Mall, chain store decline moves local business up to real estate prime

Kimberly Blair, a San Diego-based wellness practitioner who specializes in grief counseling, noticed an uptick in “screen fatigue” among her clients, whom she had been counseling largely virtually.  So, she decided to open a storefront location and offer more in-person sessions. When she began casting about for locations, she found that there were many prime options because shopping center space was plentiful.

“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.

Across the country, small businesses, including health practitioners, yoga instructors, and artists, are finding it easier to secure prime commercial space that was once out of their reach. However, experts caution that the opportunities for small businesses vary largely by geography.

According to a recent report from commercial real estate firm Cushman & Wakefield, the national vacancy rate in shopping centers rose to 5.8% in the second quarter of 2025, a 20 basis point increase from Q1 and a 50 basis point increase from a year ago. The report indicates an overall softening of demand, which is leading to easing pressure on asking rents, including for shopping center space specifically. While the data during the peak of the Covid closures was even weaker, the increasing number of store closures and mounting cost pressures on tenants are likely to further dampen rent growth in the next several quarters, the report concluded. 

“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 monitors business foot traffic. Opening up retail real estate, especially in booming markets with high consumer migration, presents opportunities for independent retailers and boutiques, Lafontaine said, and she added that malls are also now more open to local businesses, especially if they are ones locally recognizable.

Blair’s experience is not uncommon, according to Teresha Aird, co-founder and chief marketing officer of real estate brokerage Offices.net. “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, adding that some of the hardest-hit retail corridors, like inner-ring suburbs and mid-sized city centers, are seeing a reset.

“That’s opened the door for independent retailers, fitness operators, and – in particular – service-based businesses, who were previously priced out,” Aird said. 

To be clear, while vacancies are growing in strip malls, the rents are still rising. “Typically, rental rates don’t go down,” said James Bohnaker, senior economist and Cushman & Wakefield. “The rental rates are going up, but not at the same rate of increase,” he said, adding that post Covid, rental rates were going up 4%, but now they are closer to 2%.

It’s this flattening of the rental rate rise along with increased vacancies that is creating an opening for small businesses wanting to expand into once priced-out commercial property. “We are seeing a rise in medical offices and spas and other uses you wouldn’t have typically seen,” Bohnaker said.

Cushman & Wakefield expects this trend to continue in the near term. “The market has recalibrated a bit. So far this year we are seeing more store closures,” Bohnaker said.

And that will continue to open up opportunities for smaller businesses wanting to move in.

Andy LaPointe, owner of local gourmet food business, Traverse Bay Farms, has two retail outlets in two northern Michigan strip malls.

“What we’ve found is when national brands pull out of prime spots, it’s less about simply filling those spaces, it is about reimagining it as an experience and destination that reflects the local community,”  LaPointe said, noting that for a small business like his, a lot of the spadework has been done when they move in.

“These spaces already had a site selection review, foot traffic, and locals are used to seeing activity in the space. But the magic happens when a small business brings, not a cookie-cutter replacement, but something unique, a place to linger and a sense of belonging,” LaPoint said. “So when a national chain leaves a space, it isn’t just a gap, it’s a canvas for a small, local business to create something lasting.”

Similar to Blair’s leasing experience, many small business owners are scoring more favorable terms, including flexible lease lengths, partial fit-outs, and even rent-free periods in some cases, according…