Retailers Aren’t Just Shrinking — They’re Repositioning

Retail real estate continues to evolve, but the story is no longer simply about store closures or declining demand. Increasingly, the market is being shaped by how retailers refine their footprints, prioritize locations, and rethink the role physical space plays within their broader business strategy.

Recent data from CompStak highlights an important shift occurring across the retail landscape: tenants are becoming far more intentional about the size and placement of their stores, but those decisions vary significantly depending on sector and geography.

The result is a retail market that is becoming more selective, more strategic, and increasingly driven by efficiency.

Food & Beverage Tenants Are Getting More Efficient

One of the clearest trends emerging from the data is the contraction of food and beverage retail footprints following the post-pandemic expansion cycle.

According to CompStak’s lease transaction analysis, average food and beverage lease sizes in central business districts (CBDs) grew through 2022 before reversing sharply. By 2025, average transaction sizes had fallen approximately 63% from peak levels.

As operating costs, labor expenses, and construction pricing increased, many restaurant and hospitality users began shifting toward leaner, more efficient footprints.

Interestingly, non-CBD food and beverage markets experienced a very similar trend, with average transaction sizes declining roughly 66% from their peaks over the same period.

This suggests the trend is not simply urban versus suburban. Rather, it reflects a broader industry-wide recalibration around profitability, operational efficiency, and location quality.

For landlords and brokers, this shift has important implications. Retailers may still be expanding, but many are doing so with smaller layouts, highly targeted demographics, and stronger expectations around visibility, traffic, and co-tenancy.

Apparel Retail Is Telling a Different Story

Clothing and apparel tenants, however, are following a less uniform path.

CBD apparel leasing remains well below pre-2019 levels despite a temporary rebound in 2023, reflecting continued pressure on traditional urban retail corridors. Many apparel retailers continue reassessing large urban footprints as consumer shopping behavior evolves and e-commerce remains deeply integrated into purchasing habits.

At the same time, non-CBD apparel leasing has moved in the opposite direction.

CompStak data shows that average apparel transaction sizes outside CBD markets have risen roughly 44% above 2019 levels and more than doubled from their 2023 lows.

This divergence may point to a larger migration toward suburban retail corridors, open-air centers, and lifestyle-oriented environments where retailers can access consumers closer to where they live and work.

In many markets, suburban retail has become increasingly attractive due to:

• stronger parking accessibility,

• lower occupancy costs,

• shifting population patterns,

• and growing consumer preference for convenience-driven shopping environments.

The Retail Market Is Becoming More Precision-Oriented

Perhaps the most important takeaway from these trends is that retailers are not simply reducing space across the board. Instead, they are becoming far more precise in how they deploy physical locations.

Retailers today are evaluating:

• store productivity,

• trade area demographics,

• customer experience,

• fulfillment integration,

• labor efficiency,

• and long-term occupancy costs with far greater scrutiny than in prior cycles.

That evolution is reshaping leasing patterns across nearly every retail category.

For landlords, this means successful retail environments increasingly depend on adaptability, merchandising strategy, and tenant mix rather than simply maximizing square footage.

For investors and developers, it reinforces the growing divide between highly curated retail destinations and commodity retail product struggling to remain competitive.

A Landlord Perspective: Flexibility and Positioning Matter More Than Ever

For retail property owners, these trends reinforce the importance of adaptability in an increasingly efficiency-driven leasing environment.

Many tenants are no longer looking for the largest footprint possible. Instead, they are prioritizing spaces that support operational efficiency, visibility, customer convenience, and long-term profitability. That shift is forcing landlords to think more strategically about how their properties are configured, marketed, and repositioned over time.

Properties that can accommodate flexible floorplans, evolving tenant needs, outdoor gathering areas, experiential uses, and strong co-tenancy dynamics may be better positioned to compete in today’s market. Meanwhile, older retail centers that fail to evolve could face increasing vacancy pressure and reduced leasing velocity.

As retailers continue refining where and how they operate, retail owners may need to focus less on maximizing square footage and more on creating environments that align with changing consumer behavior and tenant economics.

In many ways, the future of retail leasing may not be defined by how much space tenants occupy — but by how effectively that space performs.