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**The 2026 Retail Forecast: Not Too Different from 2025**
Despite frequent predictions of retail’s decline in the wake of the pandemic, the sector continues to show resilience. Heading into 2026, the retail real estate landscape is described by experts as steady and strong, even amid lingering economic challenges.
While many other commercial property types have faced volatility, retail has maintained solid footing. “The overall view for the sector in 2026 is that it will be steady,” noted Darren Pitts, co-founder and executive vice president of Velocity Retail Group.
### The 2025 Analysis: A Steady and Resilient Sector
Retail performance in 2025 defied gloomy forecasts and proved surprisingly strong. Stephanie Skrbin of Axiom Retail emphasized that leasing activity, particularly in Class A and B centers, remained robust. Additionally, both investment activity and pricing improved over the previous year.
According to Meghann Martindale, Principal and Director of Market Intelligence at Avison Young, physical stores became more relevant amid e-commerce disruptions and pandemic aftershocks. “New experiential, omnichannel, and mixed-use formats invigorated the sector,” Martindale said.
J. Wickham Zimmerman, CEO of Outside the Lines, Inc., echoed this sentiment, noting that experiential spaces encouraged longer visits, while consumers focused on convenience and affordability. However, Martindale pointed out that the definition of “experiential” now varies widely—from immersive environments to food, entertainment, and interactive product testing—depending on the brand.
Still, not all was perfect. Brad Umansky, President of Progressive Real Estate Partners, gave the sector a “solid B” grade. While expansion continued and capital markets were relatively active, anchor and sub-anchor spaces that came to market in the past one to two years remain a leasing challenge.
### Grocery and Discount Retail Remain Pillars
Retail takes many forms—from large regional malls to small neighborhood restaurants. Among these, grocery stores led the way in 2025.
“Aldi continues to lead with a value platform in the grocery sector,” said Darren Pitts. Discounts retailers like Costco, Wal-Mart, TJX, and Ross also continued strong expansions.
Jim Dillavou, principal and co-founder of Paragon Commercial Group, noted that grocery anchors now prefer to be adjacent to services such as salons, fitness, dental, and pet care. This shift is driven by data showing those uses increase dwell time and customer spend.
Yet even grocery retail had hurdles. Sandy Sigal, CEO and president of NewMark Merrill Companies, pointed out that uncertainty around the Kroger/Albertsons merger stalled traditional grocery expansion. While giants like Walmart opened fewer stores, niche grocers like Trader Joe’s and Grocery Outlet continued to perform well—albeit selectively.
On the discount side, Skrbin warned of increasing pressure from inflation, labor costs, and shifting behaviors, which led to slight slowdowns and some store closures.
### Navigating Supply and Demand
Retail also dealt with closures and consolidations. Jason Baker, principal and co-founder of Baker Katz, cited Coresight data showing 569 closures and 1,118 openings in 2025. “Most closures involved long-struggling brands,” he said.
Vacancies filled much of the development gap caused by the slowdown in new construction. According to Umansky, long-vacant big box spaces are an ongoing challenge. If not leased in the last 12 months, these properties will likely require unconventional uses and creative landlord strategies for absorption in 2026.
Dillavou added that development without financial incentives is largely infeasible. “Absent subsidized land, municipal assistance, or creative financing, new development is tough to pencil,” he said.
Pitts agreed that high development costs will force tenants to accept higher rents to reach growth targets, which could elevate overall rents and valuations. Skrbin added that low construction activity benefits landlords, especially in the restaurant market where second-generation space is in high demand.
Martindale noted that reduced new deliveries and the adaptive reuse of older spaces have resulted in a more resilient retail property inventory.
### Outlook for 2026: Cautious Optimism
Heading into 2026, experts anticipate a landscape marked by steady performance and selective investor competition.
Strong leasing fundamentals and capital interest could make the acquisition market highly competitive. “2026 will be a good time to sell value-add assets,” Dillavou added.
Retail in top-tier markets will remain attractive as top-performing retailers expand both online and in-store, Pitts observed. Zimmerman emphasized the importance of experience-driven shopping environments, noting that successful retail will be “authentic places for people to gather.”
Operators will need to focus on placemaking, flexibility, and amenities to stay competitive. “Retail centers that fail to evolve risk becoming obsolete,” Zimmerman warned.
Still, fiscal policy and market dynamics present headwinds. Interest rates could affect refinancing options for investors, Pitts said. Martindale noted that inflation and category shakeouts—such as in retail pharmacy—pose risks, while Skrbin warned that a broader market correction may be nearing.
Sigal summed up the sector’s transformation: “The retail industry is undergoing a reset. Rapid expansion is out. Rational growth and optimal store sizing are in.”
Overall, while challenges remain, retail heads into 2026 with momentum, a clear direction, and lessons learned from years of uncertainty.
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