U.S. Retail Real Estate Outlook 2026: Why Fundamentals Remain Strong Despite Economic Uncertainty

The U.S. retail sector remains one of commercial real estate's most stable property types in 2026. Positive net absorption, more than 20,000 new lease commitments totaling roughly 75 million square feet, and a historically small construction pipeline continue to support occupancy levels nationwide. Vacancy is projected to finish the year at just 5.0%, while asking rents are expected to rise 1.2%. Although inflationary pressures and geopolitical uncertainty could affect consumer spending, limited new supply and ongoing tenant demand are helping maintain favorable market conditions for owners and investors.

Why Is Retail Demand Holding Up in 2026?

Despite economic headwinds, tenant demand remains historically favorable. 

The retail sector recorded positive net absorption during the first half of 2026, supported by more than 20,000 new leases representing approximately 75 million square feet. These lease commitments are expected to drive additional move-ins during the second half of the year, helping offset store closures and support occupancy levels. 

Retail property performance is also benefiting from strength in other commercial real estate sectors. Apartment occupancy increased by nearly 285,000 units during the first half of the year, while office users absorbed more than 40 million square feet. Increased residential density and office utilization can contribute to stronger foot traffic across retail corridors and shopping districts.

How Limited Is New Retail Supply?

New construction remains exceptionally constrained, creating one of retail's strongest advantages. 

The construction pipeline accounted for just 0.3% of existing inventory as of mid-2026, limiting future supply pressure. The sector is expected to add only 32 million square feet this year, representing inventory growth of just 0.4% for a third consecutive year.

Only 16.4 million square feet were delivered during the first half of the year, marking the second-lowest two-quarter delivery total on record. Most active construction is concentrated in built-to-suit convenience stores and supermarkets rather than broad speculative development.  

This limited pipeline continues to support landlord leverage and helps reduce the risk of significant oversupply across most markets. 

What Is Expected for Vacancy and Rents?

Vacancy is increasing modestly but remains below long-term averages. 

National retail vacancy stood at 4.9% in June and is projected to finish 2026 at 5.0%. While slightly higher than recent lows, that figure remains 60 basis points below the sector's long-term average.  

At the same time, asking rents are forecast to increase 1.2% year over year, reaching an average of $23.17 per square foot. Continued backfilling efforts, retailer expansion plans, and limited new supply are helping support rent growth despite broader economic uncertainty. 

Are Retailers Expanding or Closing Stores?

The sector continues to see more expansion than contraction. 

Approximately 4,130 store openings were announced during the first half of 2026, slightly exceeding closures. Openings generated roughly 68 million square feet of absorption compared with approximately 36 million square feet returned to the market through shuttered locations.  

Many retailers are refining their footprints rather than broadly downsizing. Expansion often focuses on high-growth markets and smaller-format stores that improve operational efficiency while maintaining customer access. Meanwhile, expansion-minded retailers continue to absorb much of the space left behind by underperforming locations. 

Which Retail Property Types Are Performing Best?

Food-oriented retail remains among the strongest performers. 

Single-tenant retail entered the second half of the year with vacancy below its long-term average, supported by steady demand for grocery stores, convenience stores, and restaurant concepts. Supermarkets accounted for more than half of single-tenant net absorption over the past year, with several major grocers maintaining active expansion strategies. [ 

Within shopping centers, community centers, neighborhood centers, and power centers recorded strong leasing activity. Property owners are also diversifying tenant mixes through healthcare providers, fitness concepts, entertainment users, and other experiential tenants that help drive traffic and increase retention.  

Why Are Investors Increasing Their Retail Allocations?

Investor confidence has improved as retail fundamentals have proven more durable than many anticipated. 

Retail transaction activity increased 21% year over year during the 12 months ending in June, representing the strongest sales growth among the major commercial property sectors. Institutional sales volume also rose significantly as larger investors returned to the sector.  

Investors continue to target: 

• Single-tenant net-leased assets 
• Properties occupied by high-credit tenants 
• Assets with long lease terms and built-in rent growth 
• Shopping centers offering leasing or repositioning opportunities 
• Recently renovated properties with strong occupancy fundamentals 

Marcus & Millichap Perspective: Retail Investment Activity Remains Strong

Transaction activity across the retail sector reflects the resilience of property fundamentals and growing investor confidence. As demand for income-producing assets persists, buyers continue to pursue opportunities across net-leased properties, grocery-anchored centers, and multi-tenant retail assets. 

This level of transaction activity highlights sustained investor interest across net-leased properties, shopping centers, grocery-anchored retail, and value-add opportunities as buyers continue to pursue income-producing assets in a low-supply environment. 

Implications for Investors

• Limited new construction continues to support pricing power and occupancy. 
• Net-leased assets with high-credit tenants remain attractive amid economic uncertainty. 
• Shopping centers with leasing upside may benefit from continued tenant expansion and backfilling activity. 
• Improving capital availability and renewed institutional participation support transaction liquidity.