International

Retail real estate adapts through redevelopment and strategic ownership amidst sector upheaval

Monday, 27 October 2025 5:03AM UTC

The retail real estate sector faces profound transformation with declining traditional retail spaces, rising rents, and a shift towards mixed-use developments and direct retailer ownership, reshaping the future of brick-and-mortar retail.

The retail real estate sector is currently navigating a period of marked transformation, characterised by closures, consolidation, and reinvention amid evolving consumer behaviour and economic pressures. The first half of 2025 saw the weakest leasing period since the pandemic, with U.S. retailers vacating nearly fifteen million more square feet of space than they occupied—a reversal of two years of steady growth. Notable closures include major chains such as Joann, Party City, Rite Aid, and Forever 21, with Walgreens planning to close approximately 450 stores by the end of 2025 and further closures anticipated through 2027. The fallout has extended to the store footprints of retailers acquiring bankrupt chains Claire’s and Big Lots, who have also shed multiple locations.

A stark illustration of the challenges facing brick-and-mortar retail is San Francisco Centre, a mall once among the Bay Area’s top performers with sales topping $1,000 per square foot. It now faces near-total vacancy, at 93%, and looming foreclosure after anchor tenants Nordstrom and Bloomingdale’s exited. The mall’s demise was less about the rise of ecommerce and more about a collapse in the local retail ecosystem, driven by pandemic lockdowns, surging crime, homelessness, and organised retail theft, all of which devastated foot traffic.

Yet, despite these setbacks, the end of physical retail is not imminent. Evaluating the broader market reveals resilience beneath the closures. National retail vacancy remains under 5%, its lowest level since the 1980s, although early 2025 saw net absorption dip below zero, meaning more space was vacated than leased. A crucial factor maintaining this relative stability is the limited emergence of new retail space—only 7.2 million square feet were added in Q2 2025, the lowest since the turn of the millennium. Developers face high hurdles from tariffs inflating steel and aluminium costs and elevated federal interest rates, which make financing costly.

This scarcity of new supply is underpinning high occupancy and record-setting asking rents, which nationally average $22.73 per square foot and are expected to grow at 3.1% per year through 2029. As new builds slow, focus is shifting to adaptive reuse and mixed-use redevelopment, breathing new life into ageing assets. Former enclosed malls are frequently being reimagined as open-air, mixed-use community hubs combining retail, residential, healthcare, and entertainment functions. These developments foster strong demand and sustained asset value.

Open-air centres, particularly neighbourhood and community formats, outperform with vacancy at a resilient 5.6%, compared to 10% plus in many regional malls. These centres evolve into 'third places' that balance commerce and community, anchored by grocery stores, personal services, gyms, medical suites, and flexible workspaces.

Changing consumer lifestyles also influence market dynamics. Generation Z, in particular, drives new retail formats by seeking social spaces centred on health and shared activities rather than traditional nightlife or passive shopping. This shift propels experiential retail, where brands like Coach, Ralph Lauren, and Gucci integrate cafés, workshops, and cultural experiences into their physical stores. Gucci’s combination of retail with hospitality ventures exemplifies this blending of commerce and community, transforming stores from mere points of sale into venues for social belonging.

Retailers themselves are increasingly taking direct stakes in their real estate, moving beyond mere tenancy toward ownership and active stewardship. Walmart’s acquisition of Monroeville Mall for $34 million to reconfigure it as a mixed-use destination blending retail, entertainment, hospitality, and residential components exemplifies this trend. Similarly, Dillard’s purchase of Longview Mall in Texas reflects concerns about absentee landlords and a strategic move to control its retail environment. Costco is spearheading a $425 million development in Los Angeles that combines a warehouse store with 800 apartments, including affordable housing, underscoring retail’s expanding role in community infrastructure. Meanwhile, IKEA’s purchase of Nike’s flagship SoHo store site involves blending small-format retail with office space, illustrating an urban adaptation.

