Shopping Centers National Overview

Strong demand and limited supply are keeping the U.S. shopping center market resilient in 2025, despite mounting financial headwinds facing consumers. Positive rent growth and renewed institutional investment continue to position retail as one of the most stable CRE sectors.

 

Supply and Demand

The U.S. consumer is facing a wave of headwinds that look poised to slow retail spending in 2025. Consumer sentiment has plummeted to lows not seen since the pandemic began, and many economists are worried about a second round of inflation due to the inventory shocks associated with the new trade policy. Credit card debt maturities are rising to levels not seen since the Great Financial Crisis, and student loan payments resumed in full this Spring. All of this suggests retail could be in trouble, but the reality is that there is a shortage of highquality retail space, and the pullback in consumption is expected to slow growth rather than turn negative.

 

The shopping center market has been historically tight over the last three years, so much so that tenants are finding it difficult to find spaces to expand into. Investors targeting value-add plays are coming up dry, and tenants are staying in older centers longer than they would like. While store closures are never good for all retail landlords, loosening vacancy rates in 2025 is likely to spark a wave of new leases from recent retail winners.

 

Rent Trends

Shopping centers have recorded positive rent growth for the longest consecutive stretch on record, a trend that is expected to continue in 2025. The property type has become a safe haven for CRE investors. Limited new supply and long lease terms have shielded the asset class from the large boom-and-busts felt in multifamily and industrial markets, while new and exciting trends in the experiential retail space have helped the product evolve.

 

Sales Trends

Transaction activity is roughly in line with prepandemic figures but still sits nearly 40% below the peak level recorded in 2022. The market, however, has shown positive signs in 2025, with Q1 showing 25% more deal activity than in the first quarter of last year. Driving this surge is the return of widespread institutional activity. These investors often have access to the best information, and their willingness to acquire more space shows significant confidence in the future of retail. Retail pricing has also held up better than the other major property types, with the price per square foot of shopping centers rising 6.1% over the past 12 months.

 

West

 

Demand Drivers

The West Coast remains the costliest retail market for investors to break into, a factor which is largely attributed to the region’s high-skill workers and elevated disposable income. Suburban retail centers across the West have demonstrated resilience and stronger performance compared to some urban cores, adapting to shifts in work and lifestyle patterns. Looking ahead, recent return-to-office mandates are likely to benefit urban retail corridors, particularly in Los Angeles and San Francisco.

 

The strength of California’s tech sector, particularly in AI and semiconductors, is anticipated to create positive spillover effects on consumer spending from its high-earning workforce. The high population growth observed over the last two decades has led to the region occupying eight of the top 10 most retail-scarce metros in the country per population.

 

The demand is there from investors; most people are just trying to wait out interest rates or pricing, but if we saw even a minor reduction in entry costs, transaction volume would rise rapidly. The fundamentals in the market are too strong for investors to overlook.

-Matt LoPiccolo, Senior Vice President

 

Sales Trends

Q1 2025 was the strongest on record for West Coast shopping centers since Q1 2022, when interest rates were nearly 250 basis points lower. Institutional investors have significantly ramped up activity in West Coast metros, with 90% of the deal volume in some cities attributable to these types of investors. These factors culminated in a very active start to 2025, propelling sales volume ahead of prepandemic levels. This could spark a rapid increase in activity if interests do fall in H2 2025.

 

The rise in confidence is not just among investors, as many lenders and banks are reporting a heightened appetite for shopping center loans in the first four months of 2025. Competition from lenders will help ease financing costs as spreads narrow in order to secure deals.

 

Southwest

 

Demand Drivers

The Southwest benefits from its proximity to highcost West Coast locales, and many metros in the Southwest remain the top destination for households moving away from California. This spurred stable population growth, 50-80 basis points above the national average each year this decade. As a result, much of the current development pipeline contains neighborhood and power centers with necessity and grocery-based retailers. This is especially true for rapidly growing cities like Dallas-Fort Worth and Phoenix, which are also the cities recording the strongest rent growth in 2025.

 

While rising mortgage rates have slowed population migration nationally, the Southwest continues to record elevated population growth despite the headwind. This signals that we could see an even larger spike in move-ins in H2 2025 or 2026, once interest rates moderate.

The strength of California’s tech sector, particularly in AI and semiconductors, is anticipated to create positive spillover effects on consumer spending from its high-earning workforce. The high population growth observed over the last two decades has led to the region occupying eight of the top 10 most retail-scarce metros in the country per population.

 

Restaurants are the most active in the market right now–especially franchise concepts and freestanding quick-service formats like Cava. We’re also seeing a lot of boutique fitness-class-based models like pilates, yoga, barre, are outperforming the big-box gyms.

-Grayson Duyck, Vice President

 

Sales Trends

Activity is ramping up across the five states that constitute the Southwest, so much so that April transaction volume was already 50% of the Q1 total for shopping centers. Both institutions and REITs have been net buyers here through the first four months of 2025, typically the first firms to become active at the start of a new cycle. This is an encouraging sign, as these areas recorded some of the strongest pricing growth and cap rate compression in the country during 2021 and 2022, but have also been some of the most affected by rising interest rates.

 

Because population growth is driving much of the need for new retail space, sales pricing for suburban shopping centers has been strongest of late, growing by nearly 4% since interest rate hikes began. Grocery-anchored centers in surrounding suburbs have been highly sought after as a result.

