CBRE Sees Retail Real Estate Tightening as New Construction Stays Depressed

Why Retail Space Is Getting Harder to Find in 2026

The U.S. retail property market is heading into the second half of 2026 with demand still outpacing supply, according to CBRE's 2026 Midyear Review. The real estate services firm says continued consumer spending has kept commercial property resilient even with inflation stuck above 4%, a level that makes additional Federal Reserve rate cuts unlikely for the rest of the year.

CBRE expects the availability rate for retail space — which includes vacant space plus occupied space being marketed for a new tenant — to keep declining from 4.9% in the second quarter. The pressure comes from the supply side: construction of new retail space totaled just 11 million sq. ft. over the past four quarters, against a historical average of roughly 18 million sq. ft. Supermarket chains, discounters, service retailers, and fast-casual and quick-service restaurant brands are leading the search for space, the report said.

Expanding brands increasingly prefer new construction, with Dallas, Phoenix and Houston posting the strongest net absorption, and CBRE expects Southern markets to take the bulk of retail expansion. The firm raised its five-year forecast for nominal retail rent growth to a 1.7% compound annual rate, from 1.5% in January. The most robust increases are concentrated in supply-constrained coastal markets — Manhattan (+4.5%), Stamford (+3.6%), Long Island (+3.5%) and Westchester County, N.Y. (+3.2%) — where tight availability gives owners pricing leverage. Sun Belt markets draw the most leasing activity, but CBRE says their rent growth is already at or near its peak.

Demand fundamentals remain healthy: U.S. retail sales rose 6.7% year over year in June, according to the U.S. Census Bureau. The report also lifted its hotel revenue-per-available-room forecast to 2.5% growth from 1.2%, citing stronger domestic business and leisure travel, and expects occupancy to hold above 60% with room rates up nearly 2% by year-end. Hotels, it notes, are increasingly appearing in larger mixed-use and open-air centers.

Scarcity, Not Spending, Is Driving CBRE's Retail Forecast

CBRE's Thesis Runs on Scarcity, Not Spending

The central dynamic in this report is the construction pipeline, and the numbers are stark: 11 million sq. ft. of new retail space over four quarters is barely 60% of the roughly 18 million sq. ft. historical norm. With consumers still spending — June retail sales were up 6.7% year over year — occupier demand keeps pressing into a fixed supply, and that imbalance, rather than sales growth alone, is what hands owners pricing power.

Why builders are not filling the gap is the question CBRE leaves open. The report itself flags inflation above 4% and expects no near-term Fed rate cuts, and higher financing and construction costs are the obvious reason new projects stay stalled. That reading is an inference from the report's data, not something CBRE states directly.

The Sun Belt Absorbs, the Coasts Price

The geographic split is the most useful detail in the review. Leasing volume is concentrated in Dallas, Phoenix and Houston, and in Southern markets generally. But rent growth there, CBRE says, is at or near its peak. The biggest forecast increases are instead in coastal markets — Manhattan, Stamford, Long Island and Westchester County — precisely because an open-air or grocery-anchored site in those areas is scarce. For a retailer deciding where to expand, the trade-off is explicit: more available space in the South, but faster-rising rents in the Northeast.

Hotels Are the Report's Quiet Upside

CBRE raised its RevPAR growth forecast to 2.5% from 1.2% and expects occupancy above 60% with room rates up nearly 2% by the end of the year. The report also notes hotels appearing more often in larger mixed-use and open-air centers. That suggests confidence in the same locations driving retail demand — properties anchored around grocery and convenience that pull in daily footfall.

The Rate Environment Could Break the Forecast

All of this rests on consumer resilience. Inflation above 4% and the expectation of no Fed cuts for the rest of the year keep the cost of capital high for developers, which sustains the supply shortage. But if spending cracks, the scarcity argument weakens quickly: a market supported more by the absence of new supply than by genuine demand growth is vulnerable to a demand shock. That is a risk assessment, not a CBRE finding.

How Retailers, Landlords and Investors Should Read the Supply Squeeze

For retailers and restaurant operators:

• Expect availability to keep falling from 4.9% — begin site selection and lease negotiations early in high-absorption markets such as Dallas, Phoenix and Houston, where space is being taken fastest.
• Budget for continued rent escalation in supply-constrained coastal centers, where CBRE forecasts growth of 4.5% in Manhattan, 3.6% in Stamford, 3.5% on Long Island and 3.2% in Westchester County.
• Prioritize grocery-anchored and open-air locations, the formats CBRE identifies as the strongest drivers of retail rent growth.

For owners, developers and investors:

• Underwrite Sun Belt assets on the basis that rent growth is at or near its peak, even where leasing activity is strongest.
• Treat the new-build pipeline — 11 million sq. ft. in four quarters versus an 18 million sq. ft. historical average — as the key variable behind pricing power in coastal markets, and reassess income assumptions if construction recovers.
• Note CBRE's upgraded five-year rent CAGR forecast of 1.7% (from 1.5% in January) as the benchmark to test against; the forecast depends on supply staying constrained.