Ownership of physical real estate increasingly underpins retail valuations. For example, Macy’s real estate holdings are estimated at $7.9 to $10.5 billion, surpassing its market cap of around $4.8 billion, highlighting a valuation gap attributed to discounts on its retail operations. Macy’s has acknowledged this disparity and plans to divest underperforming properties while considering redevelopment opportunities. In contrast, Dillard’s shows how owning retail real estate outright strengthens balance sheets without overshadowing the retail business, giving the company strategic flexibility, from leasing to redevelopment.

This pattern is echoed across the sector, with retail companies holding significant real estate interests better insulated from rising rents and capital costs, and empowered to leverage property assets as financing tools and avenues for growth. Public equity markets reinforce this narrative: Real Estate Investment Trusts (REITs) focused on retail report stability and growth, reflecting confidence in the sector. For instance, Kimco Realty achieved a record small shop occupancy of 92.2% in Q2 2025 and raised its full-year FFO guidance, while Simon Property Group reported a 4.2% increase in domestic net operating income supported by high occupancy and boosted dividends.

Investors continue to project strong returns, with retail REIT earnings forecast to grow by 7% annually in the near term, pointing to sustained cash flow confidence despite broader economic uncertainty. This underlines the retail sector’s evolution into a resilient, albeit redefined, asset class.

Amid these broad trends, specific retailer struggles reflect wider structural pressures. Joann, the longstanding fabric and crafts store with more than 80 years in business, serves as a recent example of retail distress. Initially planning to close 500 of its approximately 800 locations to “right-size” its footprint amid Chapter 11 bankruptcy due to weak consumer demand and inventory issues, Joann later announced it would close all remaining stores. Financial services firm GA Group and Joann’s lenders acquired most assets and are overseeing the wind-down process, which includes store closing sales with discounts up to 40%. As part of the bankruptcy arrangements, downstream operators like Burlington are set to take over leases of 45 former Joann locations, while other retailers such as Hobby Lobby and Boot Barn will acquire select sites. The closures underscore the challenges facing mid-sized specialty retailers amidst changing consumer habits and competitive pressures.

Overall, retail real estate is far from in terminal decline. The market today is a complex blend of contraction in legacy chains, strategic redevelopment, rising rents, and evolving consumer and retail formats. While brick-and-mortar retail confronts formidable challenges, it adapts by becoming more integrated with community life, social wellness, and mixed-use environments. The future of retail spaces will be measured less by square footage alone and more by their ability to anchor cultural experiences, serve evolving consumer needs, and sustain economic value in a changing landscape.

📌 Reference Map:

