U.S. Retail Construction Remains Constrained

U.S. retail construction activity remained both steady and constrained in the second quarter of 2026, according to the latest data from CoStar Group, a provider of property market information and analytics in property. In Q2 2026, roughly 72.1 million square feet of retail space was under construction in the U.S., up 0.9% year-over-year and below the 10-year average of roughly 78.9 million square feet, CoStar found.

“The limited amount of construction activity reflects a development environment that remains difficult to pencil in most markets,” said Brandon Svec, CoStar’s National Director of Retail Analytics. “The sharp rise in land prices, construction costs and interest rates over the past several years has pushed required rents well above prevailing market levels for many retail formats.”

Even in markets with strong population growth and leasing demand, achieving returns that justify ground-up construction remains challenging, Svec notes. “Beyond cost pressures, developers remain cautious following years of heightened supply-risk awareness, while retailers continue to favor measured, capital-disciplined expansion strategies,” he notes.

New retail construction remains heavily concentrated in 15 markets, which account for nearly 47% of the national pipeline. Among those markets, Dallas, Houston, and Austin collectively comprise 21% of the U.S. pipeline (or 15 million square feet). Other large pipelines are found across the Sun Belt and select fast-growing markets: Phoenix, Las Vegas, Chicago, Charlotte, Atlanta, Miami and Denver.

Click here to register to obtain access to CoStar’s full analysis.