Retail real estate demand exceeded expectations in the fourth quarter of 2025. Retailers absorbed more than 12 million square feet of space during the quarter. This performance marked a sharp reversal from the first half of the year. Earlier in 2025,
the sector posted two consecutive quarters of negative absorption. During that period, many landlords prepared for extended retail weakness.
Consumer spending resilience continued to support retail real estate performance. Additionally, retailers adapted quickly to shifting market conditions. As a result, retail outperformed expectations despite concerns about slowing consumer demand. Strong fourth-quarter absorption did not reflect increased retail move-ins. In fact, tenant move-ins declined 3% quarter over quarter.
Instead, net occupancy improved because fewer retailers exited space. Retail move-outs exceeded 100 million square feet in each of the first three quarters. However, move-outs declined sharply in the fourth quarter. Retailers vacated just 87.6 million square feet during Q4 2025. That figure represents a 15% reduction from the prior quarter.
Slower move-outs ultimately drove the retail sector’s late-year recovery.
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