Over the past several years, the retail industry has been rocked by seismic shifts in consumer behavior, technological disruption, and a reimagining of the traditional brick-and-mortar model. Nowhere is this transformation more evident than in the unprecedented wave of store closures reported over the past year. With more than 9,900 closures announced—outpacing new store openings by over 2,000—the industry finds itself at a crossroads. Even as national retail vacancy rates hover at a near-historic low of 4.1%, experts warn that these closures are set to unleash more than 140 million square feet of available retail space by 2025. This article examines the data, dissects the industry trends, and explores how landlords and investors are pivoting to cater to an era increasingly dominated by experiences over traditional retail goods.
The Retail Closure Phenomenon: A Ticking Time Bomb?
At first glance, the retail environment might appear paradoxical. On one hand, vacancy rates are exceptionally low—a signal that, at a national level, demand for retail space remains strong. On the other, the sheer volume of announced store closures is unprecedented. Over the past year alone, more than 9,900 retail outlets have shuttered their doors. This number, which surpasses new openings by a margin of over 2,000, suggests a net contraction in the operational retail footprint that could dramatically reshape the commercial landscape.
Several factors contribute to this phenomenon. The continued rise of e-commerce, shifting consumer preferences, and the aftershocks of the global pandemic have forced retailers to re-examine the viability of large, traditional storefronts. In an era where consumers increasingly value convenience and experiential shopping, many legacy brands find themselves unable to justify the overhead of maintaining physical locations that no longer serve their bottom line. As a result, the market is bracing for a surplus of retail space that could exceed 140 million square feet by 2025—a staggering figure that raises questions about the future of malls, high streets, and suburban shopping centers alike.
Spotlight on Drugstores: When Convenience Meets Crisis
Drugstores, long considered the backbone of the retail ecosystem, are bearing the brunt of this transformation. Traditionally positioned as convenient hubs for everything from prescriptions to everyday essentials, these outlets have been hit particularly hard by market consolidation and changing consumer expectations. In a telling example, Walgreens announced in October plans to close 1,200 stores over the next three years. The implications are profound: as one of the nation’s most recognizable brands, Walgreens’ contraction sends ripples throughout the industry.
CVS, another titan in the drugstore space, has already shuttered 900 locations between 2022 and 2024. With speculation mounting that further closures could follow in 2025, the picture becomes increasingly bleak. Rite Aid, meanwhile, has closed over 800 stores since filing for bankruptcy in 2023, underscoring how financial distress can accelerate market exits. These closures are more than mere statistics; they represent a strategic pivot away from traditional retail models in favor of digital platforms and innovative fulfillment methods that reduce the need for physical footprints.
While some might view these numbers as indicative of an industry in freefall, a more nuanced perspective suggests that they are symptomatic of a broader realignment. As drugstores and similar retailers downsize, they are simultaneously investing in digital transformation and reconfiguring their physical assets. In some cases, the closure of underperforming stores is part of a deliberate strategy to concentrate resources on high-yield markets and digital infrastructure. Nonetheless, the aggregate effect is a radical reordering of the retail landscape that investors and commercial real estate professionals must navigate with caution.
The Domino Effect: Other Major Retailers and Sectoral Impacts
Drugstores are not alone in this tumultuous phase. Other mass retail closures have added momentum to what some analysts refer to as the “retail apocalypse 2.0.” For instance, Party City has announced the shuttering of 700 stores, while Big Lots has exited over 500 locations—a trend that signals not only the challenges of traditional retail but also the fierce competition from online giants. Even venerable department store chains like Macy’s are not immune. With Macy’s planning to close 150 locations over the next three years, the industry is witnessing a steady erosion of familiar brands.
These closures, when aggregated, suggest that the total number of store shutdowns could reach 15,000 by 2025. Such a dramatic contraction is poised to redefine the commercial real estate market. With empty spaces accumulating at an unprecedented rate, landlords and investors are confronted with the dual challenge of managing underutilized assets and repositioning them in a market that is rapidly evolving. The traditional model—one that once prized high visibility and heavy foot traffic—is giving way to a new paradigm that emphasizes flexibility, diversification, and, increasingly, experiential value.
