U.S. Retail Enters 2025 at Record Low Vacancy, Eyes Suburban and Sun Belt Growth

Dec 20, 2024 • 15 min read

As the U.S. retail sector steps into 2025, it does so from a position of remarkable strength. After weathering the pandemic’s upheavals and reorienting to new consumer patterns, retail is now posting the lowest vacancy rate of any commercial real estate sector, a milestone few would have predicted just three years ago.

According to CBRE’s “Q4 2024 U.S. Retail MarketView” report, the national retail vacancy rate ended 2024 at 4.3%, down from 4.6% a year earlier and the lowest figure recorded since the early 2000s. “The resilience of the retail sector has been one of the biggest surprises in commercial real estate,” says Melanie Johnson, CBRE’s Head of Retail Research for the Americas. “Even as e-commerce sales keep rising, well-located brick-and-mortar stores have found a way to remain indispensable to shoppers who crave convenience, experience, and immediate gratification.”

This shift in fortunes arrives at a time when other property types—such as office and even parts of the industrial sector—face headwinds. “Retail has emerged as the ‘unexpected winner,’” says Paul Ferguson, Senior Economist at CoStar Group. “We’re seeing a fundamental recalibration of retail’s role in the economy. It’s not just about selling goods; it’s about providing services, community, and a sense of place that can’t be replicated online.”

Consolidation and the Flight to Quality

While the outlook is broadly positive, 2025 won’t be without its challenges. Retailers continue to consolidate, focusing on core markets and culling underperforming stores. The International Council of Shopping Centers (ICSC) notes that the total number of storefronts operated by the top 20 U.S. retail chains shrank by about 1.8% in 2024, as brands streamlined portfolios and eliminated redundancy. “We’re seeing a Darwinian moment,” says Megan Rosenthal, Retail Strategist at JLL. “Only the fittest concepts—those with strong branding, omni-channel integration, and the ability to adapt to shifting consumer tastes—are thriving.”

This consolidation, however, is not the mass exodus many feared. Instead of shutting down entire regions, retailers are pruning marginal locations and reinvesting in their best-performing stores. According to JLL’s “U.S. Retail Outlook—Winter 2025,” the number of retailer bankruptcies in 2024 fell 35% year-over-year, and the average store closure count per bankruptcy dropped from 85 to 62. “Retailers are getting smarter, not just leaner,” Rosenthal emphasizes.

Suburban Renaissance and Sun Belt Boom

Driving much of the new demand are suburban hubs and Sun Belt cities. After decades of urban-centric growth, the pandemic accelerated migration patterns toward more spacious suburbs and lower-cost metros like Austin, Charlotte, and Tampa. “The Sun Belt’s population grew at twice the national average in 2023-2024,” notes Derek Ramirez, Managing Director at Cushman & Wakefield’s Retail Capital Markets Group. “These new residents need groceries, restaurants, gyms, and entertainment venues close to home, propelling retail demand in areas that previously flew under the radar.”

A Cushman & Wakefield survey of 50 top U.S. retailers found that over 60% are actively scouting suburban locations in high-growth metros, looking to backfill second-generation retail boxes vacated by weaker brands. “The cost of entry is lower, the demographic trends are favorable, and the consumer sentiment is strong,” Ramirez adds. “We’re seeing suburban strip centers achieve occupancy rates of 96-98% in some hot submarkets.”

In turn, this suburban and Sun Belt focus is driving up rents. According to Colliers’ “2025 U.S. Retail Rental Index,” asking rents in prime suburban shopping centers rose by an average of 4.2% in 2024, outpacing the 3.5% increase in urban high-street corridors. “Retailers are more willing to pay a premium for well-located suburban real estate,” says Sharon Kim, Retail Analyst at Colliers. “With more families relocating, these areas now enjoy population density and purchasing power that support higher revenues per square foot.”

Institutional Capital Returns

Perhaps the clearest sign of retail’s renewed vigor is the comeback of institutional capital. According to Real Capital Analytics, investment in the retail sector surged to $68 billion in 2024, a 20% year-over-year increase and the highest total since 2017. Cap rates for top-tier grocery-anchored centers compressed to the mid-5% range, hitting levels not seen since before the pandemic. “Institutional investors are realizing that well-located retail provides stable cash flow and a hedge against inflation,” says James Sullivan, Head of U.S. Real Estate at BlackRock. “We’re talking about essential retail—grocery, pharmacy, services—and these tenants aren’t going anywhere.”

Even private equity giants, once skittish about the sector, are wading back in. “We’ve seen high-profile acquisitions of open-air retail centers in Dallas, Orlando, and Raleigh,” notes Sullivan. “Capital is flowing where the customers are—into markets with strong job growth, affordable housing, and robust migration trends.”

A New Chapter for Retail

This upward trend may mark the dawn of a new chapter for brick-and-mortar. Far from the ‘retail apocalypse’ narrative that dominated headlines in the late 2010s, the sector is re-emerging as a paragon of adaptability. The fusion of physical and digital—click-and-collect models, experiential showrooms, rapid local deliveries—has bolstered the relevance of physical stores.

A survey by the National Retail Federation found that nearly 72% of consumers still prefer to complete the final step of their purchase journey in-store, even after researching products online. “It’s the integrated model that wins now,” says Janet Liu, Chief Retail Officer at the NRF. “Consumers want flexible options and immediate access. Bricks-and-mortar stores, especially in thriving suburbs and Sun Belt markets, deliver that in spades.”

Beyond 2025

While no sector is immune to macroeconomic volatility, retail’s performance in 2024 and early signs for 2025 suggest durability and growth potential. “The conversation has shifted,” Johnson of CBRE says. “We’ve moved from ‘Can retail survive?’ to ‘How can retail capitalize on these favorable trends?’”

As consolidation streamlines the industry, as institutional capital returns, and as suburban and Sun Belt markets gain traction, retail’s future looks more confident than it has in years. For landlords, tenants, and investors alike, this moment represents not just a return to normalcy, but the forging of a modern, resilient retail landscape that could define the sector for the next decade.