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Source: Noah Wire Services

More on this

https://therobinreport.com/retail-real-estate-redefined/ - Please view link - unable to able to access data
https://apnews.com/article/485cf78c580331beb6c58c2ae4f8fbfe - Joann, a fabric and crafts retailer, plans to close approximately 500 stores across the U.S., more than half of its 800 locations. This decision follows a Chapter 11 bankruptcy filing due to weak consumer demand and inventory issues. Founded in 1943, Joann has faced challenges like sluggish sales and increased competition, leading to significant debt. The closures aim to 'right-size' the company's store footprint during its sale process, with a proposed bid from Gordon Brothers Retail Partners. The impact on employees and precise closure dates remain uncertain.
https://www.reuters.com/business/retail-consumer/bankrupt-crafts-retailer-joann-closing-all-stores-2025-02-24/ - Joann Inc., a 80-year-old fabric and crafts retailer, has announced it will go out of business and close all its stores following a bankruptcy filing. The company, based in Hudson, Ohio, filed for Chapter 11 bankruptcy protection for the second time in a year, citing sluggish consumer demand and inventory shortages. Initially planning to shut down 500 stores, Joann will now close all locations after a recent auction where financial services company GA Group and Joann's term lenders were selected as the winning bidders. They will acquire most of Joann's assets and oversee the store closures. Final sale details and closure dates will be posted as the company completes its wind-down process, which is expected to take several weeks.
https://www.retailtouchpoints.com/features/news-briefs/joann-to-close-500-stores-as-it-seeks-to-right-size-physical-footprint - Joann has officially started closing sales at all of its 790 locations nationwide, according to a company press release. Customers will receive up to 40% off store merchandise, which includes crafting, sewing and home décor products, while supplies last. GA Group, the asset disposition, valuation, appraisal and real estate services firm, is managing the store closing process with Tiger Group as a joint venture. 'JOANN has been a beloved destination for makers and craft enthusiasts for more than 80 years,' said Tim Shilling of GA Group in a statement. 'As we begin this store closing process, our priority is to ensure an orderly wind-down of the retailer’s operations while providing customers with exceptional savings on their favorite crafting and home décor products. This sale is a great opportunity for shoppers to take advantage of these deep discounts before stores close.'
https://www.retailwire.com/joann-closing-all-stores/ - JOANN has decided to close all of its remaining stores. This news comes less than two weeks after the retailer revealed plans to shut down 500 of its 800 locations on Feb. 12, 2025. Despite efforts to restructure, including seeking a liquidator to purchase its assets, the beloved fabric and craft retailer could not be saved. This decision comes shortly after JOANN filed for Chapter 11 bankruptcy protection for the second time in a year. In early February, Axios shared a statement from the retailer regarding the initial closures. It reads, 'This was a very difficult decision to make, given the major impact we know it will have on our team members, our customers, and all of the communities we serve. A careful analysis of store performance and the company’s future strategic fit determined which stores would remain open at this time.'
https://www.retaildive.com/news/joann-closes-stores/736601/ - Over the past few months, Joann has moved to close a number of store locations across the United States. The retailer confirmed six locations to Retail Dive, including stores in Holyoke, Massachusetts, and Ithaca, New York. Those locations 'are being closed as part of routine store location evaluation and optimization,' Joann’s director of corporate communications, diversity and inclusion, Amanda Hayes, said in an email to Retail Dive.
https://www.retaildive.com/news/burlington-45-of-joanns-store-leases-bankruptcy/746764/ - Through the craft retailer’s bankruptcy, Burlington will assume the leases of 45 Joann store locations, according to a court filing on Monday. Burlington will take over the leases in May and June, with locations across the country in states such as California and Texas. The proposed cure amounts (typically the amount needed to make good on a defaulted loan or contract) for the locations range from $0 to over $50,000, and a few other locations will be taken over by companies including Hobby Lobby and Boot Barn.

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 7

Notes: The narrative presents recent developments in the retail real estate sector, including store closures by major retailers like Joann and Macy's, and the transformation of properties such as San Francisco Centre. However, similar themes have been reported in the past, with Macy's announcing store closures in January 2025 ([247wallst.com](https://247wallst.com/investing/2025/01/13/faltering-macys-to-close-66-stores-with-new-york-florida-and-california-hit-hard/?utm_source=openai)) and Joann filing for Chapter 11 bankruptcy in early 2025 ([emacromall.com](https://emacromall.com/category/departments-table.html?utm_source=openai)). The report includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. Additionally, the report cites The Robin Report, a publication known for aggregating content from other sources, which may indicate a lower freshness score. The earliest known publication date of substantially similar content is January 13, 2025.

Quotes check

Score: 8

Notes: The narrative includes direct quotes from various sources, such as Macy's CEO Tony Spring and references to Gucci's retail strategies. These quotes appear to be original and not found in earlier material, suggesting a higher originality score. However, without access to the full text of the original sources, it's challenging to verify the exact wording and context of these quotes.

Source reliability

Score: 6

Notes: The narrative originates from The Robin Report, a publication known for aggregating content from other sources. While it provides a comprehensive overview, the reliance on aggregated content may affect the reliability score. The report also references reputable organizations like Macy's and Gucci, which adds credibility.

Plausability check

Score: 7

Notes: The claims about store closures, property transformations, and strategic shifts in the retail sector are plausible and align with known industry trends. However, the narrative lacks specific factual anchors, such as exact dates and detailed figures, which would strengthen its credibility. Additionally, the tone and language used are consistent with industry reports, suggesting authenticity.

Overall assessment

Verdict (FAIL, OPEN, PASS): OPEN

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary: The narrative presents plausible and timely information about the retail real estate sector, with some original quotes and references to reputable organizations. However, the reliance on aggregated content from The Robin Report and the lack of specific factual anchors raise concerns about its originality and completeness. Further verification of the sources and inclusion of more detailed data would enhance the credibility of the report.

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