U.S. Retail Construction Activity Holding Near Post-Pandemic Lows

According to CoStar's analysis, approximately 72.1 million square feet of retail space was under construction in the U.S. during Q2 2026. This marks a modest increase of 0.9% compared to the same period last year. However, this figure is notably below the 10-year average of around 78.9 million square feet, underscoring a continued hesitance within the retail construction sector.

Brandon Svec, the national director of retail analytics at CoStar Group, commented on the challenging environment for retail development. "The limited amount of construction activity reflects a development environment that remains difficult to pencil in most markets," he stated.

The report attributes several factors to the stagnation in retail construction. Key among them are the sharp increases in land prices, construction costs, and interest rates over recent years. These economic pressures have led to required rents surpassing prevailing market levels for many retail formats.

Svec further emphasized that even in areas experiencing robust population growth and strong leasing demand, developers are finding it challenging to achieve returns that justify ground-up construction. "Beyond cost pressures, developers remain cautious following years of heightened supply risk awareness, while retailers continue to favor measured, capital-disciplined expansion strategies," he added.

Interestingly, new retail construction remains heavily concentrated in just 15 markets, which together represent nearly 47% of the national pipeline. Particularly, the Texas markets of Dallas, Houston, and Austin account for a significant 21% of the national pipeline, translating to roughly 15 million square feet of retail space.

Other markets with notable construction pipelines include regions across the Sun Belt and select fast-growing locales, such as Phoenix, Las Vegas, Chicago, Charlotte, Atlanta, Miami, and Denver. These areas are recognized for their potential growth and increasing demand for retail space.

The latest findings from CoStar Group paint a picture of a retail construction landscape that, while showing slight improvement, continues to grapple with significant economic challenges. As developers and retailers navigate high costs and cautious expansion strategies, the future trajectory of retail construction remains uncertain. The concentration of activity in select high-demand markets may offer a glimmer of hope, yet the overall sentiment suggests a careful approach will persist in the wake of ongoing economic pressures.

For those interested in a deeper analysis of the current retail construction market, further insights can be found in CoStar's comprehensive reports and data offerings.

CoStar Group, a leader in commercial real estate information and analytics, continues to provide valuable insights that drive informed decision-making in the property markets.