The Commercial Real Estate Conundrum: A Crisis of Oversupply
The looming surplus of over 140 million square feet of retail space is not just a number to be marveled at; it represents a fundamental shift in supply-demand dynamics for commercial real estate. Retail vacancies, though currently low at a national average of 4.1%, are about to experience a seismic shift. This discrepancy between a seemingly healthy vacancy rate and the forecasted explosion in available space is largely due to the scale and pace of closures across the industry.
For commercial real estate investors and landlords, this presents both a risk and an opportunity. On the one hand, an oversupply of retail space could depress rental rates and diminish asset values, especially in markets that have historically relied on steady, long-term leases from large retail chains. On the other hand, it creates a fertile ground for innovation. Savvy landlords are now rethinking the tenant mix and exploring how to transform these underutilized spaces into vibrant hubs that cater to evolving consumer demands.
Recent leasing activity underscores this strategic pivot. In 2024, food and beverage chains accounted for 21% of new leasing activity in the retail sector, with global brands like McDonald’s and Chipotle leading the charge. These establishments have long understood that consumers are drawn not just to food but to the experience that accompanies it—a comfortable atmosphere, social engagement, and an immersive brand environment. Similarly, fitness concepts such as Planet Fitness and Club Pilates now claim 12% of new leasing deals, tapping into the growing consumer emphasis on wellness and community engagement.
The Rise of Experience-Driven Leasing: A New Tenant Mix
In a market defined by rapid change, the tenants filling vacant retail spaces are evolving from traditional retailers to experience-driven brands. This shift is fueled by a fundamental change in consumer behavior. Where once the focus was on product selection and price comparison, today’s consumers are increasingly seeking out experiences that offer social interaction, entertainment, and wellness benefits. Landlords are acutely aware of this trend and are recalibrating their leasing strategies accordingly.
Food and beverage establishments are at the forefront of this transformation. The 21% share of leasing activity attributed to these tenants in 2024 is not coincidental. As consumer spending on dining and leisure increases, even amidst broader economic uncertainty, brands such as McDonald’s and Chipotle have proven their resilience. Their ability to draw consistent foot traffic—and to create memorable experiences—has made them attractive partners for retail landlords seeking to counterbalance the void left by traditional retailers.
Fitness and wellness brands have also emerged as key players in this new retail ecosystem. With 12% of new leasing activity in 2024 going to fitness concepts like Planet Fitness and Club Pilates, it’s clear that health and wellness are no longer peripheral concerns but central to consumer lifestyles. These brands offer more than just exercise; they foster communities, encourage healthy habits, and create destination spaces where consumers can socialize and unwind.
In addition to these sectors, healthcare providers, including urgent care facilities and dental offices, have carved out a 6% share of the new lease market. This trend reflects broader demographic shifts and the increasing importance of convenient, accessible healthcare services. As consumers prioritize health and wellness, integrated service models that combine medical care with retail convenience are becoming more prevalent. This diversification of tenant types not only helps landlords mitigate risk but also positions retail spaces as essential community hubs that blend commerce, care, and experience. Investment Grade Healthcare provides a more detailed overview of NNN Healthcare tenant types and investment opportunities.
Even the world of niche retail is experiencing a renaissance. With the rise of specialty grocers and even unconventional concepts like pickleball-focused venues, empty spaces are being repurposed in innovative ways that challenge the traditional definition of retail. The success of these ventures is a testament to the adaptability of the retail sector—and to the ingenuity of landlords and developers who are reimagining what retail can be in a post-digital age.
The Dollar Store Domination: Capitalizing on Vacated Pharmacies
As many well-known retail brands retreat from the physical space, dollar stores are capitalizing on the void left behind, particularly in the drugstore segment. In the past year alone, Dollar Tree has snapped up 300 vacated Walgreens locations—a clear signal that these budget-friendly retailers see opportunity where traditional brands see decline. Not to be outdone, Dollar General has announced plans to open 800 new stores early in 2024, further cementing its role as a dominant force in the market.
This aggressive expansion by dollar stores underscores a broader trend: while many traditional retailers are grappling with high operating costs and shifting consumer preferences, discount chains are thriving. The value proposition offered by dollar stores resonates with a wide swath of consumers, particularly in an era of economic uncertainty and rising living costs. Their ability to rapidly fill empty spaces, often in locations formerly occupied by high-profile drugstores, provides an interesting counterpoint to the overall narrative of retail decline.
