Retail Market Update – Q2 2025 – Nationwide Overview & Nashville Highlights

Q2 2025 Market Overview

Nationwide

• Cap Rates Hold Steady as Sales Rebound: Retail sales volume reached $59.8B over the past 12 months, up more than $200M from Q2 2024. The average sale price rose $20/SF from last quarter to $228/SF—the largest single-quarter gain since 2018. Cap rates remained stable, signaling increased buyer confidence.
• Leasing Slows, Small Format Remains Active: National vacancy rose to 4.30%, with –7.5M SF of net absorption—the second consecutive quarter of negative demand. Still, small-format leasing remains strong: two-thirds of 2025 leases have been under 2,500 SF.
• Rent Growth Decelerates, But Supply Remains Tight: Asking rents reached $25.41/SF, up 2.07% YoY, the slowest pace in years. Despite softening, supply remains historically constrained, especially in high-demand Sun Belt markets.
• Construction Activity Remains Low: Only ~5M SF of retail broke ground in Q2, extending the trend of limited new development. High costs and labor shortages continue to challenge feasibility.
• Policy Tailwinds Support Retail Investment: The return of 100% bonus depreciation offers new incentives for improvement-heavy assets. Steady job growth and consumer spending have helped sustain momentum amid macro uncertainty.

Nashville

• Vacancy Holds Firm, Demand Persists: Nashville retail vacancy stayed low at 3.2%, more than 100 bps below the national average. Net absorption was modest at ~17K SF, but demand remains steady—especially in infill and small-bay spaces.
• Rent Growth & Investment Activity Outperform: Asking rents climbed to $29.34/SF, up 4.8% YoY, outpacing national trends. Annual sales exceeded $1B, marking five consecutive quarters of growth, led by private buyers.
• Tight Supply, Aging Inventory Create Opportunity: No new space delivered in Q2; just 723K SF is under construction. Nearly 43% of retail inventory was built before 1980, highlighting redevelopment potential.
• Submarket Performance Remains Strong: Top submarkets like Brentwood, Cool Springs, and West End continue to lead on rent growth and investor interest, driven by income density and consistent demand.
• Long-Term Growth Outlook Holds: Nashville’s population has grown 6.4% since 2020, more than twice the national rate, attracting major employers like Oracle, Amazon, and Dollar General. Local universities support steady demand for housing and retail.

With access to nearly 400 retail markets nationwide, we provide invaluable insight to support your commercial real estate investment goals. Reach out to us today to begin a conversation about how we can help you navigate the complexities of the retail real estate landscape.