Fit Out Cost Guide 2025 | Retail

Rent and Vacancy

The retail leasing sector experienced softening demand in the first quarter of 2025 with 5.9 million square feet (msf) of negative net absorption. After three years of record tight vacancy, limited available inventory has constrained the sector’s ability to sustain robust absorption. Neighborhood Centers accounted for most of the space given back, registering 4.4 msf of negative absorption. Strip Centers showed resilience by absorbing 165,000 sf of space. Leasing activity slowed in the first quarter, totaling just 22.6 msf—the lowest level since the second quarter of 2020. Retail vacancy rates exceeded 5.5% for the first time since late 2022, marking the largest QOQ increase since the third quarter of 2020. Despite this uptick, vacancy rates remain historically low, 50 basis points (bps) below the five-year average of 6%. The combination of rising vacancy rates, softening demand and mounting cost pressures on tenants led to a deceleration in rent growth, with asking rates climbing just 2.3% ($0.56) YOY, 41 cents below the average growth rate observed over the preceding 12 quarters. Despite asking rents remaining at or just below their record highs, recent rate escalations remain below the rate of inflation.

Overall Vacancy Rates and Segmented YOY Rent Growth Rate escalations have slowed after vacancy ticked up

8%

7%

6%

5%

4%

3%

2%

1%

0%

2017

2021

2015

2018

2019

2016

2022

2023

2025

2024

2020

Overall Vacancy Rate NNN Asking Rate: Power Center

NNN Asking Rate: Neighborhood Center

NNN Asking Rate: Strip Center

Source: CoStar, Cushman & Wakefield Research

16

Cushman & Wakefield