’s resilience. 2024 saw healthy investment sales growth locally, and that momentum is expected to continue through 2025 as institutions target Texas for its favorable demographics.

• Atlanta (Georgia): A leading Sunbelt gateway, Atlanta combines a large consumer base with rapid growth. Retail asking rents rose ~4.2% YOY in Atlanta, reflecting tight conditions, while vacancy remains low at approximately 4.2%. Atlanta’s economy (the South’s business capital) attracts corporate expansion and in-migration, bolstering retail demand. Notably, new supply in Atlanta has been limited – only about 0.2% of stock delivered in the past year – so absorption has outpaced construction. With its strong job market and population gains, Atlanta has seen increasing retail investment interest. Sales volumes have been rising as both REITs and private equity target its mix of steady income properties (like grocery-anchored centers in fast-growing suburbs) and value-add urban retail opportunities. The market’s deep tenant pool and relatively affordable pricing (average rents in the low-$20s PSF range) make it a compelling bet for continued performance.

• Tampa Bay (Florida): The Tampa–St. Petersburg region has emerged as a Florida standout, benefiting from heavy in-migration, rising incomes, and a booming housing market. Retail fundamentals are very tight: the area’s vacancy is about 3.5%, lower than the U.S. average, and landlords achieved roughly 4.7% rent growth over the past year (top 5 nationally). Tampa’s retail scene is fueled by both local population growth and tourism (it’s a popular destination market), supporting a variety of retail formats from suburban power centers to urban mixed-use projects. Crucially, Tampa’s supply pipeline is modest – only 0.3% of inventory is under construction – which means any demand uptick drives vacancy down further. Investors have taken notice of Tampa’s strong metrics. The market saw investment sales volume climb in 2024, particularly in essential retail assets (centers anchored by grocers or national discounters). With cap rates in Florida compressing slower than in coastal markets, Tampa offers relatively attractive yields with solid growth prospects. It ranks highly on our 2025 watchlist as a Sunbelt market where high tenant demand meets limited new supply.

• Phoenix (Arizona): Phoenix remains a top growth market in the West, underpinned by rapid population expansion and a diversifying economy. Retail landlords in Phoenix enjoyed around 3.8% YOY rent growth recently, and the metro saw one of the highest net absorption totals in the country – nearly 1 million SF absorbed over 12 months – indicative of vigorous tenant demand. Vacancy is in the mid-4% range (~4.5% as of Q1 2025), which is notable given Phoenix’s development activity. The market does have a relatively larger pipeline (close to 0.8% of stock under construction), yet this new space is quickly leased thanks to continued household and job growth in the region. Key retailers (from grocers to home improvement chains) are in expansion mode across Phoenix’s suburbs. For investors, Phoenix offers a balance of scale (it’s a major metro of 5 million+ people) and growth dynamics. Investment sales in 2024 included several institutional acquisitions of open-air shopping centers and single-tenant portfolios, signaling confidence. As long as in-migration stays strong and excess retail development is kept in check, Phoenix is expected to remain an attractive market with above-average rent upside and solid property income yields.

• Raleigh (North Carolina): Among mid-sized markets, Raleigh stands out for its exceptional growth metrics and tight retail conditions. The Research Triangle area (Raleigh-Durham) is a booming tech and life sciences hub with one of the fastest-growing populations in the U.S. Consequently, retail space is in hot demand – Raleigh’s rents jumped roughly 7.5% year-over-year, the fastest growth rate of any large market in the MMCG database. At the same time, Raleigh’s vacancy rate is only ~2.3%, among the lowest in the nation. Such low vacancy indicates virtually full occupancy; many centers have waitlists for space and landlords can be choosy on tenant mix. New construction has been minimal (only ~0.5% of stock delivered in the past year), so supply isn’t keeping up with retailer expansion. These conditions create pricing power for owners – hence the outsized rent gains. Investors are increasingly targeting Raleigh for its growth story and relative affordability compared to larger gateway markets. The area’s retail investment volume is on the rise, with both institutional and private buyers pursuing assets ranging from suburban power centers near new housing developments to urban mixed-use retail in Raleigh’s revitalizing downtown. With a young, highly educated population and strong job creation, Raleigh offers a long runway for retail demand growth, making it a top pick for 2025 investment focus.

  
  

Conclusion

In summary, U.S. retail real estate in 2025 is characterized by near-record occupancy, steady if modest rent growth, and reviving capital flows. The sector’s recovery from the pandemic and structural e-commerce challenges has been underpinned by constrained supply – a decade of limited development has created a tight equilibrium where even moderate demand translates into high occupancy. Investment benchmarks are improving: sales volumes are climbing and pricing is stabilizing as investors recognize the durable cash flows in well-located retail assets. Rent trends are bifurcated, with Sunbelt and high-growth markets leading and older, slow-growth regions lagging, highlighting the importance of market selection for retail investors. Meanwhile, the development pipeline remains subdued, suggesting that supply-side discipline will continue to support fundamentals in the years ahead.

For developers, investors, and lenders, the current environment presents opportunities to capitalize on strong markets and asset types (such as grocery-anchored centers, thriving power centers, and prime urban retail corridors), while exercising caution in over-retailed or stagnant areas. The top markets identified – from Dallas to Raleigh – exemplify the favorable alignment of demand drivers and supply constraints that can lead to outperformance. Heading into 2025, retail real estate’s outlook is cautiously optimistic: barring a major economic downturn, the combination of limited new supply, steady consumer spending, and adaptive retailers should keep the sector on a positive trajectory. Investors are advised to monitor local market indicators (vacancy inflection points, rent change momentum, and sales volume trends) and remain attuned to shifts in consumer behavior. However, the core narrative for 2025 is one of resilience – retail real estate has recalibrated to a new baseline of lower supply growth and more balanced demand, setting a solid foundation for those looking to deploy capital in the sector.

Sources: MMCG database (U.S. Retail National Report, 2025)

• Pages 3–4: National Key Statistics & Overview

• Pages 5–6: Leasing Trends and Absorption

• Pages 8–9, 27–32: Rent Growth and Market-Level Performance

• Page 10, 22–27: Construction Activity, Deliveries, and Supply Constraints

• Pages 11, 45–48: Sales Volume, Cap Rates, and Investment Benchmarks

• Pages 36–37, 42–45: Vacancy Trends by Retail Asset Class

• Pages 17–21: Market Rankings, Inventory, and Under-Construction Data

• Pages 11–16: Economic Conditions, Employment, and Consumer Spending

3 Star Retail Storefront (Neighborhood Center)