U.S. Retail Market 2025 Recap and 2026 Outlook
Here’s a recap and outlook on the retail real estate market in 2026
The U.S. retail real estate sector ended 2025 as one of the most resilient commercial asset classes, supported by tight supply, steady consumer spending, and disciplined new development. Looking into 2026, moderating rates, selective expansion by credit tenants, and continued store footprint optimization should sustain healthy fundamentals, especially for well-located, needs-based assets.
2025 performance in brief
Retail vacancy in 2025 remained at or near historic lows, with only a slight uptick after several tight quarters, largely because new construction stayed muted and obsolete space was removed. Rents continued to grow—roughly in the high‑1% range—making retail one of the few property types to show broad-based value gains during the year. Open-air grocery-anchored centers, power centers, and high-traffic suburban locations captured most of the demand, while weaker Class B/C assets in softer trade areas faced ongoing pressure and often became redevelopment candidates.
Investment sales volumes improved in 2025, including a rise in large single‑asset trades that signaled growing institutional confidence in retail income streams. Capital remained selective, with lenders and buyers favoring necessity-based centers and strong-credit tenants on longer terms, while challenged assets tended to trade at discounts or via recapitalizations.
Tenant behavior and format shifts
Retailers in 2025 focused more on portfolio optimization than aggressive expansion, shrinking average store footprints while upgrading the best locations and investing in omnichannel capabilities. Experiential, food and beverage, health and wellness, pet care, discount concepts, and medical users were key drivers of new leasing, often backfilling legacy soft‑goods space. Physical stores increasingly served as last‑mile nodes, showrooms, and brand experience hubs, pushing demand toward flexible floor plates and centers that can support click‑and‑collect and returns.
2026 outlook: demand, rents and capital
In 2026, a more stable macro backdrop and gradually easing rates are expected to support a cautious improvement in retail capital markets activity. Investors are likely to remain most active in grocery‑anchored centers, well‑leased power centers, and lifestyle assets in growth markets, with modest downward pressure on cap rates for top‑tier properties if financing costs ease. Rent growth is projected to stay positive, though slightly slower than in 2025, with tight supply keeping vacancies low in most strong metros.
Leasing demand should remain solid but selective, favoring categories that have proven resilient across cycles. Owners may increasingly reconfigure larger boxes into smaller bays to capture demand from restaurants, fitness, wellness, and service tenants, while selectively exploring non‑retail uses for underperforming space.
What to Watch
Investors, landlords, and tenants should all keep a close eye on how interest rates, lender appetite, and cap rates evolve, as even small shifts will affect pricing, returns, and transaction timing. Investors need to monitor tenant credit quality, category exposure, and lease rollover to distinguish durable cash-flow assets from those facing structural risk, while landlords should track local spending, demographics, and retailer prototype changes to decide when to re- merchandise, subdivide space, or pursue mixed-use or non-retail conversions. Tenants, meanwhile, should watch occupancy costs versus sales, competition for well-located small-format space, and changing consumer traffic and co-tenancy dynamics to determine which locations to expand, right-size, or exit.
Have more questions about the retail real estate market? Contact Commercial Brokers International today at info@cbicommercial.com or 310-943-8530.