It sounds alarming: For the first time in 16 quarters, U.S. retailers in the first quarter of this year vacated more space than they leased.

That is one of the key findings of JLL’s recently released Q1 Retail Research Outlook, which looks at the state of the U.S. retail sector during the first quarter of 2025.

Other findings seem troubling, too: Net absorption in the U.S. retail sector sunk to negative 2.7 million square feet in the first quarter, JLL reported. And announced retail closures from 2024 through early 2025 totaled more than 9,900 locations, driven by store closings from struggling retailers such as Party City and Big Lots.

But the retail news isn’t all bad. It’s not even mostly bad. As JLL reported, these retail closures put millions of high-demand retail square footage back into the market for the second quarter of this year and beyond. Naveen Jaggi, president of retail advisory services with JLL, said that this bodes well for the future of the retail market: He expects leasing activity to rise as more companies seek out high-quality retail space that is now hitting the market.

We spoke with Jaggi about JLL’s report and the state of the retail market. Here is what he said.

Why is so much retail space being vacated today? Is it surprising that retailers vacated more space than they leased in the first quarter?
Naveen Jaggi: This was the result of two to three years of build-up from retailers that have been on the watch list of bankruptcies. We have been anticipating these closures for some time. They were nothing that took us by surprise. No one was surprised that Joann closed. Everyone was expecting it. It just seems more shocking when all these expected closures happen at the same time.

Most of the space being left by these retailers will be in high demand. The space will be taken up quickly. The headlines, though, are all about a lot of retail space coming to the market by bankruptcy.

Despite these high-profile bankruptcies, the retail sector is resilient today, right?
Jaggi: Retail has been resilient in part because we have a historic low of new construction activity in this sector. We have had multiple years of lower-than-average retail construction. There is a demand for quality space and markets. You must create supply one way or another. Sometimes it means that you work tenants out of spaces that are old and dying. We are in that environment now. When dying companies put space back on the market, it helps fill the demand by retailers that are growing.

What kind of retailers are performing well today?
Jaggi: Value-oriented daily needs retailers are the biggest players today. Places like Dollar General, Burlington, Dollar Tree are aggressive players. Ross Dress for Less is doing well. Retailers that play in that value daily needs space are taking quality space. We are seeing the U.S. consumer looking for ways to stretch their dollars. More players are in that space to meet that demand from consumers.

There is an entire sector of consumers who look for quality products at stores like T.J. Maxx or DSW at a value price. That is a financial demographic that wasn’t nearly as strong 10 or 15 years ago.

How about experiential retail? Is that still in demand?
Jaggi: Every retailer has realized that providing an experience is important. You must give the consumer a better experience, whether you are talking about a grocery store like grocery like Sprouts or a store like T.J. Maxx. Retailers have to give consumers a reason to come into their stores.

We are seeing more retail that combines food with entertainment, such as Punch Bowl Social in Chicago, which combines food with bocce ball, bowling and other entertainment. There are also places like The Color Factory, which provide an immersive art experience.

The U.S. consumer is attracted to those concepts. But for some of these, the verdict is still out on whether they will have long-term success. What we haven’t seen yet is whether these concepts have 10-year legs. We haven’t seen whether these concepts will reach 10 years or not. The true tale will be in 2030 when we see if these retailers will sign extensions. Are they only good concepts for a short period?

Was there anything in JLL’s first quarter retail report that surprised you?
Jaggi: Nothing took us by surprise. The broader comment I’d make, though, is that we can’t take the U.S. consumer for granted. The U.S. consumers can only take so many negative headlines, so many shocks before they start to retreat a bit. We are in an environment now in which U.S. consumers need some stable news. If consumers feel uneasiness in the marketplace, they will pull back on their spending. The one thing we don’t know is how resilient consumers will be over time in an environment in which you have bad news atop of bad news.

Employment is strong. The labor market feels strong. Wages feel strong. The equities market is back to a healthy level. Yet there is continual talk of whether they’ll be a war or whether we’ll have high tariffs or low tariffs. These things make it hard for consumers to want to shop. Many will look for places where they can find items and not face sticker shock.

Is the threat of tariffs have any impact on retailers?
Jaggi: Tariffs are not slowing retailers yet. But it’s important that we don’t let the headlines distract us from the fact that retail is a long-term outlook business. In the long term, things are good. There is no sense that tariffs will be in place forever. Retailers are saying that it’s important not to overreact to tariffs.

