Costar Asks Us Supreme Court To Hear Real Estate Antitrust Case

U.S. apartment rents declined in November, Apartment.com says, with the national average falling 0.18% to $1,706. This marks the fifth consecutive month of flat or negative monthly rent change and the steepest November decline in over 15 years, though moderating from October's decline of 0.30%. Annual rent growth slowed further to 0.7%, down from 0.8% in October and 1.5% at the start of the year. Apartment rent growth typically follows a seasonal pattern, with acceleration in the spring and a slowdown in late summer and fall. Yet although the national average rent in November remains above levels from a year ago, elevated supply pressures continue to weigh on rent growth momentum. All regions posted rent declines in November for the fourth consecutive month.(chris.wack@wsj.com)

By Kate King

Retail landlords are heading into next year on surprisingly solid footing, making the most of robust spending that has defied gloomy consumer sentiment and pressure from tariffs.

Retailers moved into 5.5 million more square feet than they vacated in the third quarter, according to real-estate data firm CoStar. That marked a notable turnaround from the first half of the year, when demand for store space turned negative because of chain-store bankruptcies, a pullback by shoppers and tariff turmoil.

Retailer bankruptcies have since slowed, and appetite for empty space was strong again in the third quarter, particularly from discount retailers such as Dollar General, Dollar Tree, Aldi, Burlington Stores and 7-Eleven.

Retail construction, meanwhile, remains near historically low levels, leaving existing supply tight. The national vacancy rate stood at 4.3% in the third quarter, CoStar said.

"We underestimate the strength and resiliency of the American consumer," said Jeff Mooallem, chief operating officer of retail landlord Urban Edge Properties.

Despite the third quarter's strong results, the market is on pace to end 2025 with retailers having vacated more space than they occupied for the first time since 2020.

But CoStar sees this as a temporary blip and expects the number to turn positive again next year, forecasting that retailers will occupy 4.7 million more square feet than they vacate quarterly in 2026.

Companies such as Tractor Supply are continuing to expand while adapting to the new tariff environment. About 40% of the products that the national chain buys and sells are exposed to tariffs. The list includes grills, power tools and large barn fans.

To mitigate the impact, Tractor Supply has negotiated better prices with its vendors, absorbed some costs and raised prices on some products.

But it hasn't pulled back on store openings. Tractor Supply is on track to open 90 stores by the end of this year, up from 80 in 2024. The company is planning to accelerate its openings further, to 100 a year, beginning in 2026.

"The rural economy is growing," said Chief Financial Officer Kurt Barton. "It gives us the confidence to continue to open up new stores, despite some of the headwinds."

More than a dozen of Tractor Supply's new stores will open in spaces formerly occupied by Big Lots, which closed hundreds of locations after filing for bankruptcy. It was one of several large retailers — Rite Aid, Party City and craft-supply company Joann were others — that have gone under since 2024 and vacated thousands of stores across the U.S.

In large part because of these bankruptcies, U.S. store-closing announcements are up 11% so far this year, compared with the same period in 2024, according to data firm Coresight Research. Closures, on a store-count basis, are on track to outpace openings in 2025 for the second consecutive year after two years of net expansion.

Replacing departing tenants is a lengthy and expensive process, and landlords have historically dreaded retailer bankruptcies. But these days, expanding retailers are jumping on vacant space. This year, for example, Dollar Tree snapped up the leases for 15 former Joann stores.

In Woodbridge, N.J., Urban Edge spent about two years replacing a Bed Bath & Beyond and Buy Buy Baby store after the chain was liquidated. But the landlord eventually found better tenants who will pay higher rent: Trader Joe's opened in the shopping center in late October and discount retailer Ross Stores is scheduled to open there in February.

The two retailers are expected to boost the shopping center's foot traffic and help the landlord attract other in-demand tenants. Fast-casual chains Just Salad and Cava recently signed leases to open at the property, Mooallem said.

Not all the news for property owners is good. Online sales continue to rise. They accounted for 16% of total retail sales in 2024, up slightly from 2023. Overall, retail sales on an inflation-adjusted basis have been essentially flat for four years.

As a result, retail rent growth has slowed from the robust pace seen coming out of the Covid-19 pandemic, when strong consumer spending allowed landlords to secure big rent increases.

"There's enough demand in the marketplace to support the current rent level," said Brandon Svec, national director of U.S. retail analytics for CoStar. "But the justification to push rent higher really started to wane in late 2024."

It could get worse next year. The full impact of tariffs hasn't yet been felt by retailers, and it is possible more price hikes could tamp down consumer spending.

Mom-and-pop retailers are already feeling the squeeze. Store closures over the past three months were driven by smaller retail space of under 5,000 square feet, according to CoStar. The data are still preliminary, but Svec expects that the closures are mostly local restaurants and smaller service providers folding under the weight of higher costs.

"That's where we'll look for weakness in 2026," he said.

U.S. consumer sentiment sank to a near-record low last month. A University of Michigan survey revealed Americans are concerned about the economic effects from inflation, job cuts and the federal-government shutdown.

Shoppers are feeling pessimistic, but they are continuing to spend. Strong stock performance has powered outsize purchasing by the wealthy. Middle- and lower-income spenders are spending on pace with wage growth, even if more of their paychecks are going to necessities with little left over for discretionary purchases, according to Svec.

"If the consumer stays employed, they're going to continue to spend," he said.

Write to Kate King at kate.king@wsj.com