 

Southeast

 

Demand Drivers

The Southeast U.S. economy is projected to continue expanding in 2025, driven by its significant and ongoing population boom. The Southeast grew by more than 3.7 million people from 2020 to 2024, underpinning strong consumer demand and overall economic activity. Florida’s pace of in-migration has slowed slightly in 2025, but growth in Tennessee and the Carolinas is helping the region maintain its rapid population expansion.

 

This population influx supports generally resilient retail sales. The area has benefited from a wave of new residents from the Northeast, who bring elevated incomes with them, supporting the need for more retail space. These factors are driving the nation-leading rent growth observed in the region. While the growth pace in the Southeast might ease slightly in 2025, the underlying economic drivers remain robust. The region’s attractiveness to new residents and businesses is expected to sustain demand for years to come.

 

Historically, the Southeast has imported a lot of capital from the West Coast and Northeast due to higher yields. That gap is narrowing, but the Southeast remains relatively attractive in terms of cap rates and price per square foot. Migration to metros like Miami, Atlanta, and Charlotte continues to rise–driven by job growth, business-friendly policies, and no or low income taxes. These factors are translating into persistent demand for essential-service retail.

-Jeff Enck, Senior Vice President

 

Sales Trends

The Southeast leads U.S. shopping center sales volume compared to pre-pandemic levels, driven by the region’s ongoing transformation. Remote work in 2020 prompted migration to the Southeast, attracted by business-friendly policies and an enhanced quality of life. These demographic and economic shifts will continue, strengthening the region’s diverse commercial real estate assets for sustained investor interest. From luxury malls in South Florida to strip centers in Raleigh, Charlotte, and Charleston, Southeast assets appeal to all portfolios.

 

Nashville leads 2025 sales trends, posting the strongest pricing growth and volume recovery among major U.S. metros. Even with higher borrowing costs, investors push Nashville property values upward faster than any other major market nationwide. From Q1 2024 to Q1 2025, Nashville’s pricing surged 5.8%, marking the steepest increase nationwide.

 

Mid-Atlantic

 

Demand Drivers

Distinct economic characteristics set the Northeast apart from other U.S. regions, significantly influencing its retail real estate dynamics. The region’s tightly packed urban cores, established infrastructure, and greater land-use restrictions contribute to chronically tight retail market conditions. This scarcity means that even modest growth in consumer demand can exert sizable upward pressure on rents. This translates to strong performance metrics at well-located shopping centers that can offer a mix of essential services, experiential tenants, and convenience.

 

The region’s high population density and higher median household incomes create a concentrated and robust consumer base. However, higher housing and energy costs often offset gains, reducing disposable income more than in other U.S. regions.

 

One factor supporting Northeast urban retail is the growing number of employees returning to offices. VTS’s office demand index shows New York City as the strongest primary market for recent office use. Boston recorded the nation’s highest year-over-year office demand growth, increasing 31.7%, highlighting momentum in the region’s urban cores.

 

 

Certain markets within the region, particularly suburban urban cores near major cities, are attracting significant investor interest. Their historical resilience through various economic cycles makes them attractive as “flight to safety” investments. Notably, areas like Westchester (NY) and Fairfield (CT) Counties and Northern New Jersey. As well as the MetroWest- the outer suburbs of Boston inside the 495 Corridor. These areas have not only weathered the post-COVID landscape but have sustained growth and investor interest due to their appealing live-work-play lifestyle and accessibility to urban hubs.

-Joanna Rotonde Manfro, First Vice President

 

Sales Trends

Investors would be wise to continue tracking office use and multifamily leasing trends within the Northeast, as the region could be on the verge of a shift back into urban cores. This would benefit retail in the largest business hubs, particularly Boston and NYC. While current media sentiment is overwhelmingly negative on the region, it is crucial to remember the Northeast is one of the most highly educated and financially compensated regions in the country. Retailers will continue looking to access these markets, driving rent growth and property pricing higher at the locale’s shopping centers.

 

Banks have returned as the primary source of shopping center financing in the region, reiterating the positive outlook. More competition from a variety of lenders will benefit investors in multiple ways. First, competition on the lender side will reduce risk premiums and apply downward pressure on lending rates, and second, deals that were unable to secure financing in 2024 could presumably pencil if pursued today.

 

Midwest

 

Demand Drivers

Midwestern real estate has long been a bastion of consistency for investors, and 2025 is no different. Each major metro is showing rent growth of 2% to 5% at shopping centers, despite the year’s rocky beginning. With multifamily leasing improving in midwestern cities, retail fundamentals appear set to remain stable regardless of national economic challenges.

 

Development activity also supports the region’s stability. Despite having the highest total population of all U.S. regions, developers have largely neglected the Midwest this cycle.

 

 

Suburban centers with strong demographics and daily-needs tenants are leading in terms of performance and liquidity. These properties typically offer ample parking, high visibility, and f lexible layouts—key attributes for medical, restaurant, and service-oriented tenants driving today’s leasing demand. New construction is limited across the board, so most investor activity is focused on stabilized or light value-add centers— properties where there’s upside through lease-up, renewals, or modest cosmetic improvements. The ability to support modern tenancy needs is key.

-Patrick Forkin, Senior Vice President

 

Sales Trends

Deal volume in the Midwest has handled the impact of rising interest rates better than most other U.S. regions. The area continues to record 10% more sales activity than 2019 levels, underscoring regional stability, liquidity, and overall safety. The Midwest remains attractive for investors, with strong liquidity and consistent per square foot pricing growth despite national challenges.

 

Columbus has transformed its retail market, with deal volume rising over 180% in the past year versus 2019. The city is rapidly growing and supported by a stable spending base, largely driven by Ohio State University.