The U.S. retail real estate sector has a promising outlook in 2025, though potential economic headwinds exist with interest rate uncertainty and the unpredictable impacts of proposed tariffs, according to a national investment forecast from Marcus & Millichap.
The research services division of Marcus & Millichap, a commercial real estate brokerage firm, sees several property performance trends driving retail property investment this year.
The company notes that core retail sales rose 3.4% year over year in 2024, outpacing core inflation, as measured by the consumer price index. And retail foot traffic rose across property types in 2024, including shopping centers, supermarkets and restaurants. With a 5.7% increase in foot traffic, gyms and fitness centers saw the biggest gains, reflecting Gen Z’s prioritization of health and fitness, according to Marcus & Millichap.
But the researchers caution that despite consumer resiliency last year, a rise in inflation could curb retail spending. Notably, Marcus & Millichap is concerned about the potential impacts the Trump administration’s increased tariffs on goods from China and proposed tariffs on goods from Canada and Mexico could have on household budgets.
“The new tariffs could raise inflation by half a percentage point or more, potentially reaching the mid-3% range,” the research report states. “Stubborn or potentially rising rates of inflation would restrict many households’ spending power at a time when consumer debt is at an all-time high.”
Marcus & Millichap expects an uptick in bankruptcy filings among retailers in 2025, with year-over-year store closures projected to double this year. However, the company also predicts sufficient demand from competitors to quickly fill those spaces.
Among individual markets, Marcus & Millichap anticipates that several Sun Belt cities will have the strongest revenue growth for retail property owners. Orlando, Fla., claimed the top spot in the company’s rankings, followed by Raleigh, N.C.; Tampa-St. Petersburg, Fla.; Miami-Dade County, Fla.; and Dallas-Fort Worth, Texas, to make the top five.
Orlando has the top household formation rate and revenue growth in the country, according to Marcus & Millichap. The company observes that international tourism is on the rise in the Florida city that is home to multiple theme parks, and local population gains have increased the demand for supermarkets and other essential retailers.
