U.S. Retail Market and Outlook (2025-2030)

Executive Summary:

U.S. retail sales are projected at roughly $7.4 trillion in 2025, but growth is tepid (≈0.4% year-over-year). The sector is navigating a continuing shift toward omnichannel and e-commerce: Gen Z and millennial shoppers – now the most optimistic spenders – heavily favor online buying but also patronize brick-and-mortar stores.

Retailers are investing in AI-driven inventory and personalization tools and blending digital with physical experiences. Despite thousands of store closures announced in 2024 (on the order of 7,000–8,000 locations), space markets remain unusually tight. CoStar reports vacancy/availability around 4–5% nationally (near historic lows) and record-high asking rents (about $25.3 – $25.5/SF for neighborhood centers, NNN). In investment markets, retail transaction volume was about $57 billion in 2024, and cap rates – which spiked in 2022–2023 – have flattened out (broadly in the 6–7% range) as sales resumed in late 2024. Looking ahead, IBISWorld and CoStar project only modest growth (~0.9% CAGR to 2030, reaching ~$7.7 trillion). Key risks include rising input costs from tariffs and trade, while an easing of inflation and healthy wage growth could buoy consumer.

Market Overview

The U.S. retail sector (NAICS 44-45) is enormous and diverse. Total industry revenue is roughly $7.4 trillion in 2025 (reflecting a cumulative ~0.4% rise from 2024). By comparison, retail employs on the order of 18 million people and comprises about 3 million establishments. Retail trade includes a range of segments – from motor vehicles and parts to general merchandise, food, apparel, electronics, and non-store (online) retail – each with different growth dynamics. Large chains dominate many categories: for example, Walmart (warehouse and discount stores) and Amazon (e-commerce) together account for ~9.4% of total retail revenue (Walmart ~$477.7 billion, 6.4% share; Amazon ~$223.5 billion, 3.0% share). The remaining ~90% of sales are spread across other firms, from Kroger and Costco in groceries to Target in general merchandise and Costco in wholesale clubs. In recent years, industry growth has been flat to modest: IBISWorld reports a ~0.9% compound annual growth rate for 2020–2025 (inflation-adjusted) reflecting decelerating demand after the post-pandemic boom.

Retailers have responded by diversifying channels and offerings. Omnichannel strategies (seamless integration of online and in-store channels) are now standard: retailers like Target and Walmart invest heavily in e-commerce platforms and curbside pickup, while still leveraging their physical footprints. CBRE notes that retail centers have become multi-use hubs (retail + dining/entertainment), and mixed-use developments are attracting strong tenant demand. For example, as CBRE Research observes, prime “main street” retail districts are seeing foot traffic recover to pre-pandemic levels, even among younger shoppers. The table above summarizes key indicators (revenue, growth, vacancy, rents, etc.). Notably, after pandemic volatility, retail profitability is relatively healthy. IBISWorld notes that chains are using product diversification, automation and eco-friendly practices to maintain margins. Overall, market volatility is low: historical comparisons show moderate swings (12-month average vacancy ~4.2% nationally seen a decade ago) and relatively steady (though low) revenue growth.

Consumer and Technology Trends

Shifting demographics and consumer preferences continue to reshape retail. Younger shoppers (Gen Z and Millennials) have higher engagement in both online and in-store shopping. CBRE’s latest survey finds Gen Zers and Millennials are most optimistic about household finances and future spending, and a majority report increasing their frequency of brick-and-mortar shopping over the past year. In fact, 60% of Gen Z and 53% of Millennials have visited a shopping mall in the past three months (higher than older cohorts). Retailers are adapting with customer-centric experiences: many malls now feature dining and entertainment to attract these groups. Consumer willingness to trade up for value (e.g. premium private labels) also remains strong.

Technology is a major competitive factor. Retailers are embedding AI and data analytics throughout operations. For example, IBISWorld notes that retailers are using AI to “minimize waste, cut costs and boost satisfaction by predicting buying trends, optimizing logistics and enhancing security". Personalization engines and recommendation algorithms help drive online sales, while automated warehouses and robotic fulfillment improve efficiency. Emerging technologies like augmented and virtual reality are being piloted for “virtual try-on” and interactive product demos (IBISWorld cites AR/VR as key for engaging tech-savvy consumers). Omnichannel platforms leverage these tools – for instance, real-time inventory apps that let consumers order online and pick up in store, or RFID beacons that personalize in-store displays.

