E-commerce and the Future of Retail Real Estate 2025

E-commerce and commercial real estate (CRE) are connected in fascinating ways — from the industrial warehouses that keep supply chains humming to the multifamily owners scrambling to add new mailrooms.

Generally, the most obvious and scrutinized connection is retail centers. If shopping moves overwhelmingly online, what happens to the brick-and-mortar storefronts that once raked in customer cash?

The outlook may not be as bleak as you might think. So far, retail performance has held steady, and some investors aren't writing off the category.^1^ Here's how retail properties are evolving in this new era of shopping.

[[[Why Retail Properties Remain Resilient in the E-Commerce Era]]]

E-commerce isn't novel — it's been a factor in shopping for years. But many feel this moment stands out. Shein is preparing for one of the biggest IPOs in years, and more brands are shuttering physical stores to go fully online.^2^ Between 2022 and 2028, e-commerce sales are on track to grow 57.7 percent.^3^

This growth is generally seen as a tailwind for industrial and logistics real estate — but it's also led to claims of a 'retail apocalypse' ^4^ Let's look at the data.

Retail vacancy rates reached record lows in 2024, as demand for these properties — especially in desirable locations — held strong.^5^ Big retail-focused REITs like Simon Property Group posted healthy year-over-year gains, driven by expectations of rising rents and steady demand.^6^ And in its annual outlook, J.P. Morgan predicts retail among 2025's best-performing CRE categories.^7^

Shifting consumer preferences come with challenges, but may also present opportunities.^8^ Instead of writing it off, some are finding ways to thrive in a retail landscape that's evolving, not extinct.

[[[Adapting Retail Properties for E-Commerce Growth]]]

Some traditional retail categories have thrived in the e-commerce era, and new ones have emerged.

High-end retail centers in desirable locations generally continue to perform, driven by consumers' preference for buying luxury items in person.^9^ Grocery stores and grocery-anchored shopping centers have also held relatively strong. The non-discretionary nature of grocery shopping has generally kept demand steady, even as inflation forced some consumers to cut back elsewhere.^10^

In recent years, experiential retail has emerged as an interesting category. Often dubbed 'retailtainment,' these stores combine technology, storytelling, and interactive elements to create memorable shopping experiences. This approach has driven a relatively strong demand for these unique properties.^11^

Other brands are adapting to the e-commerce era in different ways. Many stores in neighborhood and strip centers are becoming hubs for order pickups, exchanges, and returns. Consumers may prefer to place orders online, but when it comes to managing those products, they typically still turn to physical stores.^12^

Altogether, it seems most leading businesses are betting on an omnichannel future—a mix of in-person and online shopping.^13^ E-commerce's growth is undeniable, but for many purchases, many customers still aren't ready to part with brick-and-mortar stores. There's a reason Amazon bought Whole Foods, after all.^14^

[[[E-Commerce Disruption and Innovation in Retail Real Estate]]]

Disruption in commercial real estate can have counterintuitive effects. What might first seem like a negative trend can spark the innovation needed to position a category for stronger future performance.

E-commerce isn't necessarily a tailwind for retail properties. But so far, the overall category has shown impressive durability,^15^ and if major outlooks are right, 2025 could be another strong year.

For more on e-commerce's impact on commercial real estate — including its significant influence on industrial properties — check out other Crowd Street investor resources.

Note: In addition to more general risks such as high vacancy rates, oversupply of product in the market, and credit quality of tenants, some of the factors that can impact the success or failure of retail investments include the length of the lease(s) and whether it's single or multi-tenant.