Everybody keeps telling you the same thing. Retail is dead. Amazon killed it. The malls are dying, strip centers are next, so don't touch it.
Here's the number that ends that conversation: retail vacancy in the United States is sitting at 4.4%. That's not "recovering." That's tighter than office by a mile and almost as tight as industrial.
So I brought on the guy who actually has the data. James Cook runs retail real estate research for the Americas at JLL. He's been quoted in the Wall Street Journal and The New York Times, and he spends his days looking at the numbers the rest of us are guessing about. I even handed him a list of predictions I made on a live stream back in January and asked him to grade me A through F, which was either brave or stupid.
In This Article
The Retail Apocalypse Was Never About Retail
Nobody Has Built Anything Since 2009
The Barbell Economy Should Actually Scare You
Retail, By the Numbers
4.4%
National retail vacancy today, near industrial lows
15-20%
Office vacancy across the country, for comparison
30M SF
All new retail expected in 2026, ~70% single tenant
The Retail Apocalypse Was Never About Retail
James put it better than I could. He said this is the conversation he has at the family barbecue. Somebody asks what he does, he says he researches retail real estate, and they say "but everybody buys everything online now."
And his answer is always the same: where did you go last Saturday?
Well, I went to Kroger. Then Target. And of course we did our big Costco run.
That's the whole thing in a nutshell. Yes, more retail happens online than it did 20 years ago. No, it did not all go away. What actually happened is that retail shifted hard toward daily needs. It's cheaper to buy it at Walmart than to have Amazon ship it to you, and a whole lot of American families are shopping on a budget right now.
There is a type of retail that died. Retail properties get graded like report cards, A through D. Before online shopping existed, your class B and C malls were the internet. That's where you went for selection. Now we've got actual internet, so we don't need the C and D malls anymore. A lot of that stuff is getting torn down or redeveloped.
But people saw Sears close, then Party City, then Jo-Ann Fabrics, and assumed the whole asset class was going under. What those closures actually tell you is that a specific brand was mismanaged or fell out of fashion. That's not the same thing as retail dying. If you're trying to figure out where retail fits against office, industrial, and multifamily, my breakdown of the types of commercial real estate lays out how each one actually behaves.
Nobody Has Built Anything Since 2009, And That’s the Real Story
This is the part most investors miss, and it's the reason 4.4% is even possible.
Think back to before the Great Recession. People were building retail like crazy. James was living in Phoenix at the time, and new power centers were popping up on every corner. Then 2008 hit, and construction stopped.
And it basically never restarted. We are sitting at close to the same retail inventory we had almost 20 years ago. Meanwhile retailers kept expanding and kept leasing that space up. Vacancy went down, down, down, down, down.
Now construction and labor costs are so high that in most markets the replacement cost math doesn't work. You cannot build a new shopping center and make it pencil. So we're stuck with the inventory we have while demand keeps eating into it.
What does get built today is a fraction of what it used to be. One of my January predictions was that 2026 retail development would hit a record low of roughly 30 million square feet, with about 70% of it single tenant, meaning almost no new multi-tenant strip supply. James gave that one an A. The new construction that's happening is concentrated in Nashville, Texas, and Florida, and a big chunk of it is a free-standing build-to-suit for something like a Dollar General.
Compare that to the 300,000 to 500,000 square foot power centers we used to throw up, and you start to understand the supply picture. Today's new retail is often 10,000 square feet on the ground floor of an apartment building. That is not moving the needle.
The Barbell Economy Is What Should Actually Scare You
Retail is fine. But "retail is fine" isn't the whole story, and this is where it gets real for anybody who owns a single strip center.
James describes today's consumer economy as a barbell. Weight on both ends, nothing in the middle.
On one end, you've got high net worth households, and that group keeps getting wealthier. Luxury retailers and anybody servicing that customer are doing fine.
On the other end, you've got a lot of families dealing with inflation and a fixed grocery budget that buys less than it did a year ago and way less than five years ago. So value and discount retail is expanding in almost every category. Dollar General. Aldi. Ross, TJ Maxx, Burlington. Walmart. JLL runs an annual back-to-school shopper survey, and this year they saw roughly a 20% jump in parents saying they'd shop at Walmart.
