Hey —

Two stories landed this week that, side by side, tell retail property owners something fundamental about where their centers are heading.

One is about headwinds. One is about opportunity. The investors who understand both at the same time are the ones making the best decisions right now.

Let's get into it.

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The Federal Reserve did exactly what everyone expected on Wednesday — held rates steady at 3.5% to 3.75% for the second consecutive meeting. No surprise there.

And yet the Dow closed down nearly 770 points. The S&P fell. The Nasdaq fell. When the market sells off on the news it expected, that tells you something. The anxiety isn't about what the Fed did — it's about what the Fed can't do.

Here's why:

The dot plot shifted. The Fed's individual rate projections still show a median of one cut in 2026 — but seven of the nineteen FOMC members now expect zero cuts this year. That's one more than December. The committee is splitting, and the hawks are gaining.

Inflation got revised higher. The Fed raised its 2026 GDP forecast to 2.4% (good), but also raised its core PCE inflation forecast to 2.7% (not good). Higher inflation forecasts + a splitting committee = a much narrower path to rate cuts.

Source: FOMC Statement — March 18, 2026 | Board of Governors, Federal Reserve System | Source: Fed Holds Rates Steady — March 18, 2026 | Charles Schwab

Here's the context the Fed is operating in — and the context your tenants' customers are living with right now.

On February 28th, the U.S. and Israel launched joint airstrikes on Iran. The Strait of Hormuz — the world's most critical oil chokepoint — was severely disrupted. Brent crude spiked toward $120 a barrel at the peak, settling around $94 as of the EIA's March 10th Short-Term Energy Outlook. That's up roughly 50% since the start of the year.

The EIA projects oil stays above $95 per barrel for the next two months.

That shows up at the gas pump — fast. Moody's chief economist Mark Zandi estimated gasoline could approach $4 a gallon in the near term. Gregory Daco at EY-Parthenon estimated the energy shock could push March monthly inflation to near 1% — the highest single-month reading in four years. JPMorgan sees annual inflation potentially hitting 3% or higher.

The NRF's chief economist noted the average American household spends roughly $2,500 a year at the gas pump — about $50 a week. When that number jumps, lower-income shoppers feel it immediately. Not in a survey two months from now. This week. In your parking lot.

What it means for rates: The 10-year Treasury climbed back above 4.2% this week. Per Bankrate's March 19th report, the 30-year fixed mortgage rate is sitting around 6.29–6.33% — up from around 6.09% just a month ago. The easing cycle retail property owners were counting on? Pushed further out, again.

Source: Short-Term Energy Outlook — March 10, 2026 | U.S. Energy Information Administration

Source: The Iran War and Surging Oil Prices Are Affecting Consumers | PBS NewsHour | Source: Mortgage Rates Today — March 19, 2026 | Bankrate | Source: NRF 2026 Retail Sales Forecast — March 18, 2026 | National Retail Federation

CRE Takeaway: If you have a loan maturity or refinance event in the next 12–18 months, this week's Fed meeting was not good news. The window for rate relief is getting narrower, and the bar for cuts is getting higher. This is not a panic moment — but it is a planning moment.

Now here's the story that changes how you think about your center.

The Wall Street Journal reported this week, citing CoStar data — confirmed by The Real Deal on March 18th — that in 2025, for the first time in recorded history, service-based tenants leased more retail square footage than goods-based retailers. The split: 50.4% services, 49.6% goods.

Fifteen years ago, services were only 40% of retail leasing. Think about that trajectory.

Brandon Svec, CoStar's national director of U.S. retail analytics: "Consumer dollars remain firmly pointed at services. There's nothing to suggest that's going to be shifting anytime soon."

What counts as a "service tenant"? Gyms, fitness studios, spas, nail salons, hair salons, med spas, cryotherapy, IV drip bars, pickleball facilities, urgent care, dental, vision, veterinary, tax prep — businesses delivering experiences that cannot be replicated online.

Fitness was a standout. CoStar's underlying data showed fitness expansion increased meaningfully in 2025 — particularly effective at absorbing second-generation retail space and driving consistent daily foot traffic.

And yet vacancy stayed near historic lows. Despite all the store closure headlines, U.S. retail vacancy held at 4.4% — near record lows. Service tenants are absorbing the space left by struggling goods retailers. They're not filling a niche. They're holding the entire retail real estate market up.

One nuance worth noting: Restaurant leasing actually declined as a share of overall leasing, falling to its lowest post-pandemic level at 16.8%. This happened despite consumers spending more than ever on food away from home. Restaurant operators are being very selective about which centers they sign leases in. That selectivity is a signal worth paying attention to when you're marketing a vacancy.

Source: Service-Oriented Leasing Surpasses Goods-Based Tenants — March 18, 2026 | The Real Deal / WSJ / CoStar Source: Service Tenants Dominate Retail Leasing Market — March 18, 2026 | CRE Daily / CoStar Source: Fitness Centers, Pickleball Courts, Other Services Now Dominate Retail Real Estate — March 9, 2026 | NNN Fitness / CoStar Insight

CRE Takeaway: The strip center that wins the next decade is not the one with the best collection of retailers selling things. It's the one with the best collection of businesses delivering experiences and services that people have to show up for in person. That shift is not coming — it already happened. This week's data confirmed it statistically for the first time.

1. Your vacant bay may be more valuable than you think. Service tenants aren't hunting for cheap rent — they're hunting for the right location, co-tenancy, and traffic pattern. And they are actively expanding.

2. Service-oriented tenant mix is your competitive moat. A center with a gym, nail salon, urgent care, and dental office is a center that e-commerce literally cannot touch. That is the most defensible real estate in retail right now.

3. Don't automatically renew below-market. If you have a struggling goods-based tenant with a renewal coming up, this data should inform your negotiating position. You may have more leasing demand in the service category than you realize.

4. This is a repositioning opportunity. Centers that were 70% goods-based five years ago can be repositioned. The leasing demand is there, and consumer spending behavior is pointing in a clear direction.