Fit Out Cost Guide 2025 | Retail

Retail Sector Overview In the last few years, consumers have defied expectations at every turn. When inflation ran hot and interest rates increased, consumers continued to spend. As recently as December 2024, real consumer spending achieved a record high. Despite a customary dip in January, retail sales were strong in the first quarter, partially boosted by advanced consumer purchases ahead of anticipated higher costs for items such as autos and smartphones. However, while consumer demand thus far has remained healthy, forward-looking indicators signal a likely pullback. The Michigan Consumer Sentiment 1 survey has fallen for four consecutive months and consumer expectations for the economy are down by 32% year-to-date. Similarly, retailers are bracing for higher costs of goods resulting from tariffs, which will pressure profit margins and result in cost-cutting elsewhere, including real estate. Some of the tariff costs will be passed on to consumers, raising prices and potentially impacting demand. Retail was already amid a cyclical transition; announced bankruptcies and store closures reached a post pandemic high in 2024 and many of those vacancies are slated to hit the market this year. Through the first quarter of 2025, store closures outpaced store openings 4,879 to 3506. Convenience, discount, and grocery stores, which experienced significant expansion 2022-2023, began to slow down in late 2024, a trend that has persisted into this year. Amid prevailing economic uncertainty, retailers are proceeding with caution, reluctant to expand their footprint until a clearer economic outlook emerges.

1 https://www.wsj.com/economy/consumers/consumer-sentiment-university-michigan-april-2025-008b1b93

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Cushman & Wakefield