Retail has held up better than many expected in the post-pandemic era, but the next 12–18 months will test how robust that strength really is. The cooling labor market, rising consumer debt, and looming tariff-driven inflation pose real risks. Yet even in that more hostile environment, retail real estate possesses structural advantages—diversified tenant demand, constrained supply, and adaptability—that should allow it to endure.

1. A Moderating Labor Market, Not a Collapse

   The labor market is indeed decelerating. Job openings are down, and wage growth has slowed relative to last year. Still, the unemployment rate stayed at 3.8 % in August 2025, according to BLS data, which continues to provide some support to consumer income.

   In retail real estate, this means spending may soften—but it’s not collapsing. Centers anchored by essential services, grocers, and discount-oriented tenants stand to fare relatively better when discretionary budgets tighten. Unless unemployment spikes significantly, many tenants should maintain enough liquidity to service rent payments.

2. Rising Consumer Debt, But Shifting Spending Behavior

   With credit card debt reaching $1.21 trillion as of mid-2025, marking one of the highest levels on record, consumers are clearly feeling pinched.  Still, the story isn’t about collapse—it’s about adaptation. Consumers are reprioritizing purchases: fewer luxury indulgences, more value buys, and a cautious approach to non-essential categories. That behavior favors value-format retailers, QSRs, dollar chains, and discounters—tenants that often anchor resilience in community shopping centers.

3. Tariff-Driven Inflation Will Stretch Margins, Not Break Demand

   With the prospect of new or reinstated tariffs in 2026, inflation pressures may intensify again, especially in goods-oriented retail categories. That said, many retailers have already built buffer pricing flexibility. Retailers will pass on some of this cost to consumers, which will be a challenge to many households but also a boost to retailers that can maintain value oriented pricing, like those in Big V’s power center portfolio.

   From a property standpoint, moderate inflation can support nominal topline growth (i.e., reported sales in dollar terms) even if volumes are flat. If throughput doesn’t collapse, sales-per-square-foot can remain stable or even tick upward, preserving rent-to-sales ratios in many retail leases.

4. Supply Discipline: The Structural Foundation

   One of retail’s protective features is supply constraint. As of Q1 2025, the national retail vacancy rate stood at just 4.2 %, up only modestly year-over-year and still near historic lows. In many markets, vacancy for community and neighborhood centers is even lower—often in the 3–5 % band according to recent reports from CBRE.

   Because speculative retail construction remains limited (often measured in single-digit millions of square feet across markets), landlords retain pricing power even if tenant demand softens. With very little competing new stock, even modest leasing activity can help stabilize occupancy and slow rent erosion.

5. Tenant Diversity, Efficiency & Strategic Adaptation

   Retailers today are leaner and more strategic. Many operate with just-in-time inventory, agile pricing engines, and stronger online/offline integration. That helps them respond quickly to shifts in demand.

   Additionally, tenant demand is broad. Grocery, fitness, medical, pet services, wellness, and discount retailers remain active. For example, according to JLL Research, in 2025 investment volumes in U.S. retail real estate jumped ~23 % year-over-year to ~$28.5 billion, reflecting confidence in mid- and long-term fundamentals.

   This diversity helps insulate properties from shocks concentrated in any single retail vertical. The presence of more stable, necessity-based tenants can act as an anchor when cyclical uncertainty bites.

6. The Investor Takeaway: Durability Over Momentum

   Retail isn’t likely to deliver explosive returns in the next year—but it doesn’t need to. Its strength lies in steady income and relative resilience. Despite macro uncertainty, vacancy remains low, tenant composition is more defensive, and properties generally enjoy stable cash flow profiles.

   In Q2 2025, the U.S. retail vacancy rate rose only 10 basis points to 4.3%, despite several high profile junior anchor bankruptcies.

Investors seeking lower beta in commercial real estate are increasingly favoring grocery-anchored, open-air, and necessity-based centers. These assets may not generate headline-grabbing performance, but their structural durability gives them appeal in a volatile cycle.

Yes—the shadows ahead are real. A weakening labor market, elevated consumer debt, and renewed inflation pose risks. But retail real estate enters 2026 with notable defenses: constrained supply, adaptable tenants, diversified demand, and structural income stability.

It’s not about expecting retail to escape unscathed—it’s about believing it can weather the turbulence better than most. In the coming cycle, the strength of retail will lie not in growth surprises, but in its ability to absorb pressure and hold value.