Discount Retailers Are Reshaping Retail Real Estate in 2025
A Value-Driven Retail Resurgence
In an economic climate where consumers are increasingly seeking affordability and value, discount retailers have emerged as dominant forces—not just in retail, but across the broader commercial real estate (CRE) landscape. Chains such as Dollar General, Dollar Tree, Family Dollar, and Five Below are not only thriving amid inflationary pressures, but they are also expanding aggressively and reshaping demand for retail property nationwide. Their success has important implications for investors, landlords, and developers alike.
From Bargain Buys to Daily Essentials
The growing popularity of discount retail is not merely a temporary response to recent economic stressors. Rather, it reflects a fundamental and potentially lasting shift in consumer behavior. More than half of U.S. shoppers now prioritize price over brand loyalty, a trend that is driving increased foot traffic to dollar stores and value chains. Data from late 2024 and early 2025 shows consistent year-over-year gains in visits to major players like Dollar General and Dollar Tree, with Five Below posting an especially strong uptick in customer traffic. Moreover, the frequency of repeat visits is also rising, a clear signal that these retailers are becoming integrated into consumers’ regular shopping routines, particularly for everyday essentials like snacks, personal care products, and household items.
This behavioral shift—where discounters are becoming a go-to destination for staples rather than just bargain hunting—is transforming the role these stores play in the retail ecosystem. The rise in weekday foot traffic suggests shoppers are using these stores as reliable options for quick replenishment trips, further embedding them into local retail networks. Five Below, historically focused on discretionary and novelty items, has begun to expand its product mix into essential goods, reflecting this broader evolution.
Economic Tailwinds Strengthening the Sector
From a macroeconomic perspective, the conditions in 2025 continue to favor discount retail’s momentum. Economic growth remains steady, with U.S. GDP projected to rise by 2.4% this year, and consumer spending forecasted to grow by more than 3%. The labor market remains strong, with low unemployment and modest wage growth supporting consumer confidence. Easing inflation and anticipated interest rate cuts by the Federal Reserve may further bolster disposable income and retail sales. For retailers focused on low prices and value, this environment is conducive to continued expansion—and for CRE investors, it means more leasing activity, particularly in necessity-driven segments.
Diverging Strategies Among Leading Discount Chains
The strategic paths of leading discount retailers, however, are not uniform. Dollar General remains the most consistent performer, expanding steadily into rural and small-town markets and investing heavily in store remodeling programs like “Project Elevate” and “Project Renovate.” These initiatives aim to enhance customer experience and increase sales productivity in existing locations. In 2025 alone, Dollar General plans nearly 5,000 real estate projects, including more than 4,000 remodels. This level of reinvestment not only boosts store-level performance but also signals long-term tenant commitment—an attractive quality for landlords and net lease investors.
By contrast, Dollar Tree is undergoing a major strategic recalibration. The company is closing more than 1,100 underperforming Family Dollar stores and has launched a formal review of the entire Family Dollar banner. These closures are largely concentrated in competitive suburban and urban markets, where operational challenges and saturation have taken a toll. While the Dollar Tree brand may continue to grow selectively, the overall focus is shifting toward consolidation and portfolio optimization. For owners of Family Dollar-leased properties, this presents a significant underwriting challenge, as the risk of vacancy rises in weaker locations.
Five Below, meanwhile, remains committed to rapid growth despite recent struggles with comparable sales. The company plans to open 150 new stores in 2025 and is betting on its “Five Beyond” concept—which includes higher-priced merchandise—to diversify revenue and increase average basket size. While Five Below’s strategy introduces a higher degree of risk given its reliance on discretionary spending and trend-driven inventory, its balance sheet remains strong, and analysts see potential for a rebound.
Supply Constraints and Strong Leasing Activity
The expansion strategies of these retailers are shaping demand across retail property types. Dollar General and Aldi continue to favor rural and suburban markets, where land costs are lower and competition is limited. Burlington is targeting smaller-format stores that fit into more compact retail footprints. In total, discount and off-price retailers—also including Ross, TJX Companies, and Ollie’s Bargain Outlet—account for some of the most active real estate expansion pipelines in the country. This has helped keep retail vacancy rates historically low, even as other sectors such as office and traditional department stores continue to struggle.
Importantly, discount retail growth is playing out against a backdrop of historically constrained retail supply. Elevated construction costs and tight financing conditions have sharply curtailed new development, with retail construction activity down nearly 27% in 2024 and forecasted to drop another 45% in 2025. As a result, discount chains are increasingly backfilling former pharmacy, big-box, or underutilized spaces—a dynamic that benefits landlords and supports absorption in struggling submarkets.
The Net Lease Opportunity
For investors, this creates compelling opportunities within the net lease sector. Properties leased to investment-grade tenants like Dollar General (S&P: BBB) and Dollar Tree (S&P: BBB-) are prized for their stable income, long-term leases, and passive management structure. Absolute triple net (NNN) leases, in particular, offer inflation protection through rent escalations and minimal landlord responsibilities. Cap rates have risen significantly over the past two years in response to higher interest rates, pushing average retail NNN yields into the mid-6% to low-7% range, creating potentially attractive entry points for cash buyers and 1031 investors.
However, successful investing in this space requires more than just recognizing a strong brand name. Lease structure, remaining term, tenant creditworthiness, and store-level performance all play crucial roles in determining a property’s risk and return profile. A newly built Dollar General with a 15-year absolute NNN lease and 10% rent bumps every five years offers a very different investment proposition than a 10-year-old Family Dollar lease with flat rent and landlord responsibilities for roof and structure.
Location and Lease Details Matter for Discount Retailers
Location remains a paramount consideration. Retailers are no longer pursuing undifferentiated, blanket expansion. Instead, they are refining their site selection strategies to align with demographic trends, competitive dynamics, and margin profiles. A Dollar General in an underserved rural community with strong traffic and minimal competition may present a far lower risk than a Family Dollar in an oversupplied suburban corridor. Investors must evaluate how well a specific property fits the tenant’s broader strategy—and whether the tenant is signaling long-term commitment through reinvestment or remodeling.
A Durable Trend with CRE Implications
Looking ahead, the discount retail sector shows no signs of slowing down. Even as economic conditions improve and inflation eases, consumers’ embrace of value appears to be a lasting shift. Retailers that can deliver quality, convenience, and affordability are well-positioned to thrive—and to support stable income streams for commercial real estate investors. In a retail world where the margins are tight but the customer demand is strong, understanding tenant strategy, lease structure, and local market fundamentals will be key to navigating both opportunity and risk in 2025 and beyond.
