U.S. Retail Market Faces 200 Million-Sq.-Ft. Shortage Amid Rising Consumer Demand

The U.S. retail landscape is being transformed by demographic shifts and enduring pandemic-era effects that have changed how, where and when people live, work and shop.

CBRE’s analysis, detailed in its “Five Forces Shaping the Future of Retail” report, found that the U.S. is under-retailed by 200 million sq. ft. – or roughly 5% of the existing stock. For context, that’s enough space to fill five-and-a-half Central Parks in New York City. Annual retail construction completions in 2021-2023 were down by more than 80% from the mid-2000s.

“From the 1980s to the 2000s, the U.S. developed more retail space than was necessary, but development has sharply declined over the past 15 years. With ongoing population growth in many markets, this has resulted in a significant undersupply of retail space today," said James Breeze, Vice President of Global Retail Research for CBRE. "The retail sector is challenged not only by a shortfall in new development but also a need for new formats that complement online shopping and accommodate product returns and the shopping preferences of younger generations.”

Average retail availability across the U.S. is approximately 4.7% – the lowest since CBRE started tracking the metric in 2005. Availability is especially tight in markets where retail development failed to keep pace with robust population growth, such as Austin, Orlando and Nashville, where availability is as scant as 2-3%. These markets present a unique opportunity for investors and developers to build new retail and acquire existing space.

In contrast, major urban centers like New York, Los Angeles and Chicago show relatively balanced availability rates of 5.5% to 8.5%, offering promising opportunities for targeted retail development.

The undersupplied markets were identified by analyzing the amount of retail space per capita by market:

Retail Square Footage Per Capita, by Market

Vibrant Mixed-Use Districts Are Thriving

Retail in vibrant mixed-use districts—defined as clusters of prime office, urban residential and walkable retail, dining and entertainment venues—has demonstrated resilience and robust performance despite hybrid work that has kept people home more often.

This trend is further underscored by the post-pandemic resurgence of retail rents in high-demand areas, particularly in vibrant mixed-use districts. Examples of vibrant mixed-use districts include Uptown Dallas, Brickell in Miami, Fulton Market in Chicago and Tribeca and the Meatpacking District in New York City.

Vibrant mixed-use districts command retail rents 74% higher than those in prime business districts, which primarily feature trophy office buildings, and 110% higher than in non-prime business districts, typically consisting of suburban office parks and aging downtowns.

"Vibrant mixed-use districts are the cornerstone of urban retail resilience, as they attract consumers with their diverse offerings and benefit from the steady foot traffic generated by nearby office developments and residences,” said Todd Caruso, Retail Investor Leader for the Americas, at CBRE.

Consumers Flock to Dense Retail Hubs in Cities and Suburbs

High streets have seen the largest gap between pre- and post-pandemic performance, suggesting a resurgence in consumer interest in urban shopping areas. From Q2 2019 to Q2 2024, high street retail rents have grown at a compound annual growth rate (CAGR) of 3%, outpacing the broader retail market's 2.1% growth rate, particularly in key markets such as Dallas, Los Angeles and Manhattan. The rent spread between high streets and the overall retail market reached $38.90, or 135%, the highest increase since 2016.

Foot traffic patterns indicate a similar rebound. Urban high streets are performing particularly well, outpacing all other retail formats in terms of growth in unique visitors since May 2023.

Gen-Z and Millennials Lead Consumer Spending

Consumer spending in the U.S. is expected to grow significantly in 2025, driven primarily by the optimism of millennials and Gen Z. CBRE partnered with Morning Consult to conduct a survey of 2,200 people and found that younger generations report the most positive outlook on their household finances, with 36% of Gen-Zers and 39% of millennials indicating they are likely to incur debt for spending, compared with lower percentages among older generations. Despite being digitally native generations, younger shoppers also show a strong preference for in-store shopping experiences, with 60% of Gen Z and 53% of millennials visiting shopping malls in the past three months.