Date: March 31, 2026
Written By: Jon D. Kelty, Partner
As we reach the close of the first quarter of 2026, retail real estate continues to show surprising resilience and strength. Despite fluctuating interest rates and a challenging lending environment, fundamentals across most retail asset classes remain solid.
Occupancy remains high, driven by limited new development and steady tenant demand. Rent growth has leveled off but remains positive for well-located centers, especially grocery-anchored and daily-needs retail. Class A assets are seeing strong leasing velocity, while older or unanchored centers are relying on creative repositioning to stay competitive. Case in point, Simon Property Group is reporting occupancy for their malls at around 96% which, which is an eight-year high. Monmouth Square, the redevelopment of Monmouth Mall, will convert the space into an open-air shopping destination with a focus on dining, retail, medical offices, and residential uses.
Development & Redevelopment
Ground-up retail development is still constrained by construction costs and financing hurdles. However, adaptive reuse and mixed-use redevelopment are filling the gap, turning underperforming centers into vibrant retail, residential, and service-driven environments. Landlords who can repurpose space quickly are finding success. CIM Group’s Centennial Yards project is an ambitious 50-acre urban revitalization that will bring world-class entertainment, dining, and living to downtown Atlanta. On the transactional side, retail REITs like Tanger are strengthening their portfolio with acquisitions. Recently, Tanger acquired Legends Outlets in Kansas City, a 690,000-square-foot open-air outlet center.
Tenant Demand & Use Mix
The tenant mix continues to diversify. Medical, fitness, and QSR operators are expanding aggressively, while traditional soft-goods retailers are more selective and focused on proven locations. Many tenants are refining their footprints, using smaller spaces and flexible layouts that balance showroom and fulfillment functions. Grocery-anchored sites are also in high demand with the expansion of concepts like Trader Joe’s, Sprouts, Lidl, and Aldi (which plans to add 800 new locations by 2028).
Leasing Dynamics
Landlords currently hold most of the leverage in strong submarkets, but well-advised tenants are still finding opportunities, particularly where vacancy lingers, or redevelopment is planned. National and regional tenants with strong balance sheets and good credit will have significantly stronger positions and opportunities. Key negotiating points include construction contributions, co-tenancy protections, and early termination flexibility.
In short, retail real estate remains one of the healthiest sectors in commercial real estate, not because of explosive growth, but because of steady demand, disciplined development, and adaptability. The major risks facing retail real estate are generally macroeconomic and socio-political matters.
Recent Notable Examples
Bronwyn Eyeington (Franklin Street – Tampa, FL) – Overall, the Tampa retail market is still very strong. Retail availability still remains near historic lows, and average market rents continue to grow. New projects under construction are limited, and a good chunk of new developments are pre-leased, which keeps the market supply constrained. With market supply relatively constrained, this creates even more competition for existing retail space and allows landlords of existing space in hotter submarkets of Tampa to ask and oftentimes lock in rents that may be deemed “over market” asks on rent with new tenants as well as offer a more limited amount of Tenant Allowance (TA). Landlords have the leverage. As for categories of expanding tenants, a lot of grocers like Whole Foods, Aldi’s (who’s taking a lot of those former Winn Dixie spaces), and Publix are continuing to expand. There are also a lot of first-to-market higher-end restaurant groups looking to enter the Tampa market.
John Jennings (Newmark – San Diego, CA) – Retail demand across Southern California remains consistent. With limited new supply and resilient sales volumes, occupancy and rents continue to hold up, but there are signs of the market softening. Bringing deals to the finish line is increasingly difficult as elevated construction costs, higher interest rates, and rising operating expenses—insurance, labor, cost of goods sold, tariffs, and utilities—squeeze pro formas and widen bid–ask spreads. The result is longer timelines, tighter underwriting, and greater reliance on second-generation space, and creative deal structures to make deals pencil. While retail vacancy in Southern California (excluding regional malls) has edged up from historical lows, it stands at only 6.1%.
Diana Zagarzhevskiy – (CBRE Indianapolis, IN) – Indiana’s retail market remains strong heading into 2026, driven by steady population growth, rising suburban affluence, and a wave of high-quality mixed-use developments reshaping key trade areas. Downtown Indianapolis continues to gain momentum with projects like Cole Motor introducing vibrant local restaurants and boutique retail, while Fishers District and The Farm at Zionsville are expanding their next phases to meet tenant demand for experiential dining and entertainment. Westfield’s Grand Junction and surrounding corridors are rapidly growing with new mixed-use and neighborhood retail, and Carmel continues to attract chef-driven concepts and upscale national brands, further solidifying its position as the metro’s premier dining destination. Across the state, retail leasing activity remains competitive, with strong tenant interest from restaurants, fitness, med-spa, and service-based retailers seeking well-located, high-traffic environments within these dynamic new developments.
What’s Next?
Retail real estate continues to demonstrate resilience, supported by strong occupancy, limited new supply, and evolving tenant demand favoring necessity-based and experiential uses. While market conditions remain steady, challenges such as higher costs, tighter lending, and more complex deal structures are shaping how transactions are being done. Looking ahead, success will depend on adaptability, through redevelopment, strategic leasing, and creative structuring, as well as a close eye on macroeconomic trends that could influence consumer behavior and capital markets in the quarters to come.
