The Daily Dig
U.S. retail construction continued to contract in the first quarter of 2026. Approximately 64.2 million square feet was under construction nationally, down from around 70 million square feet a year earlier and well below the 10-year average that held consistently above 90 million square feet during the last expansion cycle, according to CoStar Group. That puts current activity near levels last seen during the early stages of the post-pandemic recovery.
CoStar's national director of retail analytics, Brandon Svec, pointed to cost pressures as the root of the problem. Land prices, construction costs, and interest rates have all climbed significantly over the past several years, pushing required rents well above prevailing market levels for many retail formats. Even markets with strong population growth and leasing demand are struggling to make ground-up projects work financially.
Retailers have compounded the issue by keeping expansion strategies measured and capital-disciplined, with a clear preference for smaller footprints, especially in soft goods categories where e-commerce competition has been persistent. Developers are also competing for viable sites against residential, industrial, and mixed-use projects, further constraining retail development opportunities, particularly in infill locations.
Texas is the clear outlier. Dallas, Houston, and Austin are leading the country in active retail construction, and a significant share of that space is already pre-leased, a direct signal of strong tenant demand for well-located, modern product. Outside the South, unleased inventory is higher, pointing to either more cautious tenant commitments or projects at an earlier point in the delivery timeline.
Snapshot:
Report Source: CoStar Group
Data Period: Q1 2026
Publication Date: April 7, 2026
Sector: Retail Construction
SF Under Construction, Q1 2026: ~64.2 million SF
SF Under Construction, Q1 2025: ~70 million SF
10-Year Average (Last Expansion Cycle): Consistently above 90 million SF
Year-Over-Year Change: Approximately 8% decline
Leading Markets: Dallas, TX; Houston, TX; Austin, TX
Market Condition, South: High pre-leasing rates in Texas and high-growth southern metros
Market Condition, Outside South: Higher levels of unleased space
Key Cost Pressures: Land prices, construction costs, interest rates
Retailer Trend: Smaller footprints, selective and capital-disciplined expansion
Site Competition: Residential, industrial, and mixed-use development
TheJobWalk Thoughts
The Texas pre-leasing data matters more than it might look at first glance. When tenants are committing before a building is finished, procurement and scheduling windows compress fast. GCs and subs targeting retail work in Dallas, Houston, or Austin should be building relationships now, not waiting for projects to hit the street.
Outside the Sun Belt, the risk profile on retail ground-up is real. Higher unleased inventory in slower markets historically means tighter budgets, slower decisions, and a greater chance of delays or scope changes. Price those opportunities carefully.