Retailers learned important lessons during the pandemic. They have diversified their supply chains. They can go from Peru to Bangladesh to Vietnam or China to see where pricing is least exposed to tariffs. That is where retailers are focusing their energy.

When you go shopping, look at the products on the shelves. Look at where they are made. Five, six years ago so much of it would have been made in China. If you look today, it is very diversified. Athletic shoes are still predominantly made in China. Other than that, there is a greater diversification of where products are made. I was in Houston a week ago and I saw Izod polo shirts that were made in Peru.

We were at the ICSC Las Vegas recently. I was pleasantly surprised when talking to people to learn that most retailers are not overreacting to tariff talk. Retailers are not changing their behavior now based on a short-term conversation on tariffs. That was a pleasant outcome, not seeing any overreaction.

Younger Partners Executive Vice President Ben McCutchin brokered the sale of the 260.4 acres at 3497 Berend Road in Pilot Point, Texas, for a future home development site.

The Texas Department of Transportation (TxDOT)’s plans call for widening FM 1385 from a two-lane rural road to a six-lane urban road along 12 miles between US 380 and FM 455. This project is part of a larger corridor improvement effort, including the reconstruction and widening of other roads like US 380, FM 2931, and others. 

More than 20,000 new housing units are planned within surrounding master-planned communities in a largely unrestrained state regulatory framework, according to the city of Pilot Point’s website. It lists major developments including Bryson Ranch, Talley Ranch, Four Seasons, Pecan Creek, Mustang Ranch, Eland Ranch and Creekview Meadows, as residential projects. According to Esri, Pilot Point’s median home value of $391,685, which is lower than both Frisco at $575,000 and Prosper at more than $700,000.

The buyer of the 260-acre parcel is Dallas-based Talley Land Development. The seller is Gene McCutchin Ltd III, the estate of the late Gene McCutchin. Currently, the land is used for agricultural purposes. McCutchin represented both the buyer and seller in the transaction.

The late Gene McCutchin saw the northward movement of development and purchased the land in 2000 for a long-term investment. The region is seeing growth in industrial, logistics and retail sectors, creating local job opportunities such as e-commerce, distribution centers and service industries that are expanding northward from Frisco and Denton, according to city of Pilot Point data. Additionally, the Dallas North Tollway expansion and the Denton County Outer Loop projects will improve regional connectivity with access to employment hubs in Frisco, Prosper and Denton, McCutchin added.

Constellation Real Estate Partners began construction on Constellation Rock Island Logistics Center, a 286,700-square-foot Class-A industrial building on 16.8 acres at 4701 W. Rock Island Road in Grand Prairie, Texas. 

Completion is scheduled for the second quarter of 2026.

Designed by Meinhardt Associates, Constellation Rock Island Logistics Center will feature a rear load building with frontage off Highway 161, 36-foot clear height, ample employee parking, and 80 trailer positions. The facility can accommodate a wide range of users from 75,000 square feet to 286,700 square feet.

Constellation Rock Island Logistics Center will have great visibility and immediate access to Highway 161, connecting it to various critical arteries within the DFW metroplex bridging prospective tenants to a strong labor pool and an abundant consumer base.

Marketing and leasing efforts for Constellation Rock Island Logistics Center will be exclusively handled by David Eseke and Clay Balch of Cushman & Wakefield.

JLL Capital Markets closed the sale of DHT-4 Last Mile, a 141,360-square-foot, Class-A industrial facility in the Northwest Houston submarket of Cypress, Texas.

JLL worked on behalf of the seller, Vigavi Realty, LLC. Allegra Holding Group acquired the asset.

Completed in 2022, DHT-4 Last Mile features 32-foot clear heights, LED lighting, ESFR fire suppression and high-quality office finishes. The state-of-the-art distribution center, which is fully leased to a premier e-commerce user, sits on approximately 37 acres, providing ample parking with 233 auto spaces and 940 van spaces.

The property is strategically located at 15302 Cypress North Houston Road, offering immediate access to Highway 290 and Beltway 8. This prime infill location in Northwest Houston allows the tenant to efficiently serve the dense and rapidly growing population centers in the region.

The JLL Capital Markets team was led by Senior Managing Director Trent Agnew, Senior Director Charles Strauss and Director Lance Young.

CBRE negotiated a 31,260-square-foot lease at Stiles Lane Business Park in Sugarland, Texas, to Ferguson, the largest value-added distributor serving the specialized residential and non-residential professional in the North American construction market.