For commercial landlords, this trend presents a dual-edged sword. On one hand, partnering with established discount retailers can provide immediate occupancy and steady cash flow. On the other, the proliferation of low-margin tenants may impact the overall prestige and long-term appreciation of a retail property. Nonetheless, the rapid growth of dollar store chains is a clear indicator of how the retail landscape is being reconfigured—not simply through the exit of legacy brands, but through the emergence of new, value-driven players that appeal to a broad demographic.
Consumer Behavior in Transition: From Goods to Experiences
Underlying these shifts in leasing and tenant mix is a profound transformation in consumer behavior. The modern shopper is no longer satisfied with a transactional exchange; instead, they demand an experience that combines convenience, social engagement, and emotional connection. This change is not limited to any one segment of the retail industry—it spans across food, fitness, healthcare, and even discount retailing.
Several factors are driving this transition. The rise of social media and the proliferation of digital platforms have fundamentally altered how consumers interact with brands. Experiences are now shared in real time, and the demand for authentic, memorable interactions has never been higher. For younger consumers in particular, the value proposition of a shopping trip is increasingly measured in terms of the overall experience rather than the mere acquisition of goods.
Moreover, the economic environment—marked by fluctuating consumer confidence, inflationary pressures, and changing employment landscapes—has led many shoppers to prioritize value and experience over material accumulation. Studies indicate that while consumers continue to invest in physical products, there is a growing willingness to spend on dining, fitness, and other lifestyle services that offer both immediate gratification and long-term health benefits. This behavioral shift has forced retailers and landlords alike to rethink their business models, pivoting toward offerings that create lasting, intangible value.
In response, landlords are revising lease structures and reconfiguring their spaces to foster community engagement. Mixed-use developments that combine retail with entertainment, fitness, and even healthcare services are emerging as the new norm. These developments not only attract diverse consumer groups but also offer a buffer against the volatility that has characterized traditional retail leasing over the past decade. By creating vibrant, multi-use environments, landlords can leverage the power of experience-driven consumption to drive traffic and enhance the long-term viability of their properties.
Data-Driven Analysis: The Metrics Behind the Shift
A closer look at the numbers provides a compelling narrative for the future of retail. The fact that store closures have outpaced openings by more than 2,000 units in the past year is a stark indicator of systemic change. Furthermore, projections suggest that available retail space could swell by over 140 million square feet by 2025—a figure that not only highlights the scale of contraction but also points to a fundamental rebalancing of supply and demand.
Key metrics in the industry reinforce this outlook. For example, the national retail vacancy rate stands at a near-historic low of 4.1%, a figure that belies the dramatic churn occurring within individual markets. While high-traffic urban centers and upscale shopping districts continue to command premium rents and occupancy rates, mid-tier and suburban retail locations are witnessing accelerated closures and declining lease renewals. This divergence is driving landlords to re-examine the viability of traditional retail leases and to consider alternative tenant profiles that can generate consistent revenue in a more volatile market.
Market research indicates that investors are increasingly factoring in nontraditional metrics such as customer dwell time, experiential value, and social engagement when assessing the potential of retail spaces. These metrics, once considered peripheral to the core business model, now play a central role in shaping leasing strategies. For instance, properties that can successfully attract high-traffic food and beverage tenants or offer dedicated spaces for community-oriented activities are seeing higher occupancy rates and more favorable lease terms. In contrast, properties heavily reliant on legacy retailers with high overhead costs are facing steeper declines in both rental rates and market valuations.
Adapting to a New Paradigm: How Landlords and Investors Are Responding
The retail landscape’s rapid transformation has compelled commercial landlords and real estate investors to rethink their asset strategies. Gone are the days when long-term, single-tenant leases from traditional retailers could guarantee stable returns. Today’s market demands agility, diversification, and a keen understanding of evolving consumer trends. Landlords are now actively pursuing tenant mixes that combine reliable foot traffic with the promise of experiential engagement.
One emerging strategy is the conversion of underperforming spaces into multi-use facilities. Many property owners are investing in the redevelopment of aging shopping centers to include co-working spaces, community centers, and even healthcare facilities. These mixed-use developments not only reduce the reliance on a single retail tenant but also create an ecosystem that fosters repeat visits and community loyalty. By integrating dining, fitness, healthcare, and entertainment within a single property, landlords can offer a value proposition that resonates with modern consumers.
