If you’ve been following the economic news lately, it must feel like we’re living in, I don’t know, two different realities. It really does. On one hand you have the US economy just performing spectacularly. We’re posting the strongest GDP growth in two years, and it’s all fueled by this massive consumer spending.

Yeah. Holiday sales are expected to break a trillion dollars for the first time ever. Exactly. Okay. But then you look at consumer sentiment and it tells a completely different story. Confidence is down for the fifth straight month, hovering near some pretty recent lows. It is a classic economic paradox, isn’t it?

Right? You have this high velocity spending clashing with just. Deep, deep uncertainty. Right? And that’s precisely why we’re doing this deep dive today. Our mission is to, you know, cut through some of those mixed signals by looking at recent commercial real estate news. Okay. We’re gonna focus specifically on the, I think, surprising resilience of the US retail sector, and crucially how these national trends are really getting amplified in high growth markets like Dallas-Fort Worth, which is still the undisputed leader in overall CRE activity right now.

Still number one. Okay, so let’s unpack this. We have to start with the macroeconomic backdrop, the cost of money, because that tension is defining everything for investors today. Mm-hmm. Let’s look at what’s driving that spending growth. The US economy grew at a really powerful 4.3% annual rate in the third quarter of 2025, and that growth was, I mean.

Overwhelmingly driven by the consumer spending expanded by 3.5%, which is a big jump from the previous quarter. What’s fascinating to me though, is the composition of that growth. It sort of explains why the market feels so mixed. It does. While consumer spending is robust, especially on things like services and experiences.

Business investment growth has really slowed down sharply, right? Yeah. A sharp drop from the prior quarter. And this tells you that while Americans are still out there buying, businesses are pulling back, they’re cautious about the future, pausing, non-essential expansion. And even with all that spending, consumers are clearly anxious.

That’s why we’re seeing the conference board’s confidence score drop again in December down to 89.1. And it’s important to remember that score is based on a 1985 benchmark of 100. So 89.1 is, uh, it’s a significant dip. Concerns about sticky inflation, trade tariffs, federal policy shifts. Yeah, it’s all weighing on people.

And that anxiety translates directly to cost pressures. I mean, look. Annual US consumer inflation has eased a bit from 3% down to 2.7% in November. Okay. But the biggest pain point for households is still shelter. Rents are still up 3% from a year ago. That constant pressure on housing just squeezes the consumer wallet.

It makes that 4.3% GDP growth feel a little less meaningful to the average person. Now on monetary policy, we did see the Fed implement its third consecutive rate cut. That puts the benchmark rate between 3.5% and 3.75%, which was widely welcomed. It’s a signal that the short term borrowing rate is stabilizing in what a lot of people see as, you know, neutral territory.

So if we connect this to the bigger picture for commercial real estate. The narrative gets complex. It does. The Fed is signaling a slowdown in future cuts. Maybe just one more. In 2026, this confirms that the era of ultra cheap sub 4% money is, well, it’s definitively over. So for CRE investors, financing costs are still high.

We’re talking. Mid 6% range for most borrowers, right? And that’s roughly double the rates we saw just a few years ago. It fundamentally restricts who can buy and what they can afford, but the capital markets are showing some signs of life. We saw CMBS issuance, commercial mortgage backed securities.

Surpass $126 billion in 2025. That’s the highest level since 2007. On the surface, that looks like epic market strength, and this is where that theme of selectivity comes in. While that $126 billion figure is massive, it really masks some lingering stress in certain sectors. How so? While that issue in strength is almost entirely fueled by loans tied to say a high quality data centers or prime trophy office assets, mostly in places like New York City.

The majority of BNC class assets, you know, suburban office parks, older retail centers, they’re still struggling to get affordable financing. This higher cost of capital has really favored cash buyers and it’s forced what analysts are calling price discovery. Exactly. Meaning sellers finally had to accept that asset values had to be reset lower to meet this new reality Precisely.

Buyers only came back to the table when the valuations were recalibrated. It shows that high rates didn’t shut down the market. They just forced a major, and frankly, a healthy correction. So it demands a much more selective and capital rich approach, which is why we’re seeing is such a clear bifurcation in performance.

Okay, let’s transition that into the retail sector itself, because this is where that consumer paradox really plays out low confidence. Yet, holiday spending is tracking about 4% ahead of last year. It’s a mix, but the key point is that consumers are prioritizing specific types of spending. Online sales were especially strong up almost 8%, but even brick and mortar did well.

Electronics, clothing and accessories both saw growth over 5%, right? When people are concerned about the future, they tend to consolidate spending. It’s either necessities or smaller, immediate rewards like dining out or small luxuries, and that keeps the cash registers humming. The National Retail Federation projected that total holiday spending would surpass a trillion dollars for the first time.

That confirms this underlying resilience and that resilience has translated into better fundamentals for the properties themselves. The outlook for retail property investment is seen improving all through 2026. Building on a strong 2025 where investment volume was already 12% higher than the pre pandemic average.

The main reason for this strength, and this can’t be overlooked, is the supply dynamic. New retail construction just hit historic lows in 2025. How low? We saw less than 43 million square feet started and under 55 million delivered. That’s the smallest annual total since 2007. That supply constraint is the key ingredient, isn’t it?

You have steady consumer demand meeting this historic scarcity in new construction, and that scarcity is driven by the high financing costs and the labor shortages we’ve talked about. It just completely shifts the leverage to landlords for any quality space. Absolutely. Nationally retail vacancy held steady at a historically low 5.8% in Q3, and that scarcity helped push average US Retail rents up almost 2% to a record, $25 and 69 cents in square foot, and that growth was strongest wear.

