With the holidays around the corner what are the emerging trends in retail.

Despite intermittent slowdowns, the commercial real estate (CRE) retail sector has consistently demonstrated remarkable resilience since the pandemic. Owners and users appear to be navigating the landscape with confidence, and emerging data may signal further momentum ahead.

 

Consumer Sales and Unemployment Remain Steady

Advance estimates of U.S. retail and food services sales for August 2025, was up .6% from the previous month, and up 5% from a year ago, according to the U.S. Census Bureau. Total sales for the June 2025 through August 2025 period were up 4.5%. While the unemployment rate rose to 4.30% in August 2025, compared to 4.20% last month and 4.20% last year, it’s still significantly lower than the long-term average of 5.67%.

Consistent with that, consumer spending shows steady momentum in necessities (grocery, health/personal care, food service) versus more mixed results in discretionary buckets (electronics/appliances, hobbies/sporting). The underlying pattern is what matters for retail operators and owners.

 

Q2 2025 CRE Retail: Tight on Quality, Not on Headlines

Beneath some retail closure headlines, the supply story is nuanced:

  • Net absorption:Retail vacancy moved up to 10 basis points from Q1 to 4.3% in Q2 2025. Though up slightly, these rates are still historically low.
  • Construction:Deliveries were only ~6M square feet in Q2; ~47.9M square feet is under construction nationwide, which is lean by pre-pandemic norms given financing and build-cost headwinds. Potentially protecting the sector from oversupply.
  • Quality constraint:Nearly 40% of available space is Two-Star or below, and<25% was built after 2000, so tenants seeking modern footprints have limited options. Translation: Owners like KBS who own and operate market leading properties are more likely to backfill vacancies quicker with quality retail tenants.
  • Closure math:Coresight Research tracked ~5,822 closures by late June 2025 that totaled ~123.7M square feet, which is significant, but heavily concentrated in underperforming/older locations. Owners and operators in premier corridors continue to re-lease space. Often with experiential and mixed-use offerings that are more likely to attract more retail users and drive property values.

 

Who’s Still Expanding (and Why That Matters)

Even with uncertain economic trends leading national headlines, expansion follows spending:

  • ALDI plans more than 225 new U.S. stores in 2025, leaning into value and private label.
  • Target is on a multi-year plan for 300-plus new stores over the next decade, with ~20 openings in 2025 and an emphasis on stores-as-hubs (curbside, pickup, same-day).
  • Dollar General targets~575 openings in fiscal 2025 (plus thousands of remodels), aligned with the trade-down dynamic.

This is important for owners and operators because grocery-anchored centers and value-oriented anchors continue to attract capital and drive traffic. Expect smaller, more efficient prototypes, like pop-up shops; curated assortments; and omnichannel touches such as curbside shopping, that reinforce brick-and-mortar’s edge: immediacy and physical experience.

 

Year-End Outlook

Success will be driven by creating immersive and sharable experienced that encourage consumers to leave home rather than shopping online. The pandemic rewired shopping behaviors and accelerated digital habits, but it also emphasized the resilience of physical retail, especially when centers are experience-rich and convenience-tuned. Near-term, tariffs, policy uncertainty, and higher build/finance costs will keep pressure on prices and supply pipelines.

Tenants are making data driven real estate decisions. The use of AI and advanced analytics to predict foot traffic, optimize tenant mix, and measure the ROI of marketing and common area maintenance expenses have become standard practice. Owners who can provide data on consumer demographics and behavior to potential tenants will have a significant leasing advantage.

With low unemployment, solid spending, historically low vacancy, and constrained new supply, the sector is showing positive signs heading into what should be the busiest retail event of the year – the holidays.

Learn more by visiting KBS.com/Insights.