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U.S. Retail Construction Slowed Again in Q3

Austin, Texas, is one of the few markets U.S. where retail construction (as well as other commercial developments) remains strong, as shown in this recent photo of skyscrapers under construction there. Photo: Reinier Snijders/iStock by Getty Images

U.S. retail construction fell to the lowest level on record in the third quarter of 2026, with building starts at their lowest level in at least a decade and financing costs moving higher, a new report by CoStar Group concludes. Specifically, for the period, roughly 58.3 million square feet of retail space was under construction in the U.S., down from 60.6 million square feet in Q2 and 63.3 million square feet in Q1.

Despite being unchanged from a year prior, the metric remains roughly 4% below its prior 10-year average of 60.7 million square feet.

In addition, new construction starts fell to their lowest quarterly total since at least 2016. Developers broke ground on about 7.7 million square feet of retail space during Q3, down from 10.7 million square feet in Q2.

“The pullback in construction reflects a development environment that remains difficult to pencil in most markets,” said Brandon Svec, National Director of Retail Analytics at CoStar Group, a provider of commercial real estate information, analytics, online marketplaces and 3D digital-twin technology. “Elevated land prices, construction costs and borrowing costs have pushed required rents well above prevailing market levels for many retail formats, and flat asking rents during the quarter did little to close that gap.”

As a result, CoStar says that retail supply growth “will remain limited for the foreseeable future. Based on current conditions… we expect the pipeline is likely to shrink further before any meaningful recovery takes hold.”

As has been the case in recent quarters, three of the sector’s major bright spots are in Texas, with Dallas-Fort Worth, Houston and Austin collectively accounting for about 15.5 million square feet under construction, or nearly 27% of the national pipeline.

The 15 largest metro pipelines account for roughly 56% of all space under construction, highlighting how limited development remains outside of markets where population growth and tenant expansion plans can still support new projects.

Click here to register to see the full report from CoStar.

Shop! Association

The Shop! Association is a global trade association dedicated to advancing the retail environment and experience industry. Its purpose is to empower members to innovate at retail by connecting them with education, insights, and events that support collaboration and forward-thinking solutions. From ideation through implementation, Shop! engages its diverse membership to co-create innovations that help shape the future of retail worldwide. Central to its mission is fostering an inclusive culture that embraces diverse voices and upholds high standards of ethics and transparency. Since 1956, Shop! has empowered its members to innovate at retail through education, insights and events. Learn more by visiting shopassociation.org. Interested in joining the Shop! Association? Reach out to Dina Meindl, Membership Services, for more information today! dina@shopassociation.org.