Investors are also turning their attention to the potential upside in the oversupply of retail space. While an abundance of vacant space may initially signal distress, it also represents a pool of assets ripe for repositioning. The influx of dollar stores and other discount retailers into spaces vacated by legacy brands creates a unique arbitrage opportunity for those willing to take a long-term view. By acquiring these properties at depressed prices and then re-tenanting them with high-demand, experience-driven brands, investors can generate attractive returns even in a seemingly saturated market.
Furthermore, technology is playing an increasingly important role in this transformation. Data analytics, artificial intelligence, and predictive modeling are being deployed by both landlords and retailers to optimize tenant mix, forecast demand, and tailor leasing strategies to specific market dynamics. These tools enable real-time adjustments to lease terms, marketing strategies, and even property layouts—ensuring that assets remain competitive in an environment defined by rapid change and shifting consumer expectations.
The Broader Economic Implications
Beyond the immediate impacts on the retail and real estate sectors, the current wave of store closures has broader economic implications. For communities that have long relied on retail as a primary source of employment and economic activity, these closures represent a significant challenge. Retail jobs, while often low-wage, provide vital entry points into the workforce and support a host of ancillary services ranging from logistics to maintenance.
As major retailers downsize or exit local markets, there is a risk that affected communities could face higher unemployment rates and reduced consumer spending power. This, in turn, could create a feedback loop where diminished economic activity leads to further closures and a downward spiral in local business ecosystems. Policymakers, urban planners, and community leaders will need to work collaboratively to mitigate these impacts. Strategies may include investing in workforce retraining programs, incentivizing mixed-use development projects, or even repurposing vacant retail spaces into community centers, educational facilities, or affordable housing.
At the same time, the shift toward experience-driven retail and mixed-use developments offers a glimmer of hope. By reimagining vacant spaces as hubs for community interaction, innovation, and even healthcare delivery, local governments and private investors have the opportunity to transform a looming crisis into a catalyst for economic revitalization. In many ways, the current transformation in retail could serve as a blueprint for how communities adapt to broader economic shifts in the 21st century—balancing the imperatives of innovation, sustainability, and inclusivity.
Consumer Confidence and the Role of Digital Integration
One of the most critical factors underpinning the shift in retail is the integration of digital technology into every facet of the consumer experience. While the physical storefront is in flux, digital platforms have emerged as the primary interface between brands and consumers. E-commerce giants have long dominated the digital space, but traditional retailers are now leveraging online channels to complement—and in some cases, supplant—their physical presence.
Digital integration is not just about creating an online store; it’s about building a seamless omnichannel experience that bridges the gap between the digital and physical worlds. Retailers are investing in mobile apps, personalized marketing, and data analytics to better understand consumer behavior and tailor their offerings accordingly. This digital pivot is critical not only for attracting tech-savvy consumers but also for enhancing the overall shopping experience. For instance, in-store digital kiosks, interactive displays, and mobile payment systems are becoming commonplace, transforming what was once a simple transaction into an engaging, multi-sensory experience.
In a similar vein, landlords are exploring the concept of “smart buildings” where data-driven insights inform everything from energy consumption to foot traffic analysis. By integrating sensors, AI-driven analytics, and real-time monitoring systems, property managers can optimize space utilization and even predict which areas are most likely to attract high-quality tenants. This technological synergy between digital retail and smart real estate is setting the stage for a new era in commercial property management—one where every square foot is optimized for maximum consumer engagement and profitability.
Looking Ahead: The Future of Retail Leasing in 2025 and Beyond
As we peer into the future of retail leasing, several key trends are poised to dominate the landscape. The surge in store closures, coupled with the rapid expansion of experience-driven tenants, will continue to reshape both the retail and commercial real estate sectors. For traditional retailers, the imperative is clear: adapt or become obsolete. The digital revolution, changing consumer behaviors, and the economic pressures of maintaining large physical footprints mean that the old model is no longer sustainable. Instead, retailers must reinvent themselves by embracing technology, optimizing their physical presence, and focusing on experiential engagement.