Sustainability and circular retail are growing themes. Chains across segments are increasing investment in eco-friendly operations (from energy-efficient stores to sustainable sourcing) and capitalizing on the “pre-owned goods” trend (e.g. used apparel, refurbished electronics). Consumers’ growing environmental awareness is pushing retailers to offer recycling programs and resale options. According to IBISWorld, retailers’ sustainability budgets are rising to capture this market, and even reverse logistics (the handling of returns and recyclables) is being treated as a revenue opportunity

Leasing and Space Utilization

The retail property market remains remarkably tight. National retail vacancy/availability is roughly 4–5% (as of early 2025) – near historical lows. For example, CoStar reports availability at just ~4.8% in Q1 2025, reflecting that open retail space is scarce. In high-demand corridors (dense suburban and urban retail cores), even smaller vacancies persist. As a result, when space does become available, it is leased extremely quickly – CoStar notes median time-to-lease of only ~7.5 months in 2024, the fastest pace in nearly 15 years.

Ask rents are at an all-time high: national average triple-net asking rents hit about $25.5/SF in Q1 2025. (For instance, neighborhood/community center rents average ~$24–26/SF NNN.) Rents have been rising modestly – roughly +1–2% YoY in recent quarters – driven by solid demand and low availability.

Leasing activity was strong in 2024 (roughly +10 million SF net absorption over the year), but there are signs of cooling. Notably, first-quarter 2025 saw a decline in net demand: CoStar calls it the sector’s “first quarter of demand losses” due to a surge in announced store closures. In Q1 2025 the U.S. retail market recorded about –4.98 million SF of net absorption, reflecting some operators exiting space. Still, overall 2024’s positive absorption (as retailers expanded into new centers and infill locations) underscored that diverse segments (grocery-anchored centers, necessity-oriented strip centers, etc.) continue to underpin underlying demand. In short, space efficiency is rising: retailers are optimizing footprints (e.g. smaller urban formats, fulfillment centers, or shared spaces) to do more with less physical square footage.

Development and Construction Outlook

New retail construction is now at multi-decade lows. In 2024, retail construction starts plummeted to levels not seen in years, and the amount of space under construction is the smallest since the early 2010s. CoStar data show only about 81 million SF delivered per year on average since 2020 (most of it build-to-suit) – compared to roughly 300 million SF/year in the 2000s. In practical terms, only a trickle of new malls or big-box centers is being built; most recent deliveries are smaller strip centers, grocery pads, or mixed-use ground-floor retail in urban projects, where rents can justify the costs.

Geographically, new supply is concentrated in fast-growing Sun Belt and metropolitan markets. CoStar notes that Texas accounts for nearly one-third of all new first-generation retail space available for lease (4 of the top 10 markets for new space are in Texas)file-rf4g7zf6s6pcshyvbfcr8b. Other high-population-growth regions – e.g. Florida, the Southeast and some Mountain states – also dominate pipelines. By contrast, overbuilt or slow-growth areas have very little development. Overall, analysts expect persistently limited new inventory going forward: development metrics are highly misaligned (high construction costs vs. currently moderate retail rents), so deliveries are projected well below long-term averages over the next five years.

Investment Activity

Retail real estate investment rebounded in 2024. Total U.S. retail transaction volume was about $57 billion in 2024 (up ~5% from 2023), driven by pent-up demand and lower interest rates late in the year. Sales accelerated each quarter, with Q4 2024 posting the strongest activity. The momentum continued into 2025: CBRE reports Q1 2025 volume roughly +8% above Q1 2024 levels. Capital remains broadly available for well-located retail assets, especially necessity-driven formats like grocery-anchored centers or drugstores.

Cap rates have largely stabilized after the sharp increases of 2022–23. CoStar notes that the “cap rate expansion that defined 2022–2023 has stalled”. In fact, late-2024 deals showed cap rates flattening or even compressing modestly: for example, newly-built single-tenant investments saw cap rates rise from the high-3% range in 2022 to the mid-5% range by late 2024, but have held steady since then. Longer-term trends suggest retail yields may hover in the 6%–7% range on average (lower for grocery-anchored centers, higher for secondary centers). Overall, the market consensus is that cap rates have peaked and may even slowly drift downward if demand remains firm.

CBRE-style metrics reflect this dynamic: national average retail cap rates (which affect valuation) are currently at their recent high and appear to be leveling off. From an investment standpoint, pricing on quality retail (e.g. dominant grocery centers) has shown resilience – yields on staple assets are similar to pre-2022 levels.

