Record Q4 Leasing Underpins Retail Optimism As REITs Predict A Rollicking 2025

A merry holiday shopping season led to strong fourth-quarter results and robust leasing activity for the nation’s largest publicly traded owners of retail real estate.

And on earnings call after earnings call, retail REITs are starting 2025 anticipating continued momentum despite the high-profile bankruptcies of some chains and contractions in some categories like pharmacy retail. 

Publicly traded REITs Simon Property Group, Kimco Realty, Regency Centers, Brixmor Property Group and Federal Realty Investment Trust all reported leasing activity at or near record levels that delivered high occupancy rates, rent growth and increased projected funds from operations.

A record-breaking quarter for Federal Realty was led by unprecedented levels of leasing activity. The company did 100 deals totaling 649K SF during the quarter and wrapped up leases totaling 2.4M SF for the year, leading to a 94.1% occupancy rate at the end of 2024.

“Nowhere is the quality of this portfolio more evident than in the continued improvement in occupancy that you see in the fourth quarter over the third quarter and the expectation for even higher occupancy by the end of next year,” President and CEO Don Wood said on the company’s earnings call this month.

“We expect to grow faster at both the comparable property level and the bottom-line earnings level in 2025 than we did in 2024.”

Total revenue surpassed $300M for the quarter for Federal Realty, while comparable property operating income grew by more than 4% in Q4 and averaged 3.4% for the calendar year. The REIT said occupancy is expected to grow to around 95% by the end of 2025.

Leasing at Simon Property Group also hit new highs, with more than 6.1M SF leased in Q4 and over 21M SF for the year. The company also reported 25% of 2024’s activity was new leases.

Mall and outlet occupancy was up 70 basis points in Q4 to 96.5% over the year before. And average base minimum rent rose 2.5% year-over-year.

With occupancy rates up, the national retail market is tight. Retail vacancy remained near a record low at 5.4% during the fourth quarter, according to Cushman & Wakefield. The nation saw its strongest net absorption of the year during Q4 at about 1.4M SF. 

National rent growth also rose again during Q4, hitting $24.59 per SF, or 2.8% growth over the same period last year. But rent growth has been sliding somewhat since hitting a high of 4.8% in 2022, which Cushman & Wakefield suggested was an indication rent pressure is easing. 

The firm expects that metric will continue to slide in 2025 as vacancy ticks up slightly.

Record leasing activity of nearly 2,000 deals during 2024 helped drive rent growth for Regency. The company ended 2024 with a 94.1% occupancy rate and $44M in incremental base rent, leading to core operating earnings growth of just over 5%.

“Same property [net operating income] and earnings growth were strong, reflective of continued robust tenant demand and opportunities for us to drive value,” President and CEO Lisa Palmer said during the company’s earnings call Feb. 7.

“This was evident in the strength of our base rent growth, the size of our leasing pipeline driving new record high lease rates, the activity within our expanding development program, and continued growth in our dividend, which we increased another 5% in the fourth quarter.”

The company surpassed its goal of $250M in project starts and has nearly $500M in projects in process. 

After consumer spending was juiced by stimulus checks and low interest rates at the beginning of the decade, research done by the Federal Reserve found Americans’ savings had been depleted by the beginning of 2023.

But last year's holiday shopping propelled new credit card debt, filling retailers' cash registers. About 1 in 10 consumers said the season “blew up” their balances. The average household’s credit card debt rose to $10,751, per WalletHub’s Credit Card Debt Survey from last month. That’s a nearly 23% increase from the low of $8,763 in the first quarter of 2021.

That kind of spending has slowed somewhat in the new year.

After growing 4% year-over-year during the holiday season, retail sales dropped in the first month of 2025. But they were still up from the same period in 2024, according to the National Retail Federation.

Headwinds from the California wildfires and cold weather throughout the country were cited as reasons for the decline last month, though the group’s economists said the results show a stable economy overall and were a solid start for 2025.

After placing at the top of its peer group for year-over-year traffic growth in Q4, Brixmor reported traffic was up again more than 4% in January. 

The company manages its portfolio for growth rather than occupancy, CEO Jim Taylor said. Brixmor's strategy included increasing new business with tenants like Whole Foods, Sprouts, Trader Joe's, Publix and Aldi in its grocery segment rather than rushing to backfill space with the first available tenant.

“We're creating this competition in this environment to bring in some outstanding new uses to the portfolio,” Taylor said during the company’s earnings call Feb. 11. “When you bring in better tenants at these better rents, you drive better traffic. You also get [the] follow-on benefit in terms of leasing and rate on the small shop.”

Kimco reached the high end of its 2024 outlook and net operating income growth thanks to strong leasing and the integration of its RPT Realty purchase, CEO Conor Flynn said. 

In addition to robust traffic across Kimco’s portfolio, the company pointed to its strong employment rate as contributing to increased sales for its retailers.

Grocery anchors, quick-service restaurants and service providers are successfully driving traffic at Kimco centers throughout the day. Company officials also reported a surge in leasing to businesses in the medical, health and wellness, and fitness sectors as well as hair and nail salons that complement grocery-anchored tenants. 

While retail statistics are on the rise for most sectors, two categories facing headwinds are dollar stores and pharmacies. The latter has been experiencing a rapid decline in store numbers for years, especially among the market’s top two chains, CVS and Walgreens. 

CVS beat guidance from Wall Street for 2024, but the company announced it would pursue “further footprint optimization in 2025” on an earnings call earlier this month. In October, Walgreens announced plans to shutter 1,200 stores over the next three years as it looks to dig itself out of a financial hole. 

Agree Realty plans to steer clear of increased pharmacy or dollar store exposure as it looks to focus on categories like auto parts, tire and auto services as well as big-name grocers like H-E-B, Kroger and Wegmans.  

Another headwind facing REITs is the rise of retail tenant bankruptcies and exposure to credit risks, such as struggling retailers like Joann and Forever 21.

Tenant bankruptcies are always a looming threat for landlords, but Regency officials said the company’s credit loss forecast for 2025 remains in line with its historical average. And Brixmor was able to backfill several recaptured spaces to grow its overall occupancy 50 basis points year-over-year, even with bankruptcy activity knocking it down 70 basis points.

Despite a few hiccups in the sector, companies like Blackstone Mortgage Trust are looking to invest record-high cash reserves into traditionally low-risk retail properties. Thanks to a rash of loan payoffs, Blackstone said it is targeting net-lease properties that have tenants paying insurance, utilities and other costs in addition to rent. 

“With interest rates remaining elevated, a positive outlook for the U.S., consumer and essential needs-based retail showing resilient performance, we see a compelling setup today to build a credit-oriented, diversified net lease strategy,” Blackstone Mortgage CEO Katie Keenan said during the company’s earnings call.