Signature Associates

Fitness centers, pickleball courts, other services now dominate retail real estate

Posted By: CoStar on March 9, 2026.  For more information, please click here to read the source article.

For the first time, goods-based tenants are no longer the biggest takers of this property type

Retail leasing reached a structural turning point in 2025. For the first year on record, service-based retailers leased more space than traditional goods-based tenants.

And while the margin was narrow, 50.4% services to 49.6% goods, the crossover is meaningful as it reflects the long-running reallocation of consumer spending and the continued evolution of physical retail space toward uses that are less vulnerable to e-commerce.

Notably, this milestone came despite a pullback in retail leasing from the service side’s most significant contributor. Food services, a category that includes restaurants and taverns, saw its relative share of leasing decline to the lowest level of the post-pandemic period at just 16.8%.

This pullback occurred despite consumers spending more than ever on food away from home, underscoring the growing disconnect between sales performance and leasing activity. Margin compression, elevated labor and occupancy costs, and heightened competition following several years of rapid unit growth by food services retailers have begun to constrain expansion. In many markets, limited availability of economically viable restaurant space has become a binding constraint, particularly for smaller-format and value-oriented concepts. As a result, food service leasing activity moderated even as spending on food out of the home held steady.

While restaurant leasing dwindled, fitness emerged as one of the strongest service-sector leasing growth stories in 2025. Expansion activity increased meaningfully as consumers continued to prioritize health and wellness, supporting both national operators and specialized local concepts in adding locations.

Fitness tenants have proven particularly effective at absorbing second-generation retail space, including former big-box and junior anchor locations, reinforcing their appeal to landlords seeking durable demand and consistent traffic drivers.

Entertainment retailers also increased their share of leasing in 2025, extending a multi-year shift toward experiential retail. While still a relatively small portion of the overall retail leasing picture, entertainment posted one of the largest relative gains among all categories.

Retail concepts tied to recreation, immersive experiences and social interaction are playing a larger role in tenant mixes as landlords look to differentiate centers and extend the time customers remain onsite. Growth in this segment reflects both evolving consumer preferences and increased owner flexibility regarding nontraditional retail uses.

On the goods side, leasing activity remained comparatively restrained as apparel, sporting goods and select home-related categories continued to rationalize their store counts amid a slower discretionary spending and persistent competition from online channels.

Discounters and general merchandise retailers remained active on the leasing front, but their expansions were insufficient to offset contraction among more discretionary goods categories, contributing to the continued erosion of goods-based leasing share.

Looking ahead, the shift toward service-oriented retail appears durable but increasingly selective. The recent slowdown in food-service leasing highlights the limits of growth after several years of outsized expansion, while continued gains in fitness and entertainment underscore how demand for retail space is rotating within the service sector.

We expect service tenants to continue to underpin retail leasing activity, although performance will depend more heavily on concept quality, cost discipline and the consumer’s ability to sustain discretionary spending levels.