The retail market in January took a hit, with a 0.9% decline in U.S. retail sales—the largest in nearly two years. This pullback follows a strong holiday season and is attributed to severe winter weather, the LA wildfires, economic uncertainty, and continued pressure on consumer spending. Categories hit hardest included automobile dealerships, furniture retailers, clothing stores, and e-commerce, while restaurants and bars saw increased sales, signaling a consumer preference for experiences over discretionary goods.
Despite the dip in retail sales, significant shifts are occurring in the commercial real estate (CRE) sector. Some retailers are aggressively expanding, while others are closing stores or restructuring their business models.
Retail Winners and Losers in 2025
Retailers are experiencing contrasting fortunes in 2025. U.S. store closures last year hit their highest level since the pandemic, as some brands struggle with bankruptcies and downsizing while others capitalize on shifting consumer behaviors. A retail advisory firm projects that retailers will close about 15,000 stores this year as some legacy brands shrink and file for bankruptcy protection, or liquidating companies shutter locations.
Joann Fabrics, the craft and fabric retailer, filed for bankruptcy in January for the second time in less than a year, citing declining sales and inventory challenges. The company plans to “right-size” its footprint and close approximately 500 of its 800 stores, with major closures in California, Florida, Pennsylvania, Ohio, and Michigan.
After Party City announced it would close all its stores in December, a flurry of retailers quickly stepped in to bid on its locations. Dollar Tree emerged as the top bidder, winning nearly 150 sites—a move that supports its aggressive expansion plans, which include its Family Dollar chain, as noted by the Wall Street Journal. Other retailers, including Five Below, Burlington Coat Factory, Barnes & Noble, and La-Z-Boy, also placed winning bids, although more than 400 locations remain unclaimed.
Kirkland’s is reportedly exploring the option of converting some of its struggling stores to operate under the Bed Bath & Beyond or Buy Buy Baby banners. This strategic move aims to capitalize on the brand recognition of these established names, even as both have faced significant financial challenges in recent years.
On the winners’ side, approximately 1,000 store openings in 2025 have been announced, led by Aldi (170 new stores), followed by JD Sports (124), Burlington Stores (104), jewelry retailer Pandora (61), bookstore chain Barnes & Noble (60) and Dollar General (60).
Mall Reinvention Through Mixed-Use Redevelopment
Traditional malls are transforming as developers shift to a “live, work, play” mixed-use model that combines multifamily housing, offices, entertainment, and public spaces with retail. This approach comes as estimates suggest up to one in four malls could close in the coming years, leaving more than one billion square feet of obsolete retail space ripe for redevelopment.
In San Mateo, California, the Hillsdale indoor mall is set for a dramatic makeover—with nearly three-quarters of its facilities scheduled for demolition leaving only the North Block intact. The project, led by Sares Regis Group, envisions a walkable, urban neighborhood featuring housing, retail, multi-level garages, a low-rise retail village, and a public square, all designed to reaffirm Hillsdale’s role as the heart of the Peninsula through high-density offices and additional retail along key transit corridors.
Formerly the largest mall in Michigan, Lakeland mall in Sterling Heights is posed for a $1 billion redevelopment after its closure in July 2024. The planned mixed-use hub will feature more than 2,000 housing units alongside office, retail, dining, and expansive green spaces, —including pedestrian-friendly streets, a large central park, and a Green Belt with hiking and biking trails. Spread across five distinct neighborhoods, the project will also include a two-story community center and various public amenities designed to create a vibrant, dynamic downtown atmosphere.
Other malls across the country, such as Lakeshore Mall in Gainesville, GA; Collin Creek Mall in Plano, TX; and Long Island Mall in Long Island, NY, are following this trend. Meanwhile, developers such as AvalonBay Communities are taking a targeted approach by converting select former department store spaces within underperforming malls into modern housing units, showcasing a flexible strategy that repurposes retail assets without the need to redevelop the entire property.
Beyond Mixed Use: Innovative Revitalization of Class B and Underperforming Malls
Not every mall is being transformed into a mixed-use hub. The distressed retail sector has also created opportunities for firms like Namdar Realty Group, which has been acquiring struggling malls at deep discounts. However, this strategy, which some call ‘delay and decay,’ has drawn criticism from the local communities where these properties languish. Speaking on the topic with a local CBS affiliate reporter near Pittsburgh, Manus Clancy, head of Data Strategy at LightBox, highlighted that Namdar’s model of buying malls “for pennies on the dollar” and operating them with minimal investment can yield profits but often leads to property neglect. This model, while financially viable in the short term, has led to growing concerns over property neglect and declining tenant retention. More than 70% of malls are class B or C, meaning they complete less than 400 sales per square foot. Some industry players are reimagining their portfolios of class B and C malls with a more hands-on redevelopment strategy. Unibail-Rodamco-Westfield, for instance, is retaining and reinvesting in its high-performing flagship properties amid a recovering retail market, even extending loans and consolidating ownership in key assets like Westfield Montgomery Mall.
Meanwhile, Simon Property Group is targeting its second tier “B” malls, upgrading outdated spaces by filling vacancies with nontraditional tenants—such as healthcare facilities—and redeveloping areas with new uses.
Even Walmart is getting in on the action by acquiring properties like Monroeville Mall and planning comprehensive redevelopments that add restaurants, entertainment, and more to revitalize these assets.
The Road Ahead for Retail and CRE
The shifting retail landscape and CRE strategies will continue to reshape urban and suburban environments for years to come. Early 2025 retail sales data reflect consumer caution, while the transformation of malls and shopping centers marks one of the most significant industry shifts in decades.
The recent forecast announced by the country’s biggest retailer hints at a challenging outlook. Walmart forecasts lower profit in 2025, citing economic and geopolitical uncertainty. With other major retailers reporting earnings next week, we’ll soon have a clearer picture of consumer health and its downstream effects on retail owners and investors. Stay tuned for our next retail story unpacking these developments.
For more insights on commercial real estate trends, subscribe to Insights and the CRE Weekly Digest Podcast for expert analysis and real-time data.
Subscribe To Insights
Be the first to get the latest news, updates and insights from LightBox.
