Even as retail demand and pricing remain near record highs, new development is slowing to a crawl. U.S. retail construction eased again in the first quarter of 2026, extending a years-long period of restraint that developers can't seem to shake despite strong fundamentals across the sector.
CoStar Group data shows about 64.2 million square feet of retail space was under construction nationwide, down roughly 8.3% from the same period in 2025, when about 70 million square feet was being built. That puts current activity well below the 10‑year average, which "consistently exceeded 90 million square feet during the last expansion cycle," the firm reported.
Construction hasn't been this limited since the early 2010s. Activity dipped just under 60 million square feet in early 2021 and last hovered near today's levels in 2011, when about 57 million square feet was underway. Yet the drop appears disconnected from market appetite for retail assets, which remains robust.
"The pullback in construction reflects a development environment that remains difficult to pencil in most markets," Brandon Svec, national director of retail analytics at CoStar Group, said in prepared remarks.
"The sharp rise in land prices, construction costs, and interest rates over the past several years has pushed required rents well above prevailing market levels for many retail formats. Even in markets with strong population growth and leasing demand, achieving returns that justify ground‑up construction has become increasingly challenging."
The markets that are still being built are overwhelmingly in Texas. Dallas led with about 6.8 million square feet under construction, followed by Houston's 3.8 million and Austin's 3.2 million. Rounding out the top 10 were Phoenix (2.7 million square feet), Las Vegas (1.4 million), Charlotte (1.3 million), Atlanta (1.2 million), Orlando (just under 1.2 million), Chicago (around 1.2 million) and San Antonio (just over one million).
The concentration of development in high‑growth Sun Belt markets underscores how developers are becoming more selective about where new projects make financial sense. For now, most seem content to compete for existing centers rather than break the ground on new ones.
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