Service-based tenants leased over half of the total retail space in 2025 for the first time, according to CoStar.
There are a few examples in local shopping centers. (See below) Crunch Fitness replaced the goods-based Bed Bath & Beyond in the Augusta Exchange shopping center. In the Village Plaza at 270 Bobby Jones Expressway, a former Electronics and Appliance store is getting replaced with a service provider.
Nail salons and Botox (medical) bars are also increasingly located in retail real estate. These trends show up in local employment numbers for leisure and hospitality (fitness centers), other services (nail salons), and healthcare services (medical spas). It is argued that looking good is the new status symbol.
This changing landscape is driven by long-term consumer behavior towards spending on services and away from goods. About two-thirds of consumer spending is on services, with the remainder on goods. You need to go back to 1970 to find a year when US consumers spent more on goods than services.
Additionally, retail has increasingly shifted online and changed the requirement for store frontage. Less inventory is required in stores, meaning fewer or smaller shops, and online orders can be fulfilled from distribution warehouses. E-commerce sales account for about 16% of all retail sales, or about 1 in 6 dollars.
This current splurge on services is showing up in inflation. Services inflation, not including energy services, is running at 2.9%, higher than the general inflation rate.
