Kimberly Blair, a San Diego-based wellness practitioner specializing in grief counseling, observed increased “screen fatigue” among her virtual clients. She responded by opening a storefront for in-person sessions, discovering a wealth of prime locations due to ample shopping center space.”I was able to negotiate a fantastic monthly rent, but also a flexible lease term. Which in turn secures better outcomes for my clients who need in-person support, and also for my business as a competitive advantage,” blair said.
Nationwide, small businesses – including health practitioners, yoga instructors, and artists – are gaining access to previously unattainable commercial spaces. However, experts note that opportunities vary considerably by location.
A recent report from Cushman & Wakefield indicates a national shopping center vacancy rate of 5.8% in the second quarter of 2025, up from 5.6% in Q1 and 5.3% a year prior.The report points to softening demand and easing pressure on asking rents. While vacancy rates were higher during peak Covid closures, increasing store closures and cost pressures suggest rent growth will likely remain subdued.
“Main Street opportunities are definitely on the rise for tenants beyond the traditional retail model,” said Elizabeth Lafontaine, director of research at Placer.ai, which tracks business foot traffic. She noted that opening retail real estate, particularly in growing markets, benefits self-reliant retailers and boutiques, and that malls are increasingly receptive to local businesses.Teresha Aird, co-founder and chief marketing officer of Offices.net, echoed this sentiment. “We’ve seen a noticeable uptick in small businesses taking advantage of vacancies in areas that used to be off-limits due to pricing,” aird said, citing a “reset” in hard-hit retail corridors like inner-ring suburbs and mid-sized city centers.
“That’s opened the door for independent retailers, fitness operators, and – in particular – service-based businesses, who were previously priced out,” Aird said.
While vacancies are increasing, rental rates are still rising, albeit at a slower pace. “Typically, rental rates don’t go down,” explained James Bohnaker, senior economist and Cushman & Wakefield.”The rental rates are going up, but not at the same rate of increase.” He noted that post-Covid rental rates increased by 4%, but are now closer to 2%.
This flattening of rental rate increases, combined wiht higher vacancies, is creating opportunities for small businesses. “We are seeing a rise in medical offices and spas and other uses you wouldn’t have typically seen,” Bohnaker said.
Cushman & Wakefield anticipates this trend will continue, citing increased store closures this year.
Small Businesses Find Opportunities in Shifting Commercial Real Estate Landscape
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The commercial real estate market is undergoing a transformation, creating potential opportunities for small businesses as landlords adjust to changing demands and increased vacancies. While challenges remain, a combination of factors – including a desire to fill empty spaces and evolving economic conditions – is making it more feasible for smaller ventures to secure leases they might not have been able to obtain just a few years ago. Though, success isn’t guaranteed, and landlords remain cautious due to the inherent risks associated with small business ventures.
the Changing Dynamics of Commercial leases
For years, the commercial real estate market favored larger, more established businesses. Landlords often prioritized long-term leases with national chains, seeking stability and predictable income. However, the rise of e-commerce, shifts in consumer behavior, and recent economic fluctuations have led to increased vacancies, particularly in larger retail spaces – often referred to as “big boxes.” https://www.nar.realtor/research-and-statistics/commercial-real-estate
This shift in power is creating openings for small businesses. Landlords, eager to avoid prolonged vacancies, are becoming more flexible with lease terms and rental rates. Iowa Secretary of Agriculture Tom Vilsack highlighted this trend, noting that a family-owned restaurant in west des Moines recently secured a lease at a rate nearly 30% below the original asking price, with the landlord even offering tenant advancement allowances for kitchen renovations. This type of deal was unlikely just five years ago,demonstrating a clear change in the market.
Landlord Caution and Small Business Risk
Despite the increased opportunities, landlords aren’t abandoning caution.The high failure rate of small businesses remains a notable concern. According to Glenn Brill, a managing director at FTI Consulting, over 50% of small businesses don’t survive beyond six years. https://www.fticonsulting.com/
This risk leads manny landlords to prioritize waiting for established tenants willing to pay full market rates, rather than quickly filling spaces with ventures that may not last. Brill suggests that the most promising opportunities for small businesses aren’t typically in these large, vacant “big box” stores, but rather in smaller strip centers.
The Importance of Local Economic Conditions
even in smaller strip centers, success isn’t automatic. Local economic health plays a crucial role.Reduced rental rates alone aren’t enough to incentivize a small retail business to open if the surrounding community is struggling economically and vacancy rates are already high. A strong local economy and demonstrable consumer demand are essential for a small business to thrive.
Key Takeaways:
* Increased Opportunities: Vacancies are rising, giving small businesses more negotiating power.
* Landlord Versatility: Landlords are more willing to offer lower rents and tenant improvements.
* Risk Remains: High small business failure rates make landlords cautious.
* location matters: Strip centers offer better opportunities than large, vacant spaces.
* economic Health is Crucial: Local economic conditions significantly impact success.
Looking Ahead
The commercial real estate landscape will likely continue to evolve. As landlords adapt to the new realities of the market,and as small businesses demonstrate resilience and innovation,we can expect to see a more diverse mix of tenants in retail spaces. Though,careful planning,a strong understanding of local market conditions,and a solid business plan will remain essential for small businesses seeking to capitalize on these emerging opportunities.