Shopping-center owner Sandy Sigal groaned when he found out that the bankrupt home-goods retailer Big Lots was closing its location at his Whittier, Calif., strip center.
He knew it wouldn’t be easy to replace Big Lots, which had attracted shoppers from the surrounding neighborhoods to the property.
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“In today’s slowdown, as good of a location as this is, it’s taking longer,” said Sigal, who is chief executive of shopping-center owner and developer NewMark Merrill Companies. “People are saying, ‘I’m on pause.’”
The retail-property market’s multiyear rebound is fizzling, buffeted by large retailer bankruptcies, shoppers pulling back and tariff turmoil that is slowing demand for store space.
Retailers vacated nearly 6 million more square feet than they occupied during the first three months of the year, according to real-estate firm Cushman & Wakefield. That marked the weakest quarter for shopping-center leasing since the onset of the pandemic in 2020.
The slowdown follows a rise in store closures that began in the second half of last year as struggling pharmacy chains such as CVS Health and Walgreens downsized their fleets. Bankrupt big-box retailers such as Party City, Big Lots and craft-supply company Joann are also closing hundreds of locations.
In 2024, retailers across the U.S. closed about 1,300 more stores than they opened, according to Coresight Research. That ended a two-year streak of net expansion.
The rest of this year looks challenged, said James Bohnaker, senior economist at Cushman & Wakefield, who pointed to inflation fatigue among shoppers and uncertainty hovering over the economy and stock market.
“People are spending less,” Sigal said. Sales have flattened at his shopping centers, particularly at sit-down restaurants, even though foot traffic remains robust.
Concern over tariffs’ impact has some retailers who were looking to sign new leases hitting the pause button.
“We have had people say, ‘OK, we’ve got to wait and see what’s going to happen before I commit,’” said Brandon L. Singer, chief executive of retail leasing and advisory firm MONA Retail Holdings.
The overall retail sector is still on solid footing, with vacancy near historic low levels and few developers building new shopping centers to compete with existing real estate.