The retail sector is likely to benefit from the Fed's overnight lending rate cut in September, both in terms of consumer spending leading to increased foot traffic as well as investor interest in opportunities in the sector.

Household budgets may have more room for discretionary spending as mortgage rates, auto loans and credit card fees experience downward pressure. These factors build on consumer resilience that has been driving tenant demand across the segment and core retail sales reaching a record mark in August, according to Marcus & Millichap's Q4 retail national report.

The retail sector entered the second half of 2024 as the only major commercial real estate property type with a vacancy rate below its year-end 2019 recording, and broad demand continues within the space, the report said. National vacancy has held below five percent for 11 straight quarters, with the average asking rent rising throughout.