Retailers press pause on new locations as Trump’s tariffs, the economy create uncertainty
Concerned about tariffs and the state of the economy in the first few months of Donald Trump’s second presidency, retailers are rethinking plans to lease or build new locations.
Even before the announcement of elevated tariffs in April, U.S. retail leasing demand in the first quarter was the weakest it had been since the onset of the pandemic, according to a report from Cushman & Wakefield. This is beginning to show in local research for last quarter, as well: In the Philadelphia area, for the first time in at least three years, retailers moved out of more space than they moved into, according to new research from CBRE.
On the ground, retailers have been hesitant to move forward with leasing or buying property on which to build new locations, brokers told Modern Retail. They said retailers are waiting for answers on how much the locations will cost and whether they will be profitable in the new environment of lower consumer sentiment.
Andy Graiser, co-president of Melville, New York-based A&G Real Estate Partners, told Modern Retail his firm has had conversations with brokers, landlords and retailers about putting their deals on hold. He said he has seen some apparel retailers add an extra 60 days to soon-expiring leases to determine their next steps. He also watched an international retailer hold off on a deal in New York City because a top executive was hesitant to make any investments in the U.S. Graiser said other retailers have paused lease renewals for 30 or 45 days to see how things go.
Graiser said retailers in shoes, apparel and furniture — categories with high exposure to the unimaginably high China tariffs — are the ones holding back the most as their executives focus more on managing the supply chain. “It’s not permanent; they’re just trying to see where the ball lands here,” he said. “But at this point, there is definitely a little bit of a slowdown.”
Similarly, at the beginning of April, when President Trump announced new tariffs, a global brand put a large lease deal on hold due to concerns about the cost of building out their space, New York real estate broker Shlomi Bagdadi told real estate news outlet The Real Deal. Brandon Singer, founder and CEO of New York City brokerage Retail by MONA, told the outlet that a Hong Kong-based retail client also put a lease deal on pause earlier this month after the tariffs announcement.
David Ward, president of real estate firm H&R Retail in D.C. — who has worked on deals involving Target, Giant, Lowe’s and PetSmart over the years — said he has also seen more China-dependent retailers, including furniture stores, slow down or take a wait-and-see attitude. He also said retailers are fearful construction costs are going to go up substantially because of tariffs. Ward cited traditional grocers as one category of retailers being especially careful due to higher interest rates and construction costs.
“The grocery business, by and large, is a very low-margin game,” Ward said. “When construction costs go up or borrowing rates increase, then it makes it that much harder to justify doing new locations.”
Still, Graiser in New York said there’s still a lot of activity from tenants such as Dollar Tree, Five Below, Dollar Tree and Burlington who remain on the hunt for real estate opportunities that have resulted from the bankruptcies of retailers such as Big Lots, Party City and Joann. This is the case in Philadelphia, as well, according to the CBRE report.
“While some retailers held back on expansion plans due to uncertainty in the economy, others jumped at recently or soon-to-be vacated real estate spurred by an increase in retailer bankruptcies and store closures that started slowly with giants like Bed Bath & Beyond and Rite Aid in 2023,” the report said.
Dave Marcotte, an svp for Kantar who speaks with executives as a retail industry consultant, echoed the same points shared by the real estate brokers. He said that, up until about two months ago, it was typical for retailers to have had plans for the year laid out, as far as new locations or remodels of existing ones.
Now, those same people are reevaluating their playbooks.
“They’re looking at a lot of stress in their financial systems that are causing them literally to pause,” Marcotte said. “I think they’re going to wait another two or three weeks, look at the market, look at the lending rates that are out there, and then review the real estate and see what’s changed.”
Editor’s Note: This story has been updated to clarify who specifically Graiser said was pausing lease renewals for 30 or 45 days to see how things go; Greiser was referring to retailers.