American consumers haven't stopped spending, but they have slowed some purchases. Higher gas, persistent housing costs and the drag of tariffs are squeezing household budgets in ways that are reshaping retail behavior.
"When you talk about fixed costs—rent, electricity, gas to get to work—those are all going up," says Naveen Jaggi, president of retail advisory services, JLL Americas. "Which means consumers are tightening the belt on discretionary spend."
What's more, Jaggi notes, retailers absorbed tariff expenses for much of the past year, waiting to see how the policy would shake out. But that window is closing, and tariffs may start appearing in the price of goods. "The pressure on discretionary spending will only intensify," Jaggi predicts.
The result is a bifurcated market. Non-discretionary categories like groceries, daily goods and essentials remain resilient. But apparel, restaurants and leisure are strained as shoppers recalibrate their priorities.
Value Retail Takes a Starring Role
Nowhere is that shift more visible than in the rise of value retail. Its reach goes beyond its core demographic base, Jaggi says. Walmart now commands 21% of all US grocery sales, more than double the share of its nearest competitor, Kroger, at roughly 8.5%.
"Up and down the income food chain, people recognize that for daily goods you get the best bang for the buck, which gives you more to spend when you want to treat yourself," Jaggi says.
In this environment, restaurants, discount and grocery saw the most growth, with Starbucks (175 new locations), Dollar Tree (400) and Aldi (180) among the most notable for the start of 2026.
Nimble on Format, Inflexible on Inventory
With national retail vacancy at 4.3%, the supply environment has necessitated a new mindset. Retailers that once held out for an ideal footprint are now taking what's available and adapting.
Sprouts, among the most aggressively expanding grocers in the country, has trimmed its standard store size from roughly 30,000 square feet to between 18,000 and 20,000, Jaggi says. "Being nimble on format and flexible on inventory is what they need to be," Jaggi says, "as opposed to being fixated on space."
New development remains heavily concentrated in the Sun Belt and the mid-Atlantic. JLL estimates that Texas alone will deliver 50 million square feet of retail space in the next two years, representing 10% to 15% of total new development.
Going Where the Customers Are
For retailers thinking further out to 2028 and beyond, another geographic story is unfolding separate from the usual growth corridors. A growing number of retailers are targeting markets defined by customer density rather than regional momentum alone. In particular, they are focused on cities anchored by large state universities. Columbus, OH, Knoxville, TN, and Nashville are among the locations drawing attention, as are college towns in the Upper Midwest.
"Retailers are asking where the next wave of consumers is going," Jaggi explains. "It's markets with a high concentration of young, educated households, and some of those are in the Rust Belt."
With consumer confidence still depressed and the full impact of tariffs yet to be felt, retailers are taking a cautious approach. "[Retailers are] watching, and if inflation starts to creep further into their discretionary spend, they will slow down," Jaggi says.
Visit JLL at ICSC Las Vegas, Central Hall booth 2007G.
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