Fed Cuts Rates. But Why Retail Real Estate Still Pays the Real Price?

Marc Perlof • November 3, 2025

By Marc Perlof | MarcRetailGuy

November 3, 2025


If you own retail real estate, here’s what just changed for you.


The Federal Reserve just lowered interest rates by a quarter point, the second cut this year, bringing the rate to 3.75%–4.00%³. The Fed also said it will stop reducing its balance sheet on December 1⁴, which should make banks more willing to lend. Inflation is close to 3.0%¹², still above the 2% goal, and the job market is slowing.


That sounds like good news. But for retail real estate, the rate that really matters isn’t the Fed Funds Rate, it’s the 10-Year Treasury yield.


The Hype vs. the Reality
The Fed’s move grabs headlines, but retail investors and developers borrow money based on long-term rates, not short-term ones.

Fed Funds Rate – short-term. Affects credit cards, small loans, and business confidence.

10-Year Treasury Yield – long-term. Sets the base for mortgage and commercial loan rates.

Even if the Fed cuts rates again in December⁵, your loan rate won’t drop unless the 10-year yield also falls. Right now, that yield is about 4.0%, only a little lower than last quarter. Until it moves down more, borrowing costs for new projects and refinancing will stay high.


Why This Matters for Retail Property Owners
Lower short-term rates can help a little because banks can lend more easily. But construction, insurance, and labor costs are still expensive.

In Southern California, even a small drop in rates can help restart stalled projects, especially mixed-use or SB 79-zoned sites near transit. Still, smart underwriting matters: what really drives profit is the gap between your borrowing cost and your property’s cap rate, not what the Fed says.

Across the country, lower rates might bring more 1031 buyers back into the market. But long-term growth depends on whether inflation keeps cooling¹² and the 10-year yield continues to fall.


Investor Takeaways
When the Fed cuts rates, bonds and CDs pay less. That often pushes more money toward retail real estate, especially NNN properties, grocery-anchored centers, and credit-tenant deals. Expect stronger demand and slightly lower cap rates if this trend continues.

Still, be careful. Insurance, property taxes, and operating costs are rising, and retail sales could slow if hiring drops.


What You Can Do Now
• Check your loan, a refinance could save money.
• Revisit project plans, a lower rate might make them work again.
• Review your leases, inflation clauses matter more than ever.
• Track tenant sales, slower hiring hurts some retailers first.
• Expect more buyers for SB 79 or transit-friendly properties.


Bottom Line
The Fed’s cuts sound exciting, but your real borrowing cost still depends on the 10-Year Treasury yield. Keep an eye on that number, it shows when true savings begin.

With rates falling but costs still high, the real question is: Who wins, those who act now or those who wait?



References:

  1. Bureau of Economic Analysis – PCE Inflation Data (August 2025, 2.7%)
    https://www.bea.gov/data/personal-consumption-expenditures-    price-index
  2. U.S. Bureau of Labor Statistics – CPI Report (September 2025, 3.0%)
    https://www.bls.gov/news.release/cpi.toc.htm
  3. Federal Reserve Press Release – October 2025 FOMC Meeting
    https://www.federalreserve.gov/newsevents/pressreleases.htm
  4. Reuters – Fed to Halt Balance Sheet Runoff December 1
    https://www.reuters.com/markets/us-fed-halt-balance-sheet-runoff-dec-1-2025-2025-10-30
  5. Bloomberg Economics – FOMC December Outlook Analysis


Disclaimer: For information only. Not legal, tax, or financial advice.




© 2025 Marc Perlof Group. All rights reserved.

Retail Real Estate 2026: Why Some Properties Stay Strong While Others Struggle

By Marc Perlof • February 2, 2026
Retail Real Estate 2026: Why Some Properties Stay Strong While Others Struggle By Marc Perlof | MarcRetailGuy February 2, 2026 If you own retail real estate, here is what just changed. Retail real estate in 2026 is no longer one market. It has split into clear winners and clear losers. Owners who understand this are protecting value. Owners who do not are feeling pressure. The biggest change is how people spend money when things feel uncertain. Interest rates are higher. Costs are up. Households are more careful. That shift shows up first at the property level. Some retail feels stress faster than others. Lifestyle centers, nightlife areas, entertainment districts, and tourist retail depend on optional spending. When people cut back, visits drop. Sales slow. Tenants push back on rent. Vacancies last longer. This is not a crash. It is a pressure issue tied to spending people can delay. Other retail performs differently. Grocery anchored centers, pharmacies, medical and dental, quick-service food, auto service, and personal care are built around daily habits. People cut wants before needs. That makes income steadier and easier to support in a cautious market. Recent retail market reports show this split clearly. National retail vacancy stayed fairly stable through late 2025, mostly in the mid-5 percent to high-6 percent range, with necessity-based centers performing better than discretionary locations¹. Leasing slowed in 2025, with longer decision times and more rent pushback, especially from non-essential tenants². Buyers are still active, but they are more careful. They now focus on tenant quality, lease length, and operating costs more than rent growth³. What retail owners should focus on right now • Daily-needs tenants reduce risk. Properties with grocery, medical, pharmacy, and quick-service food see more stable rent and fewer concession requests. That helps protect sale price and lender support in slower markets¹. • Grocery-anchored centers sell faster. Buyers still want these assets because traffic is predictable and costs are easier to pass through. These deals tend to fall apart less often³. • Discretionary retail carries pricing risk. Properties tied to optional spending face longer vacancies, rent resistance at renewal, and wider gaps between buyer and seller pricing. Waiting too long to adjust can hurt value, not just cash flow². One thing is becoming clear in early 2026. The market is not pricing retail as one category anymore. It is pricing risk. Two properties with the same income can be worth very different amounts based on tenant mix, lease terms, and rising expenses. Owners who understand this protect equity. Others only see the gap after a buyer or lender points it out. The takeaway is simple. Retail real estate in 2026 is about quality, not hype. Stable income matters. Lease terms matter. Tenant mix matters. Insurance and operating costs matter. Owners who match strategy to how their tenants actually perform stay in control. Owners who rely on old assumptions end up reacting. If you want a clear, property-specific review of how buyers and lenders would view your retail asset today, I can prepare a short market positioning summary. No templates. No guesses. Just how your property would really trade in this market. Ask yourself this. Is your property built around spending people can delay, or spending they rely on every week? #RetailRealEstate2026 #RetailMarketOutlook #EssentialServicesRetail #GroceryAnchoredRetailCenters #DiscretionaryRetailProperties

