Q4 2025 MARKET OUTLOOK

Q4 2025 Market Outlook

By Dusty Batsell

2025 will likely be remembered as one of the more notable years in recent U.S. economic history. Despite geopolitical volatility, shifting tariff policies, and sweeping fiscal legislation, the economic slowdown widely anticipated at the start of the year never materialized. Instead, the U.S. economy demonstrated resilience, supported by steady job growth, low unemployment, stable consumer spending, moderating interest rates, and continued retail expansion.

In the fourth quarter, the economy continued to expand despite a prolonged government shutdown. GDP growth remained strong, supported by healthy consumer demand and significant capital investment in artificial intelligence and other technologies. While employment growth moderated compared to prior years, the national unemployment rate ended 2025 at 4.4%, a level considered healthy by historical standards. In response to evolving labor market expectations, the Federal Reserve implemented two 25-basis point rate cuts during the quarter, helping to sustain economic momentum heading into 2026.

Although sectors such as manufacturing and housing faced ongoing headwinds, retail real estate stood out for its strengthening fundamentals. Improved clarity around tariffs, steady consumer spending, and limited new construction contributed to robust leasing activity in Q4. Net absorption reached its highest quarterly level in two years, while vacancy declined to 4.8% across retail properties nationwide (6.7% for Neighborhood Shopping Centers) [1]. New construction fell to historically low levels, with the development pipeline representing just 0.3% of existing inventory, reflecting the continued financial challenges of speculative retail development [2].

This constrained supply environment, combined with stable consumer demand, positions the retail real estate sector for a period of sustained stability. With limited new space coming online and vacancy remaining low, the sector enters 2026 supported by strong fundamentals and a balanced supply-demand dynamic.

Looking ahead, the broader economic foundation established in 2025 characterized by resilient growth, moderated inflationary pressures, and steady employment, provides a constructive backdrop for continued performance across well-located retail assets nationwide.

[1] CBRE Figures US Retail Q4 2025
[2] Cushman & Wakefield MarketBeat US Retail Q4 2025