Sales velocity was helped by historically low interest rates (into 2024) and strong equity appetite. The pipeline of investment-grade retail (including net-leased properties) is expected to remain healthy, especially for formats tied to consumer staples or where e-commerce impact is minimal.

Policy and Tariffs

Trade policy and macro uncertainty are key considerations. Recent tariff escalations and trade tensions pose challenges: IBISWorld explicitly warns that higher tariffs on imported goods “could challenge profitability” for U.S. retailers. Retailers point out that tariffs are effectively an import tax that they ultimately must pass on to consumers or absorb. In a live-market example, industry leaders noted that new tariffs on China and elsewhere would force choices between “lower margins or lower sales” The National Retail Federation has estimated that tariffs will slow U.S. retail sales growth (forecasting only ~2.7–3.7% nominal sales growth in 2024 due to tariffs and inflation) and has warned that tariffs disproportionately burden small retailers.

Other policy factors also play a role. Stricter immigration rules or labor regulations could tighten labor supply and raise costs for retailers, while tax or fiscal policy (e.g. credit availability, stimulus) could affect disposable income. Conversely, the Fed’s recent decision to pause rate hikes and even allow modest rate cuts can improve retailer financing and consumer credit, providing some support. In sum, the sector faces downside risks if trade frictions intensify or consumer spending softens, but there is also upside if wage growth remains strong and financing costs ease.

Five-Year Forecast

Looking ahead, industry analysts expect only moderate growth. IBISWorld projects a ~0.9% annualized revenue CAGR for retail from 2025–2030 (to about $7.7 trillion by 2030).

Profits are expected to be relatively stable (retail profit margins have held up as retailers cut costs and optimize offerings). Technology adoption will continue – AI-driven personalization, dynamic pricing, and enhanced supply-chain automation will boost efficiency and could slightly accelerate sales. For example, augmented reality shopping apps and drone/robot-assisted delivery may become more common by the late 2020s. Sustainability is likely to expand – with retailers further integrating circular-economy models (e.g. buy-back programs, upcycling) in response to consumer demand.

However, the forecast is guarded. CBRE notes that the balance of risks is tilted to the downside: additional retailer bankruptcies or store closures, renewed inflation, or severe trade disruptions could trim growth. Tariffs and higher import costs remain a wildcard. On the positive side, a “commonly observed” pattern is that consumers have strong spending power: as CBRE research highlights, most U.S. households (especially working-age cohorts) continue to save and could spend more if confidence holds. In an optimistic scenario of stable prices and higher real wages, retail sales and space demand could outperform forecasts.

In summary, the U.S. retail market in 2025 is characterized by stable to slow growth, low vacancy, high rents, and a cautious investment climate. Retailers will continue evolving their brick-and-mortar strategies to coexist with e-commerce, leveraging technology and sustainability to attract consumers. Despite near-term headwinds, fundamentals (large consumer base, innovation in retailing, and employment resilience) should support modest expansion. Key CBRE-style metrics for the next five years include roughly flat occupancy (around 4–5% vacancy), rent growth of 1–3% annually, and relatively steady cap rate spreads. Overall, the market outlook calls for gradual gains but with attention to the outlined structural risks.

May 2, 2025 by a collective of authors of MMCG, retail and site selection feasibility study consultants

Sources:

• U.S. Census Bureau. Quarterly E-commerce Report, 2025 Q1. U.S. Department of Commerce.

• National Retail Federation. “2025 Industry Forecast & Economic Review.” National Retail Federation, April 2025.

• Bureau of Labor Statistics. Consumer Price Index: All Urban Consumers (CPI-U), April 2025. U.S. Department of Labor.

• Bureau of Economic Analysis. “Personal Consumption Expenditures by Major Type of Product, 2025 Q1.” U.S. Department of Commerce.

• Federal Reserve Board. Beige Book: Summary of Commentary on Current Economic Conditions, April 2025.

• Deloitte. “Global Powers of Retailing 2025.” Deloitte Touche Tohmatsu Limited, February 2025.

• Euromonitor International. “Retailing in the US.” Euromonitor Country Report, March 2025.

• McKinsey & Company. “The Future of Retail Operations Post-Pandemic,” McKinsey Global Institute, January 2025.

• S&P Global Market Intelligence. “Retail Sector Credit Trends & Outlook,” May 2025.

• Statista. “Retail Sales Value in the United States 2015–2025,” Statista Research Department, accessed May 2025.

• IBISWorld. Retail Trade in the US. April 2025.

• CoStar Group. United States Retail National. May 2, 2025.

• CBRE Research. Outlook & Insights. May 2025.