The U.S. retail market has kicked off 2026 on a relatively strong note, although a recent report from JLL indicates a concerning trend: more retail stores have closed or downsized than opened or expanded in the first quarter. Despite this, vacancy rates remain notably low at 4.4%, largely due to a lack of new construction within the sector. This resilience in the face of reduced physical retail presence suggests that the market is adapting to new dynamics.
Retail properties continue to attract significant investor attention, particularly from institutional investors, as they offer yields that outperform other commercial real estate sectors. During this period, investment transaction volumes exceeded $15 billion, reflecting a 5% increase compared to the same quarter in 2025. This marks the highest first-quarter transaction volume since 2023, signaling a renewed confidence in retail investments.
Paul Kurzawa, president and incoming CEO of Centennial, noted that “the alpha wolves are back, and they are waking up hungry,” highlighting a resurgence in both equity and debt market fundamentals. Investors are now actively seeking robust, double-digit returns over short to mid-term holds, with spreads of 150 to 200 basis points that exceed market indexes. However, Kurzawa points out that while capital is returning, investors have grown increasingly selective about where they choose to allocate funds.
He specifically mentioned a strong appetite among institutional investors for core+ assets, which are characterized as premium yet low-risk investments that promise long-term stability. Over the past year, these institutional players accounted for nearly 24% of multitenant retail investment, the highest share reported since 2017. Moreover, transactions involving high-value deals of $100 million or more constituted 26% of retail investments from the first quarter of 2025 to the first quarter of 2026, a significant rise from just 13% in 2023.
However, a notable challenge has emerged: there is a scarcity of high-quality retail assets available for sale. This gap between strong investor demand and limited inventory is driving increased competition, particularly in the high-ticket segment. While there is also movement toward value-add properties that require upgrades, Kurzawa cautioned that these investments necessitate a more nuanced approach. He emphasized that investors are increasingly focused on where they can genuinely create value through diversification or repositioning. Deals that rely heavily on speculation rather than solid financial fundamentals are struggling to close.
As this retail landscape evolves, stakeholders are monitoring these trends closely, aiming to identify and capitalize on opportunities that align with their strategic investment goals.
