Retail developers are sitting on the sidelines just as tenants are ready to expand, creating a disconnect that is shaping one of the tightest and most competitive retail markets in years.
That imbalance—robust retailer demand colliding with a shortage of new development—emerged as a defining theme at the National Association of Real Estate Editors conference in Miami this week.
"The fear of retail overdevelopment is very small right now," Danny Finkle, senior managing director and co-head of the Miami office of JLL Capital Markets, said. "Developers won't build unless there's a good lease-up."
That caution is colliding with robust tenant demand. New retail projects are leasing up in roughly three months at premium rents, yet developers remain reluctant to break ground amid elevated construction costs and muted growth expectations. The result, according to JLL, is a "love it or leave it" investment climate, with 39% of investors showing no interest in retail while 48% express mild to strong interest.
At the same time, landlords are capitalizing on disruption. Finkle noted that owners are reacquiring bankrupt spaces with the expectation they can re-lease them at higher rents to stronger tenants, reinforcing upward pressure on pricing.
Even struggling retail formats can still benefit from strong fundamentals at the site level. Ian Pierce, senior vice president of communications for Weitzman, said the mall might not perform well, typically because of poor management, but the location does because they are at busy intersections with lots of traffic and visibility.
Investor demand is increasingly concentrated around necessity-based retail. Grocery-anchored centers are leading the pack, with JLL reporting that 81% of investors are targeting these assets. Grocery tenants account for 38% of investor preferences, with Whole Foods ranking as the most sought-after retailer. The shift underscores a broader move toward daily-needs retail, which offers stability amid uncertain economic conditions.
Finkle said the same dynamic is lifting other convenience-driven formats. "They might not go to buy a dress or a shoe or a purse, but they will go for service," he said.
That preference is boosting performance across convenience stores, quick-service retail, and service-oriented tenants, as well as core and core-plus power centers and lifestyle centers. Even unanchored strip centers remain "hot," reflecting the broader supply-demand imbalance.
Retail availability remains historically tight, with national vacancy at 4.4% and construction at an all-time low, according to JLL. Those fundamentals are helping push retail's share of overall commercial real estate investment to its highest level in a decade.
Capital is following those fundamentals. Retail transaction volume reached $15.3 billion in the first quarter of 2026, up 5% year over year, as institutional investors expand their allocations. There were 58 trades exceeding $100 million over the past 12 months, compared to just 15 in 2024, signaling renewed confidence in the sector's income durability and liquidity.
Institutional buyers now account for 24% of all retail investment and roughly one-third of large trades, a presence expected to grow as more capital targets the sector.
At the same time, pricing is tightening. Cap rate spreads between multi-tenant retail formats have narrowed significantly, while competition for top-tier assets is driving sub-5% cap rates and sub-7% unlevered IRRs back into play.
With primary markets increasingly picked over, investors are turning to secondary metros such as Charlotte, Nashville, Tampa and Raleigh, where rent growth is stronger and new supply remains limited.
Debt markets are also contributing to momentum. Financing has become more accessible and competitively priced as lender diversity expands, setting the stage for increased origination activity between 2026 and 2029. JLL estimates that $7 billion to $8 billion in retail assets could hit the market in the next 60 days alone.
Despite those tailwinds, investor sentiment is not without caution. A January survey of 150 JLL clients found that 64% expect to increase retail acquisitions in 2026, while 48% plan to increase dispositions, suggesting the market is at a midpoint in its investment cycle.
The primary concern has also shifted. Economic slowdown and geopolitical uncertainty now top the list for 69% of investors, replacing debt market instability as the leading risk. The change highlights how quickly capital markets have stabilized, even as broader macro uncertainty lingers.
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