Retail construction hits record lows, making it hard to find space

Store of the Future // August 17, 2026 Retail construction hits record lows, making it hard to find space By Mitchell Parton Recently, retailers have had a hard time finding space in which to put new stores. The problem is that there are not a lot of buildings going up to begin with. Retail construction completions fell to 5.

7 million square feet in the second quarter, setting record lows for both quarterly and rolling four-quarter totals, according to CBRE. The commercial real estate firm cited rising construction costs and labor shortages. The low level of construction has kept the availability of retail space tight. Retail space availability held at an extremely low 4.

9% in the second quarter, according to the real estate firm. “That has made it very difficult for retailers who are in expansion mode trying to find desirable, well-located space,” said Ebere Anokute, Americas head of retail research for CBRE, who was previously a real estate manager for Warby Parker.

He added that retailers have been less willing to move into older or lower-cost properties. “We’re seeing a major flight to quality in the industry right now.” Commercial real estate firm JLL is also tracking record-low construction levels in retail real estate, according to the company’s global head of retail research James Cook.

“The cost of labor, the cost of materials and the cost of land to build on or properties to tear down and/or to redevelop, all that’s pretty expensive,” Cook told Modern Retail. “Retail rents are growing in most markets in the U. S.

, but they haven’t grown fast enough or high enough to justify it making economic sense for somebody to build a shopping center in most markets.” Interest rates at the federal level would need to go down to encourage new construction or the redevelopment of older buildings into more desirable space, Anokute said.

A good portion of the retail real estate still being built is in the South as population growth drives retail demand. Houston was the top market for construction completions in the second quarter, with 606,000 square feet, followed by Orlando, Dallas and Phoenix, CBRE found.

In Texas and Florida, shopping centers are almost always leased up before they even open, Anokute said, based on his previous experience in site selection. “That’s the mark of a good quality center these days, that there’s enough demand to lease up most of it prior to the construction even being completed.”

Because of the limited demand for space, retailers are now more willing to work with smaller footprints than they did about a decade ago, said Chris Ressa, chief operating officer of DLC Management Corp. His company owns and operates open-air retail shopping centers across the U. S.

“Between retailers and landlords, there’s a lot more creativity and flexibility happening to figure out how to get stores open than in prior cycles,” he said.

James Bohnaker, principal economist of Cushman & Wakefield, said it has been especially competitive to fill spaces once occupied by shuttered big-box retailers such as Bed Bath & Beyond that have now been redeveloped or renovated.

Bohnaker said that has been especially true as service-oriented tenants like gyms, schools and entertainment concepts have been competing for the same space as grocers or other big-box retailers. “The demand to backfill vacated space is tremendous right now,” Bohnaker said.

“A lot of the companies that went out of business earlier on had trouble keeping up with the changing role of e-commerce; the retailers that did survive that evolution are in a stronger financial position, and they have the conviction right now to open brick-and-mortar stores.” Copy link