Jason Dillee and Nick Bergmann with CBRE represented Ferguson in the transaction. The landlord, Pearl River, was represented by CBRE’s Cape Bell and Greg Holmes.

Ferguson, headquartered in Virgina, plans to occupy more than half of building one in Stiles Lan Business Park located at 13027 Stiles Lane. This is the 15th location in the Houston area for the company. Ferguson has a total of more than 1.4 million sq. ft. of real estate in the Houston metro, with demand for more. The new facility will primarily support multi-trade HVAC and plumbing professionals, offering added convenience with a dedicated pickup counter designed to streamline the supply experience.

Stiles Lane Business Park is a new class A industrial development featuring two buildings totaling 65,827 sq. ft. The building features 24 dock-high doors, 2 drive-in ramps, 55 car parking spots and 28 floor clear heights. The site has access to Highway 90 and Highway 59 as well as retail and food options.

 The retail commercial real estate market across Texas remains resilient amid macroeconomic uncertainty with cities like Austin, Dallas, McAllen and Houston each showcasing distinct growth patterns and investor opportunities. Experts from across the state offered REDnews key insights into Texas’ evolving retail landscape, reflecting both optimism and strategic adaptation. 

‘Very bullish’ on Austin 

In Austin, strong demand and limited supply continue to define the retail market, with personal services, restaurants and junior anchors leading the charge. The challenge, experts say, lies in finding enough space to meet tenant needs. 

“We are currently at a sub-4% vacancy rate in the market with a lot of good activity,” said Kheili Hiller, senior associate at Cushman & Wakefield. “A number of national retailers are looking at options to enter the Austin market or expand their existing footprint.” 

Developers have slowed new construction, raising concerns that demand could outpace supply. 

“I think most people have a ‘wait and see’ attitude right now given the economic uncertainty,” Hiller said. “I tend to be very bullish on Austin and think we will continue to see strong demand, which is great, but that demand can only sustain itself if there is product in which to put tenants. With developers putting the brakes on new projects, I worry that supply will become so limited that it becomes difficult to get deals done.” 

Adam Zimel, principal at Endeavor Real Estate Group, echoed the sentiment. 

“Absorption matching deliveries is a result of strong demand,” Zimel said. “Said otherwise, most all retail product being delivered is leasing because the Austin MSA is undersupplied.” 

Tenants range from chef-driven restaurants and quick-service operators to junior anchors. 

“Personal services and restaurants continue to be most active in the pad and small shop product type,” Zimel said. “In terms of the junior anchors, they are as active as I have seen in the last 10 years. It doesn’t always translate to deals but they need store counts and performance has generally been good within the market.” 

Austin’s cultural reputation adds to its appeal. 

“One driver is that Austin is a cool place to be. If you are a young, cool brand, you want to be here,” Hiller said. “We are also maturing enough as a city that the more established, super high-end retailers want to be here, too.” 

She added that local support for independents fosters growth. 

“We have so many amazing local retailers and a population who really gets behind local concepts,” she said. “It makes these retailers able to exist and grow.” 

Retailers are also adapting to new consumer habits. 

“Retailers want customers to feel like they have been transported somewhere when they enter their space,” Hiller said. “The customer base seems to have moved away from wanting to see every option possible in front of them to preferring a smaller amount of well-curated items.” 

Zimel noted changes in tenant pairings. 

“The shift in active anchors has aligned some that once were not co-tenants,” he said. “We are working a few deals at projects with both grocery and fitness as they see overlap in customer profiles with both being health oriented. They have aligned to co-tenant at projects where they once wanted separation between them.” 

Dallas retail ‘thriving’ 

In Dallas-Fort Worth, strong demographics continue to drive momentum, especially in the northern suburbs. 

“The North Texas submarket is thriving,” said Jamie Cox, senior vice president of property operations at Trademark Property Company. “Strong market fundamentals, such as population growth and a business-friendly environment, are fueling tenant demand and contributing to healthy, stable leasing trends.” 

While the region posted its first quarter of negative absorption since 2020, experts say it’s not a sign of weakening demand. 

“Recent negative absorption was almost entirely related to the closings of big-box spaces such as JoAnn, Party City and Big Lots,” said Michael Wheat, managing director and North Texas retail lead at JLL. “Despite this negative absorption, DFW continues to be one of the strongest retail markets in the country and activity has not slowed down. While the closings put large blocks of space on the market, the majority of it has been leased or is in the process of being leased.” 

“The sector is facing new challenges that retailers and owner/operators will need to learn to navigate, but this likely won’t have a long-term impact,” Cox echoed. 

