Discount Retailers Drive Resurgent Demand for Retail Space

Retailers’ demand for real estate reportedly picked up in the third quarter, reversing a decline seen earlier in the year.

During the third quarter, retailers moved into 5.5 million more square feet than they vacated, marking a turnaround from the negative net demand seen during the first half of the year, the Wall Street Journal reported Tuesday (Dec. 2), citing data from CoStar.

The report attributed the turnaround to a slowdown in retailer bankruptcies, tight supply of retail space due to low levels of construction, and resilient demand from consumers.

The real estate market is likely to end the year with more space having been vacated by retailers than occupied, but CoStar expects the number to turn positive in 2026, according to the report.

Much of the demand for retail space is coming from discount retailers such as Dollar General, Dollar Tree, Aldi, Burlington Stores and 7-Eleven, according to the report.

These companies are helping to support a real estate market that saw thousands of stores vacated by retailers such as Big Lots, Rite Aid, Party City and Joann, per the report.

Dollar General said in August that during the quarter ended Aug. 1, it opened 204 new stores, remodeled 729 locations under Project Elevate, remodeled 592 more under Project Renovate and relocated 15 stores.

For its fiscal year 2025, the discount retailer expects to complete about 4,885 real estate projects, including 575 new stores in the United States.

PYMNTS reported at the time that Dollar General’s level of construction and remodeling reflects its conviction that small-box convenience remains a durable retail format even in an age of eCommerce and big-box consolidation.

Real estate firm Simon Property Group, which owns and invests primarily in shopping, dining, entertainment and mixed-use destinations, said in November that its occupancy among U.S. malls and premium outlets rose to 96.4% in the third quarter, up from 96.2% a year prior.

“Healthy demand was seen across all our platforms and is reflected in our results,” David Simon, chairman, CEO and president of Simon Property Group, said during a Nov. 3 earnings call. “Occupancy gains continued, retailer sales accelerated and cash flow increased.”