Through the first three months of 2025, that trend has reversed itself. Strip, Power and Lifestyle Centers all posted modest occupancy losses and slight upticks in vacancy in Q1. But Sacramento’s Community and Neighborhood centers posted a solid quarter—recording 142,000 SF of positive net absorption, which brought vacancy back to 6.9%. Leases backfilling former Big Lots and drug store tenants were among the most notable deals and included move-ins from Burlington (Rio Linda/North Highlands), Chuze Fitness (South Sacramento), LA Fitness (Auburn/ Lincoln) and Planet Fitness (Elk Grove), Skechers (Carmichael/ Citrus Heights/Orangevale) and Dollar Tree (El Dorado Hills).
None of the churn of the past year has impacted rents, which continue to post strong growth numbers. The current average asking rate for retail space in the Sacramento region is $2.15 per square foot (PSF) on a monthly triple net basis. We should point out that this metric is valuable mostly as a benchmark as it includes all shopping center asset types, classes and suite sizes. Inline small shop space in premier shopping centers locally can easily top $3.00 PSF, whereas vacant box space in a Class B or C center can be in the low $1.00 range. What’s notable is that this metric is up 4.9% annually across all shopping center types even though closures and bankruptcies have been ticking up.
Our brokers still report a shortage of available Class A space, particularly for smaller shop spaces. This is driving particularly
sharp rent increases on renewals for some tenants. Anecdotally we know of multiple instances where smaller space tenants have renewed existing Class A spaces at rates of 20% or more than their previous rents. With little new development in the pipeline (and most new construction heavily pre-leased prior to delivery), the balance of power in negotiations locally still favors landlords.
It remains to be seen if this trend can hold heading deeper into 2025. Across all commercial real estate specialties, our brokers are reporting that deals are taking longer to get done. Recently heightened economic uncertainty is not helping to alleviate this challenge. Rising levels of caution from tenants have not yet resulted in a slowdown in activity, but this is a real possibility heading into spring and summer 2025.
STORE CLOSURES AND BANKRUPTCIES TO SUBSTANTIALLY OUTPACE 2024 LEVELS
In just the first three months of 2025, Party City (-747 stores) and Joann (-801 stores) began national liquidations and, as this report went to press, it appeared that Rite Aid was heading back to bankruptcy court for the second time in three years. The beleaguered Pennsylvania-based chain filed Chapter 11 initially in September 2023 and closed nearly 1,000 stores nationally in its debt reorganization process. But the chain has struggled since, with dozens of landlords and vendors reporting unpaid
balances in recent weeks and multiple locations being shuttered abruptly. Rite Aid hired bankruptcy advisors in April 2025 and, according to multiple published reports, are preparing another filing. Both Party City and Joann found themselves in similar situations in recent months and neither survived. A Rite Aid liquidation (which most analysts believe is now inevitable) would mean +/- 1,400 drug stores nationally would be coming back to market.
The good news is that the local impact of these bankruptcies will be limited. Joann had seven stores in the Sacramento region before they began closing in February while Party City is closing six and Rite Aid is down to eight stores left in the region. We are aware of multiple tenants already interested in taking on local Rite Aid locations, most are in Class A locations. Because these all were once Thrifty Payless units (Rite Aid acquired them in 1996), the store templates are larger (20,000 SF+) and align perfectly for smaller format grocery concepts or off-price apparel chains that remain in aggressive growth mode. The Party City and Joann stores might be more challenging to backfill, but we have increasingly seen a mix of players ranging from dollar store chains to Skechers willing to go larger than their usual templates to open stores on prime corners.
The good news is that Costco, Amazon Fresh, Sprouts, TJX, REI, Safeway are among the dozens of major space users that have opened stores in the Sacramento region in the past year and nearly all these chains remain active. Meanwhile, fitness clubs, restaurants, beauty concepts (from cosmetics to Medispas), and rising categories like veterinary clinics and car washes have also been actively signing deals.
In January 2025, retail data tracking firm Coresight Research predicted that US major chains would be closing 15,000 retail locations this year, more than double the 7,325 stores that closed in 2024. These numbers included the recent announcements from Party City and Joann, but came well before the recent news that Rite Aid is likely going to be liquidating their remaining 1,400 stores. Their numbers include more than 750 planned closures from Advance Auto Parts, 500 additional Walgreens stores, 300 CVS units and major rightsizing efforts planned by Kohl’s, Macy’s, JCPenney, Victoria’s Secret, Foot Locker, 7-Eleven, Family Dollar, Best Buy, Denny’s and multiple other chains that already had these plans in place before President Trump announced his “Liberation Day” tariffs.
RECESSION AHEAD?
Ultimately, the greatest factor determining market health in the next few months comes down to the policy decisions of one man.
Heading into 2025, the US economy was poised for growth. The Federal Reserve had pulled off what many economists thought
impossible; a soft landing for the economy in their battle to contain inflation. In January, business optimism was improving. The Conference Board’s Measure of CEO Confidence stood at 6.31 out of 10 for current conditions and 6.93 for future conditions, their highest readings in three years. Office leasing both nationally and locally was picking up as return-to-office movements gained momentum (though in Sacramento, space givebacks from the State of California were creating their own headwinds to net absorption and vacancy levels).
Business leaders were generally positive about the incoming Trump administration knowing that the traditional Republican economic approach of corporate tax cuts and deregulation were on the agenda. But so were tariffs.
In our last set of reports, we warned that “promised ‘across-theboard’ tariffs of 20% or more would certainly have an inflationary impact if enacted.” But we also stated that it remained to be seen how much of Trump’s rhetoric was simply a negotiation tactic for revisiting trade deals or reshaping foreign policy. We concluded by stating, “We believe much of the current uncertainty regarding policy shifts will dissipate over the first three months of the new administration with the impacts of those policy shifts becoming clearer by the midyear mark.”
But three months later, economic uncertainty has only increased thanks largely to Trump’s on-again, off-again tariffs. As this report went to press, Trump’s “Liberation Day” tariffs were largely on hold, but our three largest trade partners were all still facing steep taxes on their exports (25% to Mexico and Canada, and a whopping 145% on China). But even these remain in flux with the administration hinting in a White House press conference on April 22nd that Chinese tariffs would “come down substantially, but it won’t be zero.”
With the policy landscape seemingly changing daily, business leaders are increasingly postponing making any moves. Uncertainty is the true kryptonite of the economy. Businesses can handle a lot if they can plan on it and have reasonable certainty. Even with a reasonably bad certainty, businesses can make plans, shift strategies and plot course for the best possible outcomes given the circumstances. But with pure uncertainty all
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