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**Q3 Retail: Steady Fundamentals Amid Constrained Supply**
Despite ongoing economic uncertainty and shifting tariff policy, the U.S. retail sector demonstrated stabilization in the third quarter of 2025. After a soft first half of the year, retail fundamentals held firm. Analysts agree that vacancy rates remained steady, and new construction remained historically low due to rising costs and economic caution. However, consumer sentiment continues to be a major factor influencing the sector’s future trajectory.
**Demand Holding Steady Despite Headwinds**
According to Cushman & Wakefield’s MarketBeat report, demand for retail space has been resilient in 2025 despite multiple rate hikes and the unpredictable changes in trade policy. While some softness in the sector was linked to previously announced store closures, the analysts caution that the ripple effects of trade policy cannot yet be fully understood.
**Minimal Impact from Bankruptcies and Closures**
Recent retail bankruptcies and closures have had surprisingly limited impact on overall space availability. As noted by CBRE’s U.S. Retail Figures report, many spaces vacated by closures were quickly backfilled thanks to a strong pipeline of store openings and brand expansions. Colliers echoed this sentiment in its U.S. Retail Market Statistics report, saying that the net effect on fundamentals was negligible. Cushman & Wakefield added that the re-tenanting of closed spaces occurred at a faster-than-expected pace, demonstrating the strength of leasing demand.
**Construction Remains Constrained**
While demand for space remains elevated, new retail development continues to face significant challenges. According to Lee & Associates’ North American Market Report, ongoing high construction costs and difficulty financing projects have resulted in fewer groundbreakings. Projects moving forward tend to be tenant-driven and necessity-based, with developers avoiding speculative builds. CBRE analysts added that most of today’s active construction projects commenced before interest rates spiked, and are largely concentrated in strong, well-located markets.
**Consumers Remain Cautious**
Consumer spending—a critical pillar of the retail sector—is displaying signs of bifurcation. JLL’s Retail Market Dynamics report revealed that shoppers are tightening their holiday budgets, with average spending down by 10.2%. There remains a portion of the consumer base with the ability and willingness to spend, but heightened price sensitivity and demand for value are apparent. Lee & Associates pointed out that while consumer spending persists, growth has moderated due to flat real consumption, as shoppers navigate inflation and slower wage increases.
**Looking Ahead: A Mixed, But Stable Outlook**
Heading into the final months of the year and 2026, analysts expect the current patterns to persist. Demand remains robust in well-performing regions, but limited new supply is a defining characteristic nationwide. Colliers noted that the scarcity of new ground-up development continues to support rent growth, even as overall demand remains uneven.
JLL emphasized that retailers looking to expand will increasingly need to consider second-generation space in existing properties, as availability of newer space is restricted. Lee & Associates said that though rent growth may moderate, older Class C space continues to dominate the retail inventory. In fact, less than 25% of today’s available retail space was built in the 21st century.
Cushman & Wakefield concluded that while the near-term fundamentals remain stable, challenges remain for discretionary retailing categories, and broad demand growth is unlikely without stronger consumer sentiment.
In summary, the U.S. retail sector is holding steady amid economic headwinds, driven by tempered supply and adaptive tenant behavior. While uncertainties persist, particularly around consumer behavior and policy changes, the market remains resilient heading into the next quarter.
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