Shopping centers are entering 2026 among the most coveted commercial real estate assets, fueled by robust investor interest and strong retail fundamentals. CoStar Group National Director of U.S. Retail Analytics Brandon Svec tells GlobeSt.com that demand and pricing have reached unprecedented levels, with capital pouring into the sector and limited inventory keeping competition tight.
According to Svec, 28 retail-focused investment funds raised a combined $4.5 billion last year, driving a surge of acquisitions. More than 1,300 shopping centers changed hands in 2025, while only 767 centers larger than 50,000 square feet remain on the market. Average pricing climbed to $142 per square foot, a 14% increase over the prior five-year average and the highest level on record.
“I think it comes from lower costs of capital and what is still a strong mark-to-market opportunity on these properties that have pre-pandemic leases,” Svec says, noting that many of these assets carry rents with “a very real 20% to 40% mark-to-market opportunity.”
Retail performance continues to support those higher rents.
“The average square foot of retail space today is doing 35% more sales than in 2019,” Svec says. Although affordability is a growing concern, he adds that the overall efficiency of retail space “is actually supportive of that 30% growth.”
However, that growth isn’t evenly distributed. “A lot goes to the Costcos or Walmarts or the like,” Svec notes.
Svec expects cap rates to compress further by year’s end as investor demand strengthens across both grocery-anchored and non-grocery-anchored centers. “Look at the big money chasing these centers—it would take some type of upheaval to not end up with higher prices in 2026,” he says. Both equity investors and lenders remain engaged, though their optimism depends on continued consumer spending.
An economic slowdown, however, could expose a key vulnerability in the sector. “By my estimation, somewhere around 30% and 40% is occupied by mom-and-pop retailers,” Svec says. “We can lose 10%; we can’t lose 30%.”
A sharp contraction among smaller retailers could erode occupancy and push valuations down, since “retail space demand is partly supported by the retail inefficiencies of the mom-and-pops," Svec added. Despite lacking the credit strength of national chains, those tenants often generate “higher rents and better terms.”
Svec cautions that landlords may need to balance profit expectations with stability to avoid overreaching.
“It’s bound and governed, hopefully, by the landlords’ understandings of their centers and not getting too greedy,” he says. “If there is a real risk to the retail sector in this environment, it is getting hit with the perfect storm of smaller retailers getting pushed out, consumer spending hurt, and bigger retailers getting more discerning,” a combination that could squeeze the very tenants helping sustain the sector’s momentum.
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