Introduction
For a decade the consensus on retail real estate was that e-commerce would hollow it out. That narrative is now wrong, and a candidate who still recites it will sound a cycle behind. The reality in 2026 is close to the opposite: a decade of almost no new construction left retail structurally undersupplied, and even modest demand has produced near-record occupancy and rising rents. Retail has quietly become a landlord's market. The interesting questions are no longer about survival but about which formats are winning and how the best mall operators are reinventing assets that were written off only a few years ago.
Grocery-Anchored Retail: The Durable-Income Darling
The clearest winner is the grocery-anchored center, the open-air format built around a supermarket that draws steady, weekly, recession-resistant foot traffic. JLL's February 2026 grocery research put grocery-anchored vacancy at 4.0%, against 6.3% for centers without a grocer, within reach of the format's record lows. The tightness shows up directly in rent spreads. Regency Centers, one of the largest grocery-anchored REITs, ended Q2 2026 96.9% leased on a same-property basis and signed comparable leases at a blended cash spread of 10.4%, or 19.5% straight-lined once the annual bumps written into each lease are counted: tenants competing for scarce space concede escalators as well as higher starting rents.
- Grocery-Anchored Center
A grocery-anchored center is a neighborhood or community shopping center whose primary tenant is a supermarket. The grocer functions as the traffic engine, generating frequent, needs-based visits that support the smaller in-line tenants around it, which is why the format is prized for the durability and e-commerce resistance of its cash flow.
Investors have noticed. JLL counted grocery-anchored transaction volume up 42% over the prior year to nearly $11 billion. Cap rates for national grocery-anchored centers held in a tight 6.37% to 6.8% band over recent quarters even as other sectors repriced, and the format attracted the marquee privatization of the cycle in retail when Blackstone took grocery-anchored owner Retail Opportunity Investments Corp. private, one of the deals on the recent mega-deal tape. The public owners of this format, profiled in grocery-anchored REITs, have been among the steadiest performers in the entire REIT universe.
The Mall Renaissance Is Real, but Bifurcated
The more surprising story is the mall. Malls were the epicenter of the apocalypse thesis, and for the bottom half of the sector that thesis largely held: weak, commodity malls in oversupplied trade areas continue to close and are increasingly sold for redevelopment into housing, industrial, or mixed-use. But the top tier is thriving, and the gap between the two has never been wider. Colliers puts national mall vacancy at 8.2% in Q3 2026, about three points above shopping centers, an average that blends fortress malls that are effectively full with commodity malls that never will be. This is a genuinely bifurcated sector, not a uniformly recovering one.
The best operators are not defending malls; they are reinventing them. Simon Property Group, the dominant Class A mall owner, invested roughly $1.5 billion across more than 20 redevelopment projects in 2025 and has kept the program running. On its Q2 2026 call, management put its share of projects under construction at $1.07 billion of net cost at a blended 9% yield, about half of it mixed-use, with more than $600 million more due to start in the second half and a development pipeline above $4 billion. Occupancy at Simon's US malls and Premium Outlets was 96.0% at June 30, 2026, flat on the year, while base minimum rent rose 6.3% to $62.42 per square foot. The playbook is consistent: convert single-use retail into mixed-use destinations by adding dining, entertainment, wellness, residential, hotels, and office, the strategy detailed in the regional mall REITs.
The Numbers Behind the Sentiment Shift
The national data back the shift. Colliers' Q3 2026 retail report put national retail vacancy at 4.3%, near historic lows, after 10.5 million square feet of net absorption, the strongest quarter since 2023. Supply keeps the market tight even when demand wobbles: CBRE's Q1 2026 figures showed completions of just 4.7 million square feet, the lowest quarter in its historical dataset, and its Q2 report again credited historically low completions for rent growth.
