Chapter 5

Retail

U.S. Real Estate Market Outlook Midyear Review 2026

5 Minute Read

Explore Local Market Outlooks

5 Minute Read

Explore Local Market Outlooks

Retail: Ebere Anokute and Laura Barr [4:45 minutes]

CBRE expects a continued reduction in overall retail availability, as historically low construction completions help keep fundamentals solid even as demand moderates. Occupiers increasingly favor new construction, with markets such as Dallas, Phoenix and Houston leading net absorption. These are also among the markets with the most construction completions. We expect this flight-to-quality trend to persist through year-end, supporting our view that fundamentals will improve in this measured supply environment.
The divergence between downtown and suburban retail performance will continue in the near term, driven by activity in Sun Belt markets that have more suburban retail formats. Occupiers will opt to lease more space in newer product in the South, while pulling back on expansion in traditional downtown markets like New York and Los Angeles until more desirable options become available. Expansion will continue to be led by necessity-based retailers such as grocery, as well as discount, off-price and service retailers, with additional sustained activity coming from food purveyors in the fast-casual and quick-service space.
Consumer spending remains resilient, with overall retail sales increasing by 6.7% year-over-year in June 2026, according to the U.S. Census Bureau. With expectations of easing inflation in the second half of 2026, U.S. consumers may enjoy a modest tailwind that could offset some of the pullback in discretionary spending earlier this year.

Source: CBRE Econometric Advisors, May 2026.

Our forecast for the five-year nominal rent CAGR increased to 1.7% at midyear from 1.5% in January, based on the 2.4% growth observed in Q1 beating our initial forecast of 2.1%. We expect to see the most robust rent growth occurring in supply-constrained coastal cities, with well-located open-air centers and grocery-anchored centers also seeing strong gains.
New construction will remain a priority throughout the rest of the year, as the trailing four-quarter completions total of 11 million sq. ft. is well below the historical average of 18 million sq. ft. per year. Forecast supply CAGRs of 0.24-0.26% indicate very little new supply in the pipeline for neighborhood, community & strip centers, which will lower the availability rate to 5.4% from 6.8% by 2035.
Markets like Manhattan (+4.5%), Stamford (+3.6%), Long Island (+3.5%) and Westchester County, NY (+3.2%) are showing the strongest rent growth in our updated forecast, as the dearth of available space contributes to pricing leverage for owners. While we expect to see the most leasing activity occurring in Sun Belt markets, this may contribute to slower pricing growth in this region as rents are already at or near their peak.

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