The retail renaissance in the U.S. is accelerating, with promising new leasing metrics and a resilient economy giving retailers confidence to push forward with expansions.

But their growth efforts are increasingly colliding with a supply shortage as rising construction costs prevent developers from putting shovels in the ground to take advantage of rising rents and historically low vacancy.

“It’s almost like the anecdote about the frog that’s in the pot that's getting a little bit hotter,” JLL Senior Director of Americas Retail Research James Cook said. “Costs are getting higher and higher every year. It’s a continuation of a trend that we've been seeing for a few years.”

More stores have opened this year than have closed, with a net gain of 127 openings through Aug. 28, according to new findings from Coresight Research. Those openings account for a net gain of 28.6M SF of occupied retail space. 

Through the same date last year, retailers closed a net 1,954 stores.

The country’s retail market posted 10.2M SF of positive net absorption in the second quarter, compared to a roughly equal net negative number a year prior, according to new data from JLL.

Standbys like grocers and discount stores continue to grow, with companies like Whole Foods, Aldi, Ross Dress for Less and TJ Maxx adding new stores. But other categories are joining the race, including specialty retailers like Fabletics and Warby Parker. 

Bookstores have also made a comeback after years of shrinking, including 422 new independent purveyors in addition to big players like Barnes & Noble.

But even with retail activity and store demand cresting, rents haven’t grown fast enough to justify new construction in a way that keeps pace with retailers’ plans, even though vacancy sits at about 4.4%.

“It's just tougher than ever to expand, and there's a lot more pressure on the real estate department of these retailers,” Cook said. 

Construction volume hovers roughly 40% below 2016 levels, and completions reached a record-low 5.2M SF in the second quarter, according to CBRE.

In the majority of the country, retail rent growth is no match for the ballooning cost of building, even though rents have increased steadily for a decade. 

The average retail rent climbed by 19% from the second quarter of 2020 to just under $25 per SF today, while the average cost of common construction materials like cement, lumber and sheet metal is 30% to 60% more than in February 2020, according to the Associated General Contractors of America.

High construction costs are expected to persist, especially as data centers devour available resources and snap up workers in an unprecedented development spree, according to JLL Research Manager Andrew Volz. 

Texas, one of a handful of exceptions where retail construction is pushing forward, is also a data center hotbed, setting up a contest for labor and materials.

“It's also seen a lot of other investment that is going to be competing for those same sorts of resources in terms of labor, and it may not have the labor to support everything that's going on,” Volz said.

Arizona, Florida and Nevada also offer the combination of inexpensive land and population growth that make retail expansion make economic sense, Cook said.

Rent growth in these markets is higher than the national average, with Dallas and Houston posting growth rates in the mid-2% range and Phoenix reaching 4.3%, according to JLL.

Cheap land isn’t the only draw, however. The adage “retail follows rooftops” is bearing out as Americans migrate.

South Florida, which has seen a population influx in recent years, is a popular development target, said Brittany Feinberg, senior director at Adirondack Capital Partners. But these projects are usually preleased, a reversal from the speculative construction common in the area in years past.

The new spaces also skew toward luxury shoppers, a market that has grown in pockets across the country. But even though some new projects have come to the area, there’s still more need.

“When you look at the population tailwind, the wealth migration to South Florida, tenants want to be here, but there just isn’t that much space left,” Feinberg said. 

The growth of luxury retail is occurring at the same time that discount brands expand, demonstrating the way broader economic trends shape the way the market moves.

“Higher-income people are also moving to value because they're being cautious and seeking value right now,” Coresight Managing Director John Harmon said. “And lower-income people take value because they have to.” 

Chains like Dollar General and Five Below have expanded during a period of inflation and economic stress. 

Through August, discount grocer Aldi announced 173 openings, and Ross Stores announced 103 stores — a combined 5.6M SF of new locations. Discount stores, which represented 28% of openings last year, now represent 30% of openings in 2026. 

The draw of luxury extends to retail investment sales, which have reached $33B this year in the best start since 2022.

Investors continue to shell out money to purchase high street real estate, sensing a “generational” opportunity to pick up storefronts on famed streets like Boston’s Newbury Street, where $162M in transactions over nine deals occurred in Q2, including a $60M Chanel flagship sale at nearly $6K per SF. 

But for everyday retail patronized by the average shopper, only a few metro areas — such as expanding parts of the Dallas Metroplex, which has a construction pipeline 40% larger than the national average — can support the kind of retail traffic and rents needed to achieve a decent margin due to inflated construction costs, Feinberg said. 

The cost pressures mean that, to be able to command the rents that justify construction costs, developers and owners need to have tenants in hand to make deals, Feinberg said. What is being built is essentially filling a very specific high-end niche. 

“It's definitely a landlord's market,” Cook said. “It has been for a number of years now, with no new significant construction on the horizon. Every retailer that's looking to expand right now has to look very closely at logistically how they're going to meet their expansion plans.”