Nicole Larson
Despite persistent economic uncertainty, the retail sector continues to show signs of stability, though not without caveats. Store closures have put pressure on vacancies, while new construction remains limited. Yet, leasing momentum has persisted in prime locations, supported by resilient consumer demand and evolving tenant strategies. In this report, we explore the key takeaways across retail fundamentals and shifting consumer behavior, using foot traffic trends to illuminate where the market is headed next.
Foot Traffic Ticks Up—But Not Evenly
Overall consumer foot traffic was up year-over-year in the first half of 2025, pointing to the resilience of the U.S. consumer and the continued demand for brick-and-mortar channels. Car wash services received the most significant visit spike, followed by theaters, music venues, and attractions. However, out-of-home entertainment still has a way to go before reaching pre-COVID visit levels. Traffic to fitness chains also increased, an impressive accomplishment given the category’s multi-year growth streak.
Meanwhile, visits lagged for discretionary categories, especially those carrying larger-ticket items, such as home improvement retailers and electronics stores. Traffic to gas stations and C-stores was also below 2024, perhaps due to the recent dip in domestic travel.
Category Performance
- Apparel: Apparel visits were steady nationwide, largely thanks to the ongoing strength of off-price chains. The most significant year-over-year traffic increases were in the Western States, with Wyoming, Nebraska, and South Dakota topping the list.
- Fitness: The consumer fitness space has increased since the lifting of pandemic restrictions, and the growth continued in H1 2025 with rising visits across most states. This suggests that Americans’ commitment to health and wellness has solidified into a lasting behavioral shift rather than a temporary post-pandemic trend.
- C-Stores and Gas Stations: Although visits to C-stores and gas stations were generally lower than in H1 2024, several states—including Utah, Washington, and Idaho — saw heightened traffic to this category. In contrast, the Southeast experienced some of the largest visit declines, particularly in Georgia, South Carolina, Kentucky, and Maryland.
- Grocery: Grocery visits increased in most states, but the most significant growth was concentrated in the West and Southwest, including in Texas, which saw a 3.2% increase in visits to grocery stores in the first half of 2025.
- Superstores: Unlike grocery traffic, superstore visits were generally below H1 2024 levels, although the category also had pockets of growth, notably in the Dakotas, Idaho, and Montana.
- Dining: Dining traffic trends showed apparent regional variations in H1 2025. Visits were up in the West (specifically in Washington, Oregon, Idaho, Nevada, and Utah) and generally down in the rest of the country.
Experiences and Value Take Center Stage
Analyzing the top 10 chains from the Placer 100 Retail and Dining Index with the most significant YoY growth in visits per venue in H1 2025 highlights consumers’ current preference for affordable brands. Chili’s took the top spot — its ongoing value promotions are still resonating with diners and driving traffic to the chain in 2025. Crunch Fitness, Ollie’s Bargain Outlet, and HomeGoods — each known for their affordability — also made the top 10 list.
Several chains catering to mid- and high-income consumers — including Nordstrom, Staples, LA Fitness, and Barnes & Noble — experienced significant growth in visits per venue. This suggests that while value matters, brands don’t need the lowest prices to win customers. Consumers want confidence that they’re getting their money’s worth. Brands that effectively communicate their value proposition can thrive, no matter the final price point.
Retail Real Estate Fundamentals in Flux:
The first half of 2025 painted a mixed picture for retail real estate. While well-located centers continued to see solid leasing activity and rent stability, a surge in store closures placed an upward pressure on vacancies across lower-tier assets. New construction remains muted amid high borrowing costs, with most developers focusing on repositioning existing spaces. Absorption and leasing activity reflected the broader theme of bifurcation — strong demand for value-driven and experiential retail on one end, and lingering weakness in legacy retail formats.
- Vacancy: Retail vacancy saw modest upward pressure in early 2025, driven mainly by a wave of store closures, particularly among underperforming and legacy brands. However, this trend was not uniform. Prime, well-located centers continued to attract strong tenant demand and maintained low vacancy rates, highlighting the bifurcation between Class A and B/C assets.
