--- title: How To Prep For & Thrive In A Retail Market Collapse In The US description: Prepare for and navigate a potential retail market collapse with insights on consumer and credit shocks, risk assessment, and resilient strategies. image: https://rockstep.com/hubfs/pexels-karola-g-5239822.jpg --- [Skip to main content](https://rockstep.com/blog/prep-for-retail-market-collapse#maincontent) [ «  View All Posts ](https://rockstep.com/blog) # How To Prep For & Thrive In A Retail Market Collapse In The US December 24th, 2025 5 min read By [Andy Weiner](https://rockstep.com/blog/author/andy-weiner) ![collapse-of-retail-markets](https://rockstep.com/hs-fs/hubfs/pexels-karola-g-5239822.jpg?width=800&height=438&name=pexels-karola-g-5239822.jpg) > Preparing for a retail market collapse means focusing on fundamentals that hold up during downturns. Investors should watch for consumer and credit shocks, evaluate tenant strength, maintain conservative leverage, and keep reserves to manage volatility. Centers anchored by essential services and strong community demand are more likely to stay resilient even when the broader retail market weakens. When people ask me about a potential retail market collapse, they often expect one big event, a sudden, dramatic implosion. But in reality, a collapse doesn’t happen all at once. It creeps in from different angles, slowly eroding the stability that holds the system together. In my mind, it really comes down to two distinct scenarios, both of which are concerning. ## Two Paths To Collapse: Consumer & Credit Shocks ### Option 1: Collapse Of Consumer Buying Power The first is a major collapse of consumer buying power. That could be from a recession. It could be due to an extraneous event, and people stop shopping. And that will trigger existing stores to renegotiate their option periods and their renewals. Let me explain what I mean by option periods. In retail real estate, tenants typically have a [fixed lease term](https://www.lawdepot.com/us/resources/real-estate-articles/understanding-fixed-and-automatic-renewal-lease-terms/) followed by options to renew. Those options give them the right, not the obligation, to continue leasing the space.  But in a downturn, things change. At the end of their term, tenants sometimes take their option, and sometimes they’ll say, ‘Whoa, whoa, whoa, I’m supposed to pay X. I’ll pay 50% of X, and then I’ll stay.’ When that happens, landlords are under pressure to reduce lease rates, and the entire income model starts to fray. ### Option 2: Shock To The Bond Market  The second path to collapse is more financial in nature. A retail market collapse could come from a shock to the bond market. And what that means is a dramatic rise in interest rates, in which bondholders lose faith in borrowers' ability to repay the bonds. That kind of financial stress hits properties with floating-rate debt first. There’ll be a dramatic increase in debt service. [![WEBINAR RECORDING The Blueprint for Shopping Center Investments Check out the full recorded session for free!  ](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/22499728/interactive-183245191316.png) ](https://rockstep.com/hs/cta/wi/redirect?encryptedPayload=AVxigLJ7Ov%2B6o%2Bmk1jqxqwFAJw3aMkydIPfMdkCdtwAo%2B81EWgW3SwQqk0NhftuUCmC3zG1TMDhgtEJ7u1wK0e9K1lC1RkGdcImZCzxUZQ4zSHLTeH4KgOKTj9lgCQaXHCbY9bX8i4kCnft2iYCW%2ByJpDZMHFUB5OiV2jtlF9pmWEvTLUf8Nrx0Q&webInteractiveContentId=183245191316&portalId=22499728) Even owners with fixed-rate loans are not off the hook. At the end of your fixed-rate period, if you have a refinance, there is a possibility that you cannot borrow enough proceeds to pay back your loan, and you have to have a capital call and an equity infusion. So yes, I’m giving you ugly scenarios. But if you don’t think about them in advance, they’ll catch you off guard. ## Assessing Risk: Where Are We Now? I get asked this all the time. How stable is the current environment? “Unclear” is the best one-word answer I can give.  Is the United States stable economically? It’s certainly less stable today than it’s been for a while.  At the same time, we’re seeing major investments in data centers, AI, and manufacturing. Given all of the investment that is happening in the United States, the future is potentially very promising. Still, pressure is building. The increase in tariffs in 2025 has not had a significant impact on the economy's health. However, what it has done is squeeze the middle class, which serves as a key consumer base that strongly drives retail demand.  All in all, I would say the current risk of a retail market collapse in the US in the near future is medium.  ## A More Resilient Retail Market Despite the uncertainty, I believe this market is stronger than it has been in the past. The shopping center sector, specifically, has become more resilient in recent years because there’s no longer an oversupply of centers. Overbuilding hurt the industry in previous cycles. Today, that’s not the case. And the markets we focus on (what I call HomeTowns) have built-in advantages. ## The Built-In Advantages Of HomeTowns  One characteristic of [HomeTowns in secondary and tertiary markets](https://rockstep.com/blog/hometowns-vs-big-cities) is that they’re less volatile than those in primary markets. In primary markets, when they go up, they go all the way up. But when they go down, they fall just as far. And [secondary tertiary markets](https://www.investopedia.com/investing/primary-and-secondary-markets/) are simply just more boring, more stable. They don’t go up as much in good times. They don’t go down as much in bad times. That stability matters when things get rough. In a downturn, I do not see migration from HomeTowns to the metros. I could even see it going the other way.  ## Lessons We Learned From The Last Downturn In 2008, with the market collapse, new construction stopped, and tenants were unwilling to pay rent for new units. That will eventually happen again. And when it does, it’s the existing centers that offer the most value. That’s why our strategy today is clear. Checking [second-generation space](https://rockstep.com/blog/understanding-second-gen-spaces) is a better option than new construction. ## What Hurts First In A Collapse A dramatic decline in retail spending would hurt every shopping center. But not every property would get hit the same way. Here’s what I see as most vulnerable in a retail collapse: - Property types like enclosed malls and [big-box power centers](https://www.investopedia.com/terms/b/big_box_retailer.asp) - Tenant categories that rely heavily on discretionary spending - Markets with low tenant absorption, where diversification isn’t possible By contrast, service-oriented neighborhood centers would have a bit better protection. These properties include essential services like grocery stores, healthcare providers, and daily-use retail. ## How To Respond To Tenant Distress When tenant distress becomes widespread, property managers' responses need to be flexible and fast.  At RockStep Capital, the leasing and property management team will renegotiate in times of tenant distress. For example, they will negotiate rent holidays or reductions, temporary or permanent, on a tenant-by-tenant basis. Some leases will be long-term enough to weather the storm. There are some new shopping centers with very long-term leases, and that’s a good position to be in. But overall, if spending drops off a cliff, rent collections get hit. [![FREE 82-PAGE EBOOK The One-Stop Guide to Retail Property Investing Instantly access everything you could need to get started with passive retail investing.  ](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/22499728/interactive-185151129879.png) ](https://rockstep.com/hs/cta/wi/redirect?encryptedPayload=AVxigLJcBoiMVfx7S4wz%2Bmrgtfh0%2BAZVYDogSc1xpM7jLjxdx9FsBlB4W0Tjtpvmwfv6i2on%2FSmXqQwEolQ6R4zaEboMGBgleieU0aZVt%2FYPjPzMwCq7yXs42%2BZjB5S2IAAwOB5%2FUXnSJaT47TTk87pUI8L8lgdgfHHkDxYd2Wlt&webInteractiveContentId=185151129879&portalId=22499728) ## Silver Linings: Buying In A Downturn It might sound counterintuitive, but a collapse could also bring opportunity. If we could buy great assets even cheaper, a retail collapse could be an amazing buying opportunity. We would look for distressed opportunities in the downturn. This is where the RockStep Capital structure comes into play. [Being vertically integrated](https://rockstep.com/services) means we control information. It’s very good to have. That helps in uncertain markets. ## When Refinancing Gets Tough  If asset values fall and interest rates spike, refinancing becomes a major challenge. You’ve got to renegotiate. Sometimes you’ve got to switch from an [amortization schedule](https://www.commercialrealestate.loans/commercial-real-estate-glossary/amortization/) to an interest-only schedule to give you more cushion. It’s hard to overstate the ripple effect. There would be a correlation between a decline in commercial real estate values and a dramatic decline in the stock market. All asset values, including timber, oil, real estate, and the stock market, would constitute a diminution of wealth. ## Navigating Uncertainty: The RockStep Playbook  We can’t control the economy, but we can prepare. When it comes to staying operationally agile, here’s how we think about worst-case scenarios: - **Limit leverage: **Don’t take on a lot of debt. - **Plan ahead:** Think about worst-case scenarios so you’re prepared if they happen. - **Keep people informed:** Communicate regularly at the team level, internally, and with your investors. We also use tools like [Placer.ai](http://placer.ai/) to document the traffic each tenant receives at each property regularly. These metrics help us track footfall trends and spot potential issues early. ## Built-In Resilience At The Local Level  At the end of the day, community shopping centers in America typically perform okay during periods of economic stress. Especially those [anchored by grocery stores](https://www.icsc.com/news-and-views/icsc-exchange/a-surge-in-grocery-anchored-sales-best-shopping-centers-according-to-shoppers-and-more) or essential services. They do have built-in resilience. That said, the tension between community needs and investor returns is real. Sometimes serving long-term community needs is inconsistent with meeting investor performance goals. That’s a tough one.  Ultimately, you have to go for it with investor goals while still doing the right thing for the people who rely on your centers. ## Thinking Beyond Retail: What Comes Next  If retail demand continues to decline in certain markets, we’re ready to repurpose space into [categories such as fitness](https://www.reit.com/news/articles/reits-in-step-with-fitness-and-wellness-demand-surge), family entertainment, sports complexes, and multifamily. Those are the logical ones. These are not short-term pivots. They are long-term investments in the evolution of retail real estate. ## Why We're Still Betting On HomeTowns  Cost of living is going to be a huge issue going forward because the metros have become rough. And that’s where HomeTowns shine. In the near future, HomeTowns will grow where the cost of living is 50% that of major metros. Beyond affordability, HomeTowns offer something cities can’t always guarantee: a sense of community and stability.  In HomeTowns, you have:  - Strong community - Local leadership - High quality of life - Low cost of living - Lower overall crime - Better schools Big cities will still grow. But for many families seeking a place to live well, raise kids, and feel secure, HomeTowns are where the future is heading. Especially in the case of market collapses.  [ Andy Weiner ](https://rockstep.com/blog/author/andy-weiner) Andy Weiner is the CEO and Founder of RockStep Capital, a Houston-based real estate investment firm focused on shopping center developments in secondary and tertiary markets. A Stanford and University of Texas graduate, he began his career in his family’s retail business. Since 1997, he has led the acquisition or development of over 9.7 million square feet of shopping centers across 11 states without capital calls or assets returned to lenders. 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