Unsurprisingly, in the high growth southern markets, they saw a 2.3% increase year over year. And here’s where we see that selectivity playing out in some surprising ways. The return of the mall malls, which everyone had written off for years. We saw 38 single asset mall sales in the first three quarters of 2025.

That matches the total for all of 2024. And big landlords like Simon Property Group are reporting 96.4% occupancy. Very tight, but you have to highlight the difference here. The market is brutally bifurcated. Egg class malls are thriving because they’ve invested in experiences in technology. They attract the right demographics right at the same time.

We saw 13 million square feet of obsolete mall space get demolished in just the first nine months of 2025, 13 million. That’s a huge number. That demolition rate is the clearest signal you can get. Lower tier, poorly located assets are failing and failing rapidly. The market is not lifting all boats. It’s rewarding superior quality.

We’re seeing interesting moves from tenants too. Food and beverage is clearly a priority. Garden restaurants, olive Gardens parent company is ramping up openings. They’re expecting 65 to 70 new locations this fiscal year. They’re citing better than expected sales growth with Olive Garden’s, same store sales up 4.7%, and their story of distress is really a story of bad real estate.

They’re trying to renegotiate these pricey legacy leases from a 2014 sale leaseback deal that were structured way above current market rates and those outdated rigid lease agreements are now dragging down their profitability. It just underscores the risk of poorly negotiated real estate contracts. A good tenant can still fail under a toxic lease.

So let’s bring this focus home. Let’s pivot from the national trends to the market that’s really capitalizing on all this dynamism, Texas and specifically Dallas-Fort Worth. DFWs performance has been well staggering. It kept its number one spot in the U-L-I-P-W-C emerging trends report, and that’s backed by the numbers, nearly $18 billion in investment sales through Q3 of 2025.

And that investment is fundamentally driven by people. The DFW Metroplex has seen a massive 36% population increase since 2010, and that translates into an unprecedented surge in retail development. DFW saw 2.9 million square feet of new retail space delivered in 2025. That’s the highest amount since 2017.

Yearly, double the previous year’s figure. What’s fascinating is that even with that jump in supply demand remains just insatiable for well-located assets, which is why institutional capital keeps chasing those high profile deals. We saw a great example with CTO Realty Growth Selling Shops at Legacy North in Plano.

A prime retail hub in the Dallas area sold for $78 million, and that transaction achieved strong pricing because of significant leasing and stabilized occupancy in a really desirable growing suburb. And this strength isn’t just confined to DFW, is it? We’re seeing institutional capital flow into retail all across Texas.

Absolutely. Down in the Austin Metro, a joint venture bought the Wolf Ranch Town Center and Lakeline Plaza. That’s a million square feet for $250 million, and both of those centers were 99% leased, and for one of the partners, it was their first US Open air retail acquisition. That tells you a lot about confidence in Texas population dynamics.

Similarly, in San Antonio retail vacancy is a very healthy 4.3%. We saw the Park North Shopping Center sell for $115 million. The largest shopping center sale there since 2021. The common thread here is high occupancy and strong pricing, even with national headwinds, and importantly, D W’s Dominance is anchored by growth across all sectors.

It’s not just retail holding up the market. DFW is leading the nation in office demand 3.3 million square feet of net absorption through Q3. That’s the critical context. Plus you have massive infrastructure and manufacturing investment. That’s right. Texas Instruments just began production at its new semiconductor facility in Sherman, just north of Dallas.

It’s part of a $60 billion expansion plan, so that high tech manufacturing creates high paying jobs, which drives population growth and housing demand, which in turn fuels the need for new retail centers. It’s a powerful reinforcing economic cycle. It gives investors in the region an incredible buffer against uncertainty.

Okay, we have to close by looking at some of the headwinds that could still temper enthusiasm. The conference board projects that trade tariffs will remain a drag on the economy through 2026, which will keep overall spending in investments somewhat muted, especially for sectors that rely on international supply chains and on the construction pipeline front, the architectural billings index.

It fell for the 13th straight month in November, a score of 45.3. Anything below 50 means project demand is contracting that continuous drop signals that future new supply will stay severely constrained even in high growth markets. Even there, and despite construction jobs actually rising in 31 states led by Texas, that labor shortage is a huge factor.

Contractors keep reporting a lack of qualified workers as a key challenge to staying on schedule and on budget. That tight labor market combined with expensive financing just reinforces the lack of new retail inventory we talked about earlier. Separately, we are tracking some policy changes. A federal executive order was just signed to hasten the reclassification of marijuana from Schedule one to a less serious schedule three.

The legal details are complex, but easing regulatory burdens and simplifying banking access is expected to increase the uptake of industrial and retail space for that industry. So what does this all mean for you, the commercial real estate investor? Well, the data really confirms that retail properties, especially high quality supply, constrained assets and high growth southern markets like DFW are thriving.

They’re commanding record prices. Even as this macroeconomic uncertainty continues, it’s the definition of a flight to quality. The key takeaway is the continued need for acute selectivity. The success stories like Simon’s, 96.4% occupancy show the high value of quality, but conversely, that high demolition rate for obsolete malls underscores the risk in lower tier properties.

So investors have to focus on markets with robust population engines like DFW and properties serving those high growth areas. That’s the game right now. Okay. A final thought for you to explore as you plan for next year. Former Senator Mitt Romney recently wrote an op-ed calling for the elimination of 10 31 exchanges a critical tax break.

It allows real estate investors to defer capital gains when they sell one property and buy another. Right, and we’re talking about billions of dollars that flow through 10 31 exchanges for CRE deals every year. It peaked at over $18 billion in 2021. So here’s the question. What would the immediate and long-term consequences be for capital flow, for liquidity, and for asset pricing?

In a market like DFW Retail, if that crucial tax deferral were to suddenly close, it’s a potential policy shift that could fundamentally reset how real estate investment decisions are made across the board.