Retail real estate demand gained traction in the fourth quarter of 2025, achieving positive net leasing and sales, or absorption, of 11.9 million square feet, following net absorption of 5.2 million square feet in the third quarter, commercial real estate management firm JLL reported
The positive swing in the second half of 2025 cancelled out the negative net absorption witnessed during the first six months of the year.
JLL, a commercial real estate and investment management firm, noted that retail and similar businesses leasing the most space in the 2025 fourth quarter were Crunch Fitness, Rural King, Planet Fitness, Burlington Stores, TJX Cos. and The Kroger Co. Retail rents increase most sharply in Charlotte, NC at 7.8%, Nashville at 5.4%, Phoenix at 5.2%, Orlando at 5.2% and Minneapolis at 4.7%.
Overall, analysis of the retail real estate market as it exists today faces complexity. JLL reported the retail construction pipeline is still constrained as development economics continue to face challenges. Projects that broke ground in the fourth quarter of 2025 fell 44% from the period a year earlier to 7.1 million square feet. Fourth-quarter demolitions were modest at 1.4 million square feet. The practical effect is a continued squeeze on supply. In some areas, tenants might have fewer new choices, which may push them toward existing retail centers or waiting longer for the space they want.
Retailers that have plans to expand are grabbing appropriate available space quickly, JLL maintained, although flagging leasing volume suggests a mismatch between supply and demand. Total leasing volume dropped roughly 25% year over year, while the average time to lease ticked up slightly to 7.6 months from 7.4 in the year prior. One reason may be persistently low supply of high-quality space.
The 2025 retail investment market demonstrated growth, with transaction volumes reaching $60 billion, an increase of 27% versus 2024. Transaction volume in 2025 outpaced the long-term annual average of $54 billion. The fourth quarter saw $17 billion in investment, the largest final frame outlay in retail since the 2021 period.
In its outlook, JLL stated activity in the 2025 fourth quarter indicates the market remains tight, with vacancy in the low 4% range, asking rents still rising and net absorption positive. In the end, 2025 looked more like a normalization period, with absorption just above flat levels, according to JLL. For 2026, leasing should continue apace, yet quarterly performance may vary as retailers stay selective and activity remains concentrated in re-leasing and backfilling existing space rather than new development.