Leasing activity remains healthy. 

“The tenants we’re seeing are most active in the market include grocery, health and wellness, beauty services and restaurants,” Wheat said. “Rapid population and economic growth in DFW and the health-conscious trend that’s continuing to gain popularity are just a few of the motivating factors behind these categories of retail expansion.” 

Cox pointed to Galleria Dallas as a sign of momentum. 

“We recently welcomed the first H&M Home in the state of Texas, the first UNIQLO store in North Texas and one of only two locations in the country for Netflix’s upcoming experiential entertainment destination, Netflix House,” Cox said. 

Experiential and fitness tenants are also driving foot traffic. Cox said. “People’s growing desire to gather with friends and family has reinforced demand for experiences at retail destinations, and these tenants have become a top target for landlords.” 

“[Experiential and fitness] users serve as fantastic cotenants and attract significant foot traffic, provided sufficient parking is available,” Wheat said. 

New development continues in family-driven suburbs. 

“The majority of new retail development in the northern suburbs of DFW is associated with grocery anchored centers, due to the needs of family-oriented areas like Frisco, Prosper, Celina and beyond,” Wheat said. 

‘Wait-and-see’ approach for Houston developers 

Houston’s retail market held steady in early 2025, showing resilience despite softening fundamentals and broader economic uncertainty. According to Colliers most recent market report, vacancy rose slightly to 5.5%, up just 10 basis points from the previous quarter. Net absorption dropped to 153,538 square feet, down more than 60% quarter over quarter. 

Even with the slowdown, leasing activity remained notable at 1.7 million square feet, driven by major retailers including Chipotle, Target, HEB and Walmart. The average asking lease rate climbed to $20.69 per square foot, reflecting modest gains both quarterly and year over year. 

Construction activity also cooled. Deliveries dropped to 530,189 square feet, a 50% decline from the same period last year, and the development pipeline shrank by more than 1 million square feet year over year. Still, large-scale projects like a new 120,256-square-foot HEB in west Houston broke ground, reinforcing long-term confidence in the market. 

Colliers analysts described the mood as “wait-and-see,” as retailers adjust to trade tariffs, rising costs and shifting consumer behaviors. Despite these pressures, the report noted that Houston continues to outperform many peer markets, supported by its affordability, population growth and a solid pipeline of future development. 

RGV emerges as a “retail powerhouse” 

In the Rio Grande Valley, the retail sector is booming. McAllen recorded $96.8 million in sales tax remitted in 2024, ranking first in the region, 15th in Texas and second in per capita retail sales among Texas cities over 100,000. 

“Coupling economic vibrancy, high safety, affordability and strong cross-border tourism makes the RGV a retail powerhouse,” said Rebecca M. Olaguibel, director of retail and business development for the City of McAllen. 

Retailers are diversifying to meet the needs of a growing and bilingual population. 

“Retailers are widening their range: from value-driven big-box stores (Ross, Dollar Tree) to upscale soft goods (Lululemon, H&M, Zara) to specialty dining and entertainment,” Olaguibel said. 

Cross-border customers fuel demand for discount and electronics, while domestic migrants drive growth in home and lifestyle retail. 

Development is booming in Central and North McAllen. 

“Factors like new residential construction and high volume of consumer traffic offer the perfect setting for success,” Olaguibel said. “Both big-box retailers and discount stores are thriving, often ranking among the best-performing stores nationally. High-performing national players include big-box discount (Burlington, Ross, Hobby Lobby, Five Below, dd’s), soft goods anchors (H&M, Zara, Mango, Lululemon), electronics and value chains (Dollar General).” 

Mixed-use development and logistics are expected to gain momentum. 

“McAllen and the Rio Grande Valley’s continued population growth and economic diversification present ample opportunities for developers,” Olaguibel said. “Mixed-use developments that combine retail, residential, and recreational spaces are poised for success. Additionally, the region’s strategic position in international trade corridors makes it ideal for logistics and other international ventures.” 

Challenges remain, but leaders are responding with investment and collaboration. 

“As a rapidly growing region, we see these as opportunities,” Olaguibel said. “Through strong collaboration with local, state and federal partners, we are actively investing in and upgrading infrastructure to support sustainable retail growth. It’s a dynamic time — pardon our progress as we build for the future!” 

Across every region, the message is consistent: Texas continues to lead the nation in retail real estate, backed by demographic strength, investor confidence and a sector willing to evolve.