Chapter 5
Retail
U.S. Real Estate Market Outlook 2026
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5 Minute Read
Trends to Watch
- Available supply scarcity will continue:
Space availability will remain near historic lows in 2026, with only a slight uptick where big-box closures occur. New construction will remain limited due to financing constraints, high costs and little land availability. These factors will help to limit any rise in space availability even as demand moderates. - Modest positive absorption is expected:
After uneven demand in 2025, net absorption is expected to stabilize in 2026. Expansions by grocery, value and service-oriented retailers should largely offset continued restraint among discretionary retailers, keeping occupancy broadly stable. - Performance will diverge more sharply by format and location:
Grocery-anchored centers, neighborhood & strip centers and high-income suburban corridors are positioned to outperform for both occupancy and rent growth. Weaker malls and older power centers will continue to lag due to higher capital improvement needs and slower backfill activity widening the gap in availability and net asking rents. - Rent growth will continue in well-located open-air centers due to limited new supply and tight occupancy conditions:
Older assets may rely more on concessions and tenant-improvement allowances as retailers become more selective and expansion plans moderate.
Outlook
The U.S. retail sector enters 2026 with relatively strong fundamentals but appears to be transitioning to a more selective phase of the real estate cycle. Retail fundamentals stabilized in late 2025 as net absorption turned positive and the overall availability rate held near a multi-year low due to more targeted productivity and data-driven tenancy considerations.
Figure 7: Retail Fundamentals Will Continue to Tighten
Retail fundamentals stabilized in late 2025 as net absorption turned positive and the overall availability rate held near a multi-year low.
We expect net absorption to remain positive this year, driven by grocery, discount, off-price and service retailers that rely on physical locations to reach consumers. Full- and quick-service restaurants are also expected to remain active users of space, especially in high-traffic suburban corridors and mixed-use environments. Elevated buildout costs, shifting labor dynamics and thinner margins will cause retailers to pursue fewer high-performing sites, reinforcing their selective growth strategies. Availability may rise in weaker formats but remain tight nationally due to limited new construction.
Overall rent growth will be modest in 2026, easing from the brisk pace during the post-pandemic recovery, with most open-air centers posting increases. Strong suburban submarkets and grocery-anchored centers will outperform, supported by high occupancy and minimal new competitive supply. However, tenants are becoming more cautious and decision-making is taking longer as sales growth moderates. This will place greater emphasis on deal structure, with concessions and tenant-improvement allowances playing a larger role in many cases.
As always, economic conditions will be a critical determinant of retail performance. While moderate employment and consumer spending growth continues, many Americans face squeezed discretionary budgets that could adversely affect many non-essential specialty retailers. Consumers are becoming more discerning, prioritizing value, essentials, experiences and convenience. As a result, retailer success will require precise strategies that align selective growth with evolving consumer behaviors.
While moderate employment and consumer spending growth continues, many Americans face squeezed discretionary budgets that could adversely affect many non-essential specialty retailers.
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Retail
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