Weekly Perl: A Commercial Real Estate News Recap

By Marc Perlof • January 30, 2026
Smoothie King plots 90-plus new openings for 2026 The world’s largest smoothie franchise isn’t planning on slowing down its growth after a strong 2025.  Smoothie King says it plans to open more than 90 new store openings in 2026, in addition to launching a targeted franchisee incentive program spanning several key states, including Arizona, Illinois, Massachusetts, Michigan, Pennsylvania, Virginia and more. Through the program, Smoothie King says it is offering financial incentives to “growth-minded franchisees,” designed to accelerate brand awareness and density in these markets...

Retail Real Estate in 2026: What Commercial Owners Need to Know Right Now

By Marc Perlof • January 26, 2026
By Marc Perlof | MarcRetailGuy January 26, 2026 If you own retail real estate, here’s what just changed for you. 2026 is shaping up to be a year where retail property owners need to pay attention. Not to fear. Not to headlines. To real signals in the market. There is more global and domestic uncertainty right now. Conflicts overseas, trade tension, higher government debt, and political changes in the U.S. all affect interest rates, insurance markets, and investor behavior. This does not mean panic. It means owners need clear, reliable information. Here is where the retail market stands today. Local retail remained steady through late 2025. In Los Angeles County, vacancy ranged from about 5.6 to 6.9 percent in the second half of the year¹²³. That tells us demand is still healthy, even as some tenants adjust space needs or renew leases at new rent levels. Leasing activity slowed in some areas. Spaces are taking longer to fill, and asking rents softened slightly as owners and tenants reset pricing². This is a normal market adjustment, not a collapse. On the investment side, commercial real estate transactions increased nationally through mid 2025. Both the number of deals and total dollar volume rose, showing capital is still moving⁵. Buyers are active when pricing reflects today’s risks and returns. This is exactly what I am seeing in live pricing discussions and negotiations right now. Insurance remains one of the biggest issues for retail owners. Property insurance markets became more stable in 2025, and rate increases slowed in some areas. However, insurers are still selective. Coverage terms matter more than ever, especially for properties exposed to wildfire or coastal risk⁴. Insurance costs directly affect net income, lease negotiations, and buyer interest. Retail Outlook for Q1 and Q2 2026 In early 2026, the retail market is likely to stay steady but measured. Vacancy is expected to remain near current levels. Leasing will be deliberate, not rushed. Rents should hold close to where they ended in 2025 as owners and tenants continue to agree on realistic pricing. Capital will remain active for properties with solid income, strong tenant credit, and durable lease terms. Buyers are selective, but they are still moving forward when risk and return are properly aligned. Insurance markets will stay selective in the first half of 2026. Owners need to plan renewals carefully and understand how insurance affects operating costs, tenant negotiations, and future sale value. Here is a simple retail risk check for 2026: • Local vacancy around 6 percent, stable but uneven by location¹ • Leasing takes longer than peak years, making pricing discipline critical² • Capital remains active, but underwriting is conservative⁵ • Insurance coverage is improving in some areas, but terms still matter⁴ Not all retail performs the same. Discretionary-driven destinations like lifestyle centers, nightlife districts, and tourist-focused shopping streets feel more pressure when consumer spending slows. Retail that serves daily needs and essential services tends to perform better during uncertain cycles. The best strategy now is disciplined and data-driven. Focus on tenant credit strength. Protect lease term and income stability. Price based on real market data. Understand insurance risk clearly. This is how value is protected in changing markets. I help retail property owners position assets based on real tenant behavior and real buyer demand. Not headlines. Call or DM me if you want a clear view of how your retail property should be positioned for 2026. How will you adjust your leasing or investment strategy this year based on what the market is actually telling us? #RetailRealEstate #LosAngelesCRE #CommercialRealEstateOutlook #RetailInvestment #CRE2026 #MarcRetailGuy
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