Retail Construction Hits Record Lows: What Shoppers Should Expect at Your Local Stores
Retail Construction Reaches Historic Lows
Finding space for new stores has become increasingly difficult for retailers across the country. Retail construction completions dropped to just 5.7 million square feet during the second quarter, marking the lowest figures on record both quarterly and over a rolling four-quarter period. According to CBRE, a major commercial real estate firm, this slowdown stems from rising construction expenses and ongoing labor shortages that make it difficult to complete new projects.
The shortage of newly constructed retail space has created a tight market. Retail space availability held at just 4.9 percent in the second quarter, leaving retailers scrambling to find locations that meet their expansion goals. “That has made it very difficult for retailers who are in expansion mode trying to find desirable, well-located space,” explained Ebere Anokute, the Americas head of retail research for CBRE. This scarcity means fewer new store openings in many regions, potentially limiting shopping convenience for consumers.
Why Construction Has Stalled
The economics of retail development no longer make sense in most U.S. markets. According to James Cook, global head of retail research for JLL, a leading real estate services company, “The cost of labor, the cost of materials and the cost of land to build on or properties to tear down and/or to redevelop, all that’s pretty expensive.” Even as retail rents continue climbing in most regions, they haven’t increased fast enough to justify the investment required to construct new shopping centers.
Interest rates remain a critical factor. Experts note that federal interest rates would need to decrease significantly before developers would be willing to invest in new retail construction or revitalize older properties into modern shopping destinations.
Where New Retail is Still Growing
The South remains the primary region attracting new retail development, driven by robust population growth. Houston led all markets with 606,000 square feet of completed retail space in the second quarter, followed by Orlando, Dallas, and Phoenix. In high-growth states like Texas and Florida, new shopping centers often become fully leased before they even open, indicating strong demand in these regions. This concentration means shoppers in slower-growth areas may face even fewer new shopping options.
How Retailers Are Adapting
With limited availability of new space, retailers and landlords have become more creative and flexible in their approach. Store owners are now more willing to operate in smaller footprints than they were a decade ago, allowing them to fit into available spaces more easily. This adaptation has made it possible for some retailers to continue expanding despite the construction squeeze.
The competition for retail space has intensified, particularly for properties vacated by large retailers that have closed. When major chains like Bed Bath & Beyond shut down stores, landlords face competition from service-oriented tenants including gyms, schools, and entertainment venues alongside traditional retailers like grocers and other large-format stores. “The demand to backfill vacated space is tremendous right now,” according to retail economists tracking these trends.
What This Means for Shoppers
The record-low construction levels have several implications for consumers. First, new store openings will likely remain limited, particularly outside of high-growth regions in the South. Second, the retailers that do survive and expand are generally those in stronger financial positions, which may mean fewer bargains but potentially more stable store networks. If you’re shopping across every deal category we track, you may notice fewer new locations opening in your area.
Retailers that have weathered the e-commerce revolution are now more confident in opening physical stores, understanding the value of brick-and-mortar retail despite online competition. This means the stores that do open are likely to be well-thought-out locations backed by strong brand fundamentals.
The competitive landscape for retail space also suggests that available locations will be premium properties rather than budget alternatives. When a retailer restructures its operations, existing spaces become hotly contested. This competition drives up lease costs, which may eventually be reflected in product pricing, though retailers may absorb these costs to remain competitive.
Looking ahead, retail expansion will depend heavily on whether federal interest rates decline and whether construction costs stabilize. Until then, shoppers should expect a more selective retail environment with fewer new locations but potentially higher-quality shopping destinations. For retailers planning seasonal operations and expansions, the tight real estate market means careful selection of prime locations rather than rapid growth strategies.