The capital markets have caught up to the operating recovery. Mall transactions, which averaged roughly 50 per year over the prior five years, hit 50 in just the first nine months of 2025, a sign that buyers are re-entering a sector they had avoided. The leasing fundamentals reinforce the shift: nationally there is roughly a 7% gap between in-place rents and market rents, meaning landlords face little pressure to fill space cheaply and can mark rents up as leases roll.
| Format | Current condition | Investor sentiment |
|---|---|---|
| Grocery-anchored | Vacancy ~4%, strong rent spreads | Highly sought, cap rates ~6.5% |
| Class A mall | Reinventing as mixed-use, ~96% occupied | Recovering, transactions rising |
| Open-air / strip | Shopping center vacancy ~5.4%, minimal new supply | Favored for stable income |
| Commodity mall | Closing, sold for redevelopment | Land and conversion value only |
Retail was, by these measures, one of the only property types to post broad value gains in 2025, the reversal traced from its low point in retail real estate after e-commerce.
The Tenant Side: Creative Destruction
Beneath the landlord-friendly headline runs constant churn, and the churn is the mechanism of the recovery, not a contradiction of it. More than 8,100 stores closed in the US in 2025, up roughly 12% from 2024, and roughly 30 retailers filed for bankruptcy, led by Rite Aid, Joann, Party City, and Big Lots; net store openings grew only about 0.7% that year. 2026 has been far calmer. Through July 31, Coresight Research counted 3,255 announced openings and 3,399 closures, a net loss of 144 stores versus 1,778 a year earlier. In space terms the year is positive: new stores average nearly 80% more square footage than closing ones, adding a net 26.1 million square feet, with discounters supplying about a third of openings and apparel about a third of closures.
| Expanding categories | Retreating categories |
|---|---|
| Off-price (TJX, Ross, Burlington) | Drugstores (Rite Aid) |
| Discount and value (Dollar General, Aldi) | Crafts and party (Joann, Party City) |
| Beauty, fitness, food and beverage | Closeout (Big Lots) |
| Warehouse clubs, experiential | Weaker department stores |
The largest failure of 2026 shows how this cycle resolves. Saks Global, parent of Saks Fifth Avenue and Neiman Marcus, filed Chapter 11 in January under the debt from its $2.7 billion Neiman Marcus purchase. It emerged on June 26 as Exemplar Luxury Group with debt cut by nearly 75%, keeping 49 full-line stores and shrinking Saks Off 5th from roughly 70 outlets to 12. Simon sat on both sides: it had put $100 million into Saks Global in late 2024 to help fund the Neiman deal, fought the retailer in bankruptcy court over two leases, and in Q2 2026 took back about 1 million square feet, mostly Off 5th boxes. About half is already re-leased, and Simon expects annual rent from the space to rise from about $18 million to $44 million, mostly from 2027.
That is the backfill math in miniature, and it is the recovery's real engine. Bankruptcies hand surviving retailers favorable locations on terms they could not otherwise secure, and the expansion is concentrated in value and service formats: off-price chains, discounters like Dollar General and Aldi, beauty, warehouse clubs, and fitness, food-and-beverage, and experiential tenants taking vacated boxes at the higher market rents the in-place-to-market gap implies, the playbook covered in anchor tenant bankruptcy and retenanting.
- Experiential Retail
Experiential retail refers to store and center formats built around in-person experiences, dining, entertainment, fitness, and services, that cannot be replicated online. These tenants have become the preferred backfill for vacated anchors and boxes precisely because their value depends on physical presence.
Reading Retail in 2026
The single most important driver is supply starvation. Construction costs and a decade of developer hesitancy mean almost no new retail is being delivered, so the existing stock enjoys pricing power it has not had in a generation. Layered on top is the maturing of e-commerce: online penetration has plateaued rather than continuing its relentless march, and retailers increasingly treat physical stores as omnichannel fulfillment and marketing assets rather than pure sales floors. Together these forces have turned a sector everyone wrote off into one with genuine landlord leverage.
Retail has split into haves and have-nots more decisively than any other property type. The haves, grocery-anchored centers and Class A malls in strong trade areas, are enjoying their best fundamentals in years; the have-nots are exiting the sector through redevelopment. For an analyst, the skill is no longer judging whether retail survives but which assets sit on the right side of that divide: a question of trade area, anchor mix, and physical adaptability, asset by asset. How those assets are actually underwritten is the subject of valuing a shopping center.
