U.S. Retail Supply Is Tightening, But Few Developers Plan To Build New Product
The retail industry successfully weathered a pair of significant storms in the rise of e-commerce and the 2020 pandemic, but it faces a fresh challenge as the country deals with tariffs and elevated interest rates that have made new construction unfeasible for much of the industry.
A flurry of first-quarter closures pushed the U.S. retail sector to negative absorption of 4.4M SF after two straight quarters of increasing occupied space, according to JLL’s latest market dynamics report. That has led to a point where the portfolios of most major retail landlords across the country are full, but the historic urge to build seems unlikely, according to Danny Finkle, JLL senior managing director and co-head of the firm's Miami office.
“It's really one of the first times you've seen one of the mature asset classes reach stabilized or complete occupancy with little to no new development occurring,” Finkle said during a Tuesday retail panel at the 2026 National Association of Real Estate Editors Conference in Miami.
New retail development is currently more difficult than building multifamily or speculative industrial because of the types of tenants it needs, Finkle said. Those tenants have very specific opinions about the buildings they want to be in, the size and format of the space, and their configuration.
“Any development that's occurring today and … for the foreseeable future, most developers are not going to build without having a significant amount of preleasing and a good sense of who's going to be going into which spaces,” Finkle said.
Bucking that trend is Texas, where retail has been among the strongest sectors in commercial real estate due to the state’s growing population.
Grocery megastore chain H-E-B has ignited a passion for supermarket-anchored mixed-use developments across the state, Weitzman Senior Vice President of Communications Ian Pierce said.
Weitzman leases 44M SF of retail space in Texas and reported in January that grocery-anchored retail drove Dallas-Fort Worth to a fourth straight year of record occupancy.
"This, right now, is the era of the grocery store development, especially in Texas but also nationwide," Pierce said.
In addition to major supermarket development, anchor retailers like Walmart, Costco, Target, Lowe's and Home Depot are very active in Texas, as are smaller grocers like Trader Joe's. That's why retail real estate is so well occupied across the country, Pierce said, noting new construction adds to occupancy but not vacancy.
Some retailers are frustrated by the lack of new development across the country, Finkle said, but that’s not enough to entice developers in most cases.
“The developers just are not in any position where the math makes sense for them to take on the risk relative to the return and everything else that goes along with it,” he said. “The other part of it is … retailers go bankrupt, that's what they do.”
That’s why some retail landlords have turned to experiential concepts to anchor centers as they are offering things people cannot get on the internet.
One major change in the market that Finkle has observed over the last half decade is the way bankrupt retailers get replaced. Following the closure of chains like Big Lots, Joann and Party City, competitors and other retailers swooped in to purchase the newly empty locations.
Due to the lack of direct competitors in most categories, empty shells can become something completely different from the previous occupant. After a wave of Chapter 11 filings in 2024 and 2025, department store chain Saks Global and boating supply outlet West Marine have been the biggest retailers to declare bankruptcy so far this year.
When it’s not another retailer purchasing a vacated store space, Finkle said it’s often the properties’ landlord.
“Landlords are actually buying the leases out of bankruptcy because they want to control the spaces because they know they can lease the spaces to better-quality tenants at substantially higher rates," Finkle said.