For commercial landlords and investors, the challenges and opportunities are equally stark. The forecasted surplus of retail space represents not just a risk of depreciating assets, but also an unprecedented opportunity for repositioning and value creation. By partnering with tenants who offer not only products but also memorable experiences, landlords can transform vacant corridors into vibrant community hubs. This strategy requires a deep understanding of market trends, flexible lease structures, and a willingness to experiment with innovative property configurations.
Moreover, the rise of nontraditional tenants—from discount chains to healthcare providers—signals a broader redefinition of what constitutes “retail.” As traditional definitions blur, the boundaries between retail, services, and even community infrastructure are becoming increasingly porous. This convergence is not merely a reaction to current challenges; it represents a fundamental evolution in how consumers live, work, and interact. Retail spaces are morphing into platforms for social engagement, wellness, and even civic interaction—a trend that is likely to accelerate in the coming years.
Strategic Implications for Investors and Stakeholders
For investors with a stake in commercial real estate, the unfolding retail transformation offers several strategic imperatives. First, portfolio diversification is key. Relying solely on legacy retail tenants in an environment characterized by high volatility could expose investors to significant risk. Instead, a balanced portfolio that includes experience-driven tenants—ranging from fast-casual dining and fitness centers to healthcare and community services—can offer more resilient revenue streams.
Second, long-term planning must now incorporate flexibility. The traditional model of long-term, inflexible leases is giving way to dynamic agreements that allow landlords to adjust terms as market conditions evolve. This may include shorter lease durations, performance-based incentives, or even revenue-sharing models that align the interests of landlords and tenants. Such innovative approaches not only mitigate risk but also position properties to capitalize on emerging trends more rapidly.
Third, location remains paramount. While the overall retail space may be increasing in volume, not all square footage is created equal. High-traffic urban centers and lifestyle destinations are likely to command premium rents and sustained consumer interest, whereas underperforming suburban areas may face prolonged periods of vacancy. Investors and landlords must therefore be discerning in their acquisitions and redevelopment strategies, focusing on properties that offer the greatest potential for transformation into mixed-use, experience-driven hubs.
A Cautious Optimism: Balancing Risk and Opportunity
Despite the dramatic shifts underway, it is important to acknowledge that the retail industry is no stranger to cycles of disruption and renewal. The current wave of closures, while significant, is part of a longer-term evolution that has been in motion for decades. Retailers and landlords that embrace change, invest in innovation, and reimagine the consumer experience stand to benefit from the challenges that others see as insurmountable obstacles.
The transformation of retail is not a zero-sum game. While some brands and tenants may falter, others are poised to emerge as leaders in a new era of consumer engagement. The rise of dollar stores, the expansion of fitness and healthcare providers, and the ongoing evolution of digital integration all point to a future where retail is defined not solely by transactions, but by the quality of the consumer experience. For stakeholders—from investors and landlords to policymakers and community leaders—the challenge lies in harnessing this momentum to create environments that are both economically viable and socially enriching.
Concluding Thoughts: Embracing the Future of Retail
As we approach 2025, the retail landscape stands at a pivotal juncture. The headline-grabbing figures—9,900 store closures in the past year, a projected 140 million square feet of vacant retail space, and the retreat of legacy brands like Walgreens, CVS, and Macy’s—paint a picture of an industry in flux. Yet beneath these dramatic numbers lies a more nuanced narrative: one of transformation, adaptation, and the emergence of a new retail paradigm centered on experience-driven engagement.
For brands, the imperative is clear: evolve or risk obsolescence. For landlords and investors, the opportunity is to reimagine vacant space as dynamic, multi-use environments that resonate with today’s consumer. And for communities, the challenge is to harness this transformation to revitalize local economies, create new jobs, and foster social connections. The era of static retail is ending, replaced by a vibrant, hybrid model that merges commerce, community, and experience in ways that were once unimaginable.
As we look ahead, the success stories will belong to those who recognize that every closure, every vacant square foot, is not just a sign of decline but also an invitation to innovate. In navigating this new reality, stakeholders across the board must remain agile, data-driven, and relentlessly focused on the evolving needs of consumers. Only then can they transform challenges into opportunities and build a retail landscape that is as dynamic and multifaceted as the communities it serves.
