Creating Resilience
Low Space Availability Will Buffer Retail Sector From Tariff Headwinds
April 10, 2025 3 Minute Read
Sweeping U.S. tariffs1 are presenting downside risks for retail real estate as companies decide how much of the increased import duties to absorb or pass on to customers. Amid higher costs and uncertainty, some leases will be delayed or canceled. However, these challenges come at a time when the retail availability rate is near a record low.
Among consumer products, apparel may be the most affected by higher tariffs, as 97% of it sold in the U.S. is sourced from other countries, according to the American Apparel & Footwear Association. The U.S. Trade Commission reports that over 50% of U.S. apparel imports come from China (145% tariff rate) and Vietnam1 (46% tariff rate). Other products that are highly susceptible to tariffs include electronics, automobile parts, wine & spirits and furniture, all of which are major retail occupiers.
Figure 1: New U.S. Tariff Rates by Country1
| China | 145% |
| Cambodia | 49% |
| Vietnam | 46% |
| Thailand | 36% |
| Taiwan | 32% |
| Indonesia | 32% |
| Switzerland | 31% |
| South Africa | 30% |
| India | 26% |
| South Korea | 25% |
| Japan | 24% |
| Malaysia | 24% |
| European Union | 20% |
| Israel | 17% |
| Philippines | 17% |
Higher costs to procure goods, along with disrupted supply chains and lower sales, could trigger store closures and accelerate the shift to e-commerce. The mall & lifestyle segment seems most vulnerable given its high concentration of apparel stores. Except for those with department store anchors, power centers seem less threatened, as multichannel retailers and home improvement stores—key tenant bases for these properties—are performing well. Neighborhood, community & strip centers with food or discount store anchors are best positioned to weather tariff effects as consumers focus on essential items and lower prices.
Figure 2: Origins of Clothing and Shoes Sold in the U.S. in 2024
Leasing activity will likely slow in the near term as retailers reassess expansion plans and focus on operational efficiency. However, a relatively low 4.8% national availability rate provides some cushion for retail real estate against tariffs’ ill effects. Higher construction costs make new development less likely, which should support long-term market fundamentals.
Figure 3: Retail Availability Rates by Property Type
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