Q3 2025 Market Outlook
By Dusty Batsell
The U.S. economy held steady in the third quarter, demonstrating resilience amid prolonged geopolitical tensions, tariff policy volatility, and signs of a softening labor market. These macroeconomic factors further compounded by a U.S. government shutdown early in the fourth quarter introduce potential headwinds that may test the economy through the remainder of 2025 and beyond. Despite this backdrop, the retail real estate sector continues to outperform, supported by resilient consumer spending, sustained demand for retail space, and minimal new development.
Quarterly GDP growth rose to approximately 4.0%, driven by strong corporate earnings and steady personal consumption despite ongoing trade tensions and slightly higher inflation readings. While unemployment remained at historically low levels, the labor market softened, and prior reports were revised downward, indicating more cautious hiring trends. Large-scale layoffs were limited, suggesting employers are maintaining their workforce as they navigate economic uncertainty and assess long-term AI-related investments. In response to cooling labor conditions, the Federal Reserve cut interest rates by 25 basis points and signaled the possibility of further easing.
Limited speculative construction, thwarted by elevated development costs, has further constrained supply. And research indicates that rents would need to rise significantly to justify new development, suggesting that landlords should face minimal competitive pressure from new supply for the foreseeable future.
Moving forward, strong sector fundamentals, steady demand tailwinds, and constrained new supply continue to create a favorable environment for retail real estate. Market participants are prioritizing strategic expansion, operational excellence, and long-term value creation as the industry prepares for the opportunities and challenges of 2026.