The Short Version

• Beauty retailers continue to post strong growth, fueling store expansion across top markets.
• Ulta and Sephora lead the category, with major U.S. growth alongside new international openings.
• Social media, wellness trends and celebrity brands are driving beauty’s demand and in-store traffic.
• A surge in beauty services — from laser hair removal to men’s grooming — is boosting dwell time and repeat visits.
• The category is drawing younger shoppers and families, creating spillover benefits for co-tenants.

Beauty Retailers Keep Betting Big on New Stores

Beauty may be only skin deep, but many retailers in the sector believe they’ve only scratched the surface when it comes to growth potential.

Globally, the beauty industry has been riding a hot streak over the past few years, growing at an average annual rate of 7% to hit $450 billion in 2025, according to McKinsey & Co. Although the firm predicts that growth will cool to a 5% per year through 2030, landlords continue to benefit from store expansion and strong foot traffic. “This is definitely a category that is on fire in our portfolio,” said Macerich senior vice president of leasing Jamie Bourbeau. The mall REIT has executed twice the new beauty leases this year than in 2024.

One is a commitment from Sephora to open at Macerich’s Green Acres mall on Long Island in New York, which is undergoing redevelopment. The 5,300-square-foot store is expected to open in spring 2027. The three largest beauty retailers across the landlord’s portfolio are Sephora, Ulta Beauty and Bath & Body Works.

“The beauty category has really evolved product-wise, and I think that’s why we’ve seen so much growth,” said Nicole Larson, national research manager for Colliers retail services. “When I was growing up, beauty meant a lot of brightly colored makeup. Today, beauty and wellness have really merged into one category.” Younger Gen Z and Gen Alpha consumers, in particular, are spending more time and money on skin care routines and face masks, she added.

According to an IBISWorld report, cosmetics represent less than half of sales at beauty, cosmetics and fragrance stores in the U.S. at 37.8%, followed by haircare products at 25.9%, skin care products at 22.3% and nail and other products at 14%.

Beauty’s Power Players

The dominant retailers in the U.S. retail beauty category are Sephora and Ulta Beauty. Combined, the two account for about one-third of the total revenue in the U.S. retail beauty, cosmetics and fragrance industry. According to IBISWorld, Sephora leads with $12.5 billion in U.S. sales, followed by Ulta Beauty at $10.5 billion. Bath & Body Works and Sally Beauty round out the big four, with annual revenues of $4.5 billion and $2.3 billion, respectively.

Ulta Beauty and Sephora are definitely the “800-pound gorillas” in the cosmetics space, and both continue to add store locations, said Pegasus CEO David Chasin. The firm’s managed portfolio includes 380 properties in 37 states. “We have seen a ton of expansion in the last five to seven years from Ulta.”

Ulta Beauty has said that it will open 63 net new stores in 2025, followed by a target of between 50 and 56 new stores per year over the next two to three years. The company also is ramping up its international expansion with moves this year into the U.K., Mexico and the Middle East. In July, it announced that it had acquired U.K. specialty beauty retailer Space NK, which operates 83 stores in the U.K. and Ireland.

Ulta Beauty also debuted its first store in Mexico in August and opened its first franchise store in the Middle East this month at The Avenues in Kuwait via a partnership with the Alshaya Group. 

Ulta currently operates more than 1,550 stores across four countries. “Our real estate strategy is important because new stores consistently attract new members and encourage [multichannel] shopping, which drives greater spend per member, so you get that halo impact,” Ulta Beauty president and CEO Kecia Steelman said on the company’s second-quarter earnings call. “But ... we’re seeing some higher cost pressures with rent, insurance and [common area maintenance] and some lower vacancy rates in our higher-quality centers, and we want to make sure that we’re going into the right locations for us.”

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Although Sephora has traditionally favored mall locations, the retailer is making a bigger push into neighborhood and grocery-anchored centers in affluent areas. “I think they’re taking a page from Ulta, but I also think that this category is so strong that they want to be able to expand into other markets,” said Bourbeau.

Sephora also continues to grow its store-within-a-store strategy with Kohl’s. More than 100 Sephora at Kohl’s shops rolled out across 39 states this year, bringing the total count to more than 1,100 locations. Earlier this year, the company also kicked off a major renovation strategy for its 700 brick-and-mortar stores across North America. The extent of renovations will vary depending on location, and upgrades will go through 2029.

Trends Driving Beauty’s Boom

The beauty segment is riding some strong tailwinds that include an ever-changing cycle of trends and a growing obsession with wellness. In addition to cosmetics, fragrances and skin care, retailers are expanding into oral care, relaxation, stress relief, sleep support and hormonal health.

The beauty retail brands have excelled at marketing and especially leveraging social media influencers who post makeup tutorials, product reviews and brand collaborations, added Colliers national director of retail services and practice groups Anjee Solanki. “The more marketing you do, the more you’re going to lure people in,” she said.

Celebrity-branded cosmetics are also driving sales. Sephora, for example, hosted a promotional launch for Hailey Bieber’s Rhode beauty brand in early September that generated $10 million in U.S. sales for the company within two days.

There are near-term headwinds for beauty retailers, however, including tariffs on imports that could impact pricing, a potential pullback in consumer spending and an industry that remains highly competitive with a huge variety of brands selling beauty products in stores and online.

Why Beauty Drives Foot Traffic

The beauty category appeals to landlords because it drives foot traffic from shoppers who prioritize in-person interaction to touch, smell and sample products. Ulta Beauty echoed this on its second-quarter earnings call, reporting that half of online orders were fulfilled in store.

In addition to the traditional hair and nail salons, landlords are seeing a proliferation of beauty service businesses that specialize in areas like Botox, laser hair removal, permanent makeup and brow and lash treatments. The beauty industry is also tapping into opportunities to expand with products and services that cater to men, with concepts like Scissors & Scotch and Hammer & Nails that offer manis, pedis, waxing and skin treatments.

Beauty retailers and salons have a reputation for building a loyal customer base that drives repeat traffic. “You’re increasing frequency because people want to continue with that maintenance, and you’re seeing landlords wanting to cluster those uses in their project because of that dwell time and frequency,” said Solanki.

Overall, the beauty industry is reaching a broader mix of consumers across age groups and genders. “The demographic has really changed a lot, and it’s brought in a younger crowd,” said Chasin. Beauty retailers are leaning into social media to engage younger shoppers and boosting in-store traffic with promotions and events, such as Glossier’s Community Events.

“Not only are you pulling in tweens and children at a younger age, but they’re not going by themselves,” said Chasin. “They’re bringing in moms and dads and grandparents, and that’s a win for other co-tenants in a shopping center.”