Despite a challenging economic backdrop in 2025, the U.S. retail sector demonstrated notable resilience throughout the year.
The market ended the year in a period of recalibration, with early signs of stabilization beginning to emerge. While fundamentals have held up comparatively well, downside risks remain as store closures tied to recent bankruptcies continue to work through the system and broader macroeconomic headwinds persist. Mirroring these national trends, the Puget Sound retail market is expected to remain relatively stable in the coming year. However, emerging concerns around moderating employment growth and softening consumer activity present near-term risks. Consumer spending remains a key driver of retail demand, and early signs of deceleration in the region could temper the pace of recovery across the region.
VACANCY
While the Seattle retail market remains relatively tight, demand softened in 2025 and vacancies have noticeably increased over the past year, posting 4.0% at year-end. The vacancy rate in 4Q surpassed the 10-year historical average of 3.8%, in part due to an uptick in new deliveries throughout 2025. Kitsap and King Counties posted the highest vacancy rates at 5.4% and 4.4% while Thurston, Snohomish and Pierce Counties ended the quarter at 3.3%, 3.4% and 3.3%, respectively.
Although availability has increased modestly, new store openings continue to offset closures by national retailers. However, certain segments, particularly large-format retail, may experience elevated levels of availability in the near term, as the market absorbs recently vacated space from national chain closures.
MARKET TRENDS
Retail rents in Seattle have continued to rise, though growth has moderated in recent years. Looking ahead, rents are expected to remain supported through early 2027 by tight supply and limited new construction. While slower job growth and stagnant wage growth could temper momentum, steady demand for retail space is likely to keep fundamentals stable.
DEVELOPMENT ACTIVITY
Construction activity remains concentrated in high-growth corridors, with Mill Creek and Woodinville the most active. The Yard, a 150,000 SF mixed-use project in Woodinville, accounts for a large share of current inventory and is tied to dense new housing. Tacoma Suburban and Everett CBD follow, supported by neighborhood demand and redevelopment. Suburban projects generally lease faster and perform well upon delivery, while urban core developments face slower lease-ups. Despite these pockets of activity, construction starts remain well below pre-pandemic levels, and demolitions continue to outpace new supply, limiting near-term impacts. Developers remain cautious, prioritizing targeted projects over speculative builds.
MARKET DEMAND/NET ABSORPTION
Market wide net absorption posted its fifth straight quarter of negative activity, ending Q4 2025 at -197K SF and closing the year at -1.1M SF, the weakest annual performance observed since 2020. Although there have been a handful of recent closures by national retailers, the negative activity can also be attributed to a slowdown in overall activity as leasing volume posted 2.6M SF for 2025, a 5-year low for the Seattle region. The rising availability in larger buildings, contrasted with steady performance in smaller boxes, points to a split market dynamic: small-box properties continue to perform well, while large-box spaces face longer backfill timelines or pressure from potential redevelopment.
INVESTMENT ACTIVITY
Sales volume across the region remained relatively stable when compared to 2024. Stronger consumer spending in recent months has helped support retail demand, providing a buffer amid ongoing economic uncertainty.
4Q 2025 Seattle Retail Market: Key Data Points
Explore our full Seattle retail market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Increased: Market-wide vacancy rose to 4.0%, surpassing the 10-year average of 3.8%, with Kitsap County highest at 5.4%.
- Negative Net Absorption: Seattle retail posted -197K SF in Q4 and -1.1M SF for the year, marking five consecutive quarters of negative absorption.
- Leasing Volume Hit 5-Year Low: Total leasing activity reached 2.6M SF in 2025, the weakest annual performance in recent years.
- Retail Rents Remain Supported: Despite slower growth, rents are expected to stay firm through early 2027 due to tight supply and limited new construction.
- Construction Activity Concentrated: Development focused on suburban areas like Mill Creek and Woodinville, with urban core projects facing slower lease-ups.
- Cap Rates Tick Up: Average retail cap rate increased to 6.4%, up from 6.3% in 2024.
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