Retail leasing hit a historic milestone in 2025. As leasing platform Costar recently reported, for the first time on record service-based tenants leased more retail space than traditional goods-based retailers. The margin was narrow, with services accounting for 50.4% of leasing activity compared to 49.6% for goods, but the significance of the crossover goes beyond the numbers. It reflects years of shifting consumer behavior and the ongoing transformation of physical retail into spaces that are harder for e-commerce to replicate.
This shift happened even as one of the service sector’s biggest drivers pulled back. Food services, which includes restaurants and taverns, saw its share of leasing fall to just 16.8%, the lowest point since the pandemic. The decline is surprising given that consumers are spending more on dining out than ever, but strong sales have not been enough to offset the pressures operators are facing. Rising labor and occupancy costs, tighter margins, and years of rapid post-pandemic growth have made expansion a less attractive proposition. In many markets, finding affordable and appropriately sized restaurant space has become an obstacle in its own right.
Fitness stepped in to fill some of that void. Health and wellness continued to be a strong consumer priority in 2025, and fitness tenants responded with meaningful expansion across both national brands and local specialty concepts. These operators have also proven to be a practical solution for landlords dealing with large vacant spaces, readily absorbing former big-box and anchor locations that can be difficult to fill. Their ability to generate consistent foot traffic makes them particularly appealing to property owners.
Entertainment retail also gained ground in 2025, continuing a broader shift toward experiential concepts. While still a relatively small slice of overall leasing, it posted one of the biggest relative gains of any category. Concepts built around recreation, immersive experiences, and social interaction are becoming a more deliberate part of tenant strategies, as landlords look to attract visitors who stay longer and spend more during each visit.
On the goods side, the picture was more subdued. Apparel, sporting goods, and home-related categories continued to pare back store counts as discretionary spending slowed and online competition persisted. Discounters and general merchandise retailers remained active, but their growth was not enough to counteract the contraction happening elsewhere in goods-based retail, which contributed to the overall shift in leasing share.
Looking ahead, services are expected to remain the backbone of retail leasing, but the days of broad, category-wide expansion may be giving way to something more targeted. The slowdown in restaurant leasing signals that some segments are reaching the natural limits of their growth cycles, while fitness and entertainment point to where demand is heading next. Success in this environment will increasingly come down to concept quality, cost management, and the strength of consumer spending, particularly in discretionary categories.