- Rents: Despite macroeconomic challenges, asking rents for retail space generally held firm. Landlords retained pricing power in high-demand corridors, especially those with strong demographic profiles or tourism tailwinds. That said, rent growth was flatter compared to recent years, and tenants in secondary locations had more negotiating leverage.
- Construction: New retail construction remained limited, with developers cautious amid elevated financing costs and an uncertain economic outlook. The focus continues to shift toward repositioning existing assets rather than speculative ground-up development, particularly in markets with shifting consumer behaviors.
- Absorption: Net absorption was uneven in H1 2025. While key markets with strong population growth and in-demand categories (like fitness, discount retail, and experiential dining) contributed positively, space left behind by closures weighed on overall gains. The net result was modest yet broadly positive absorption across most regions.
- Leasing Activity: Leasing remained active, particularly in well-trafficked lifestyle centers, grocery-anchored strip centers, and mixed-use developments. Retailers that successfully communicate value (not just low prices) and align with shifting consumer priorities continued expanding. However, lease negotiations increasingly hinged on flexibility, tenant improvement packages, and performance-based rent structures.
Retail Sales Held Steady in H1 2025 — but Cracks Are Starting to Show
Despite ongoing macroeconomic noise — from inflationary pressures to tariff uncertainty — U.S. retail sales posted steady year-over-year growth across the first half of 2025, according to GlobalData.
- January started strong, with core retail sales up 4.0% year over year, aided by post-holiday discounts and soft 2024 comparables.
- February showed weakness on paper (-0.2% core retail), primarily due to a missing trading day from last year’s leap year. Adjusted for this, sales still grew about 3.2%, though consumer sentiment had started to waver.
- In March, core retail sales increased by 3.4%, helped by early tax refunds and tariff-driven pull-forward spending.
- April was the strongest month, with core sales up 5.1%. However, roughly $3.2 billion of that growth was attributed to consumers buying early to avoid anticipated tariff increases.
- May maintained positive momentum with 3.9% core retail growth, but some of it was inflated by pull-forward behavior, particularly in big-ticket categories like furniture.
- June closed out the half with +3.9% core retail sales growth, but consumer volume growth cooled to just 0.9%, as most had already made major purchases earlier in the year.
One of the most overlooked trends this year is who is driving the spending. A recent Fed working paper highlighted that when using granular, self-reported income data, the narrative shifts dramatically: much of the consumer “resilience” is being propped up by high-income households, while middle- and lower-income groups are pulling back. Retailers that cater to affluent demographics or can flex their value proposition are faring better than those stuck in the middle.
Retailers should note that underlying volume growth, which strips out inflation and tariff-influenced buying, has been consistently weaker than top-line figures suggest. Analysts warn that this could foreshadow softer performance in the second half of 2025, especially as inflation, interest rates, and tariff impacts start to ripple more clearly through the supply chain.
Retail’s Outlook for the Second Half of 2025
Looking ahead to the second half of 2025, the retail sector is expected to remain stable but face growing macroeconomic pressures. Vacancy rates should hold steady, supported by a sharp 45% drop in new construction, though closures in freestanding formats (like pharmacies and discount stores) may cause localized upticks. Asking rents are projected to rise by about 2%, driven by limited supply and steady tenant demand. While net absorption may ease slightly, it is expected to remain positive across malls and open-air centers. Store-based retail sales are forecast to grow 1.5% in 2025, maintaining a 76% share of total retail sales. However, elevated inflation could weigh on consumer volume growth and leasing momentum in more price-sensitive segments.
At Colliers, we’re proud to partner with Placer.ai, an industry-leading foot traffic analytics platform, to deliver more profound insights into the evolving retail landscape. As enterprise users of the tool, we’ve combined location intelligence with market fundamentals to uncover the trends shaping retail real estate in the first half of 2025.
Anjee Solanki
