Retail Space Supply/Demand Roughly in Balance

Retailers looking for space to rent will find an adequate supply over the course of this year, as existing retailers under economic duress continue to either downsize or go out of business. That’s one of the findings of a new study by property-analytics firm CoStar Group, which showed the U.S. retail vacancy rate is anticipated to peak in the mid-4.4% range, edging slightly higher in 2026 before stabilizing and gradually tightening in 2027.

When it comes to net absorption of space, CoStar expects that closely watched measure to remain modest through the first half of 2026 before improving in the latter half. By that time, the metric is expected to average between 4 to 5 million square feet per quarter.

“Move-outs rose in Q1 2026 following a quieter close to 2025,” said Brandon Svec, National Director of Retail Analytics at CoStar Group. “While first quarter move outs are typically elevated, historically resulting in the weakest quarter of the year, this year’s increase was amplified by several large batch closures and a higher closure rate among mom-and-pop tenants. Store closures are expected to remain somewhat elevated in the near term as certain discretionary and value challenged retailers continue to rationalize footprints amid slower sales growth and rising operating costs.”

The forecast carries both downside and upside risks, with the balance currently tilted to the downside, said Svec. “Significant uncertainty remains around the impact of increased oil and gas prices on an already fragile customer. Other downside risks include a further softening in the labor market and lower-than-expected population gains,” he noted.

Click here for the full forecast.