The retail sector stands at a critical crossroads, shaped by fluctuating consumer behavior, inflationary pressures and high financing costs. And despite a slight uptick in vacancy rates, the market remains competitive for quality spaces, according Anjee Solanki, Colliers’ national director of retail services and practice groups.
Here, Solanki offers her perspective on the challenges and opportunities facing brands and retailers. From strategic store portfolios to managing the ripple effects of tariffs, Solanki shares actionable strategies to navigate the ever-evolving landscape.
WWD: What is impacting retail vacancy rates? What’s driving the increases?
Anjee Solanki: Retail vacancy rates have dropped slightly to 4.2 percent in the first quarter of 2025, but we’re still near historic lows. The increase was driven by elevated closures, like Party City and Joann Fabrics, and cautious expansion amid inflation, slower consumer spending and rising costs from tariffs. That said, it’s not a demand problem.
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Quality space remains scarce and moves quickly, with a median time to lease now just 7.5 months. New construction is limited due to high financing and input costs, so even with softer absorption, the market remains tight and competitive, especially for well-located, second-gen space.
WWD: Are retailers and brands rethinking their physical store portfolios? Why?
A.S.: Yes, retailers are rethinking their physical store portfolios — but with a more measured and strategic lens. While many remain committed to brick-and-mortar, we see a split approach: some are reinvesting in their existing store base and pursuing cautious growth, while others are maintaining flat net store counts but seizing opportunities to upgrade locations or enter stronger trade areas.
Physical stores continue to serve as critical touchpoints for sales, fulfillment, returns and customer engagement. Still, elevated construction costs and margin pressures are prompting more selective expansion. It’s less about aggressive growth and more about making each location count.
WWD: Given ongoing inflation and now the expected negative impact of tariffs, how would you describe the current state of the consumer? More cautious?
A.S.: Today’s consumer is more cautious and calculated than ever, with spending behavior shifting in real time based on broader economic signals. Ongoing inflation, high interest rates, and the added impact of tariffs is affecting household budgets, especially in discretionary categories like apparel and home goods.
We’re seeing shoppers trade down, wait for discounts and shop around more intentionally. Essentials are taking priority, and value-driven retailers are seeing more traction. While spending hasn’t collapsed, it’s undoubtedly more deliberate, and with sentiment changing daily, retailers must stay agile to compete for a share of wallets.
WWD: How can retailers and brands mitigate the impact of these macroeconomic headwinds?
A.S.: To navigate today’s macroeconomic headwinds, retailers need to get sharper on strategy and execution. That means tightening up assortments, leaning into private labels and communicating value across good-better-best pricing tiers. Operationally, finding efficiencies — through automation, supplier negotiations and more innovative inventory management — will help offset rising costs from inflation and tariffs.
Many also explore incremental revenue streams like retail media and marketplace partnerships to diversify income. Ultimately, successful brands will stay flexible, data-driven and laser-focused on delivering value without compromising the customer experience.
