Lessors of Nonresidential Buildings NAICS 531120

Mar 18, 2026 - Services Sector Shakes Up Retail Space

• The Wall Street Journal reports that service-oriented tenants such as salons, spas, and fitness studios are overtaking traditional retailers in leasing activity, accounting for just over 50% of retail space in 2025, up from 40% 15 years ago, according to CoStar. The shift reflects rising consumer spending on wellness and experiences, alongside ecommerce growth, which now represents 16.4% of retail sales and has reduced demand for goods-based store space. For nonresidential building owners, the trend is reshaping property strategies, as landlords reconfigure large retail spaces into smaller units for multiple service tenants, generating higher rents and increasing foot traffic. Fitness operators alone made up nearly 30% of service leases last year. Strong demand from these tenants has helped keep retail vacancy low at about 4.4%, while backfilling spaces left by struggling retailers and supporting more stable occupancy and revenue streams.
• A widening split in consumer spending is reshaping the grocery sector and creating new priorities in the nonresidential real estate sector, as value-focused and premium grocers outperform traditional supermarkets, according to JLL. Discount chains such as Aldi are expanding rapidly, while specialty grocers, including Trader Joe’s and Whole Foods, are seeing visits rise by 10.4% and 9.8%, respectively. This divergence is strengthening performance for grocery-anchored retail centers, which report vacancy rates of 4% compared with 6.3% for non-anchored properties, along with a 4.4% rent premium. For building owners, the strength and positioning of a grocery anchor are increasingly critical to occupancy, tenant stability, and revenue growth, as consistent foot traffic supports smaller tenants. Investor demand reflects this shift, with transaction volume for grocery-anchored centers rising 42% to nearly $11 billion as capital targets stable, high-performing assets.

• Lenders are increasingly forcing the issue on troubled commercial real estate debt as higher interest rates make refinancing difficult, according to The Wall Street Journal. Office distress is leading the downturn, with the commercial mortgage-backed securities (CMBS) office delinquency rate hitting a record 12.34% in January, according to commercial real estate data firm Trepp. In a January report, Morningstar DBRS noted that less than half of the $100 billion in CMBS loans maturing this year are unlikely to pay off at maturity. Declining values, weak cash flows, and structural shifts in workplace demand are driving more loans toward foreclosure or liquidation. Trepp reports nearly $25 billion in CMBS loans now past maturity, the highest level in a decade. Heavily indebted borrowers are increasingly opting to walk away from properties.
• Older warehouses built before 2010 are losing tenants as modern logistics operations demand higher ceilings, stronger power capacity, and greater automation, prompting some owners to raise roofs to stay competitive, according to Bisnow. CoStar data shows pre-2010 buildings of 100,000 square feet or more lost 96 million square feet of occupancy in 2023, 131 million in 2024, and another 98 million in 2025. Properties built between 2000 and 2009 lost 86 million square feet of occupancy over the last three years. Ceiling heights that once averaged 30 to 32 feet now reach 36 to 40 feet, driving demand for roof raising projects that can cost $1.5 million to $3 million for a 50,000 square foot building. Firms that specialize in roof-raising report rapid growth as owners upgrade ceilings and power systems, although not all older assets justify the investment.