What's getting hollowed out is the middle. Mid-tier apparel. Department stores. The grocery store that isn't the cheapest but isn't special either. Middle class families are now doing the bulk of their shopping at Costco or Aldi, then hitting Whole Foods for the nice cut of meat and Trader Joe's for something fun.
Here's the takeaway for you as an owner: if your tenants sell to the middle, your shopping center is the risk. Not retail as a category. Your rent roll.
How to Read a Rent Roll in 2026
I asked James what should scare somebody reading a rent roll on a small center today. His answers were not what I expected.
The Red Flags
Quick-service restaurants. This one surprised me. QSR is expanding fast, but that growth has pulled in a wave of brand new franchisees with no operating experience. So you're seeing a lot of openings and a lot of closures at the same time. Don't just look at the logo on the lease. Look at who the operator is and how long they've been running stores.
Home furnishings. Residential sales have slowed way down, and home spending is what happens when people buy and sell houses. That category is feeling it.
Jewelry, electronics, and drugstores. There have been a steady stream of closures across all three. If you've got a pharmacy on your rent roll, go double-check that lease. Worth noting: Chick-fil-A ground leases are trading around 4.5% cap rates while Walgreens is pushing 8%. The market is telling you exactly how it feels about that credit. If you want to understand why two similar-looking buildings trade at wildly different prices, start with my guide to commercial real estate cap rates.
The Green Flags
James's answer here was refreshingly boring, which is exactly why I like it.
Ask yourself what the point of the center is. For an unanchored strip, the point is daily and weekly needs. The cheap haircut place. The tax preparer who's been there forever and just keeps paying rent. Dry cleaning. Laundry. The Mexican restaurant that's been in that space for 15 years. Fitness is strong. Even the fix-my-iPhone shops are holding up.
Those tenants will never make you feel like a genius at a cocktail party. They'll just pay rent every month for a decade. And when you're structuring those deals, how you write the lease matters as much as who signs it. Before you close on anything, run the rent roll and the tenant credit through a real due diligence process instead of trusting the offering memorandum.
Where the Deals Actually Work (And Where They Don’t)
Now here's where I got humbled a little.
My January prediction was that unanchored neighborhood strip centers, 10,000 to 50,000 square feet with no grocery anchor, were the sleeper asset of 2026. James gave that a B+, and told me they were actually the sleeper asset of 2025. Institutional money has started sniffing around.
But he still likes the opportunity for a smaller investor, and the reason is structural. Deal sizes are too small for institutions to build the volume they need. It's genuinely hard for a big fund to assemble a meaningful position in $2 million strip centers. That barrier is your edge.
The catch is that the math has to work, and it often doesn't. On that same live stream I underwrote a Walmart shadow-anchored center up in Hopkinsville, Kentucky. Listed at $5.6 million, 9% cap rate. On paper that looks like a layup. I ran it at asking price with normal 75% leverage and it penciled at a 1% IRR against my 15% target. It needed a price cut to $2.8 million to work.
So who's buying at these prices? Mostly institutions with dry powder. They cooled on office, they've cooled a little on industrial and multifamily, and grocery-anchored centers and class A malls still read as safe. They're borrowing at rates you and I can't get, and cash sitting in an account isn't earning them anything.
That's why I don't care what the asking cap rate says. I care what the deal does after debt service. If you're not already running every deal through a real model, start with my walkthrough on how to underwrite commercial real estate, or just run your numbers through the Deal Analyzer and see what comes out the other side.
Steal Chick-fil-A’s Homework
My third prediction was that instead of hiring an expensive analyst team, a first-time commercial buyer should just figure out where the next Chick-fil-A or In-N-Out is going and buy near it.
James gave that an A, and he's friends with Chick-fil-A's research team. He called them the best and biggest site selection team in the industry. His words: if you follow Chick-fil-A, you're not going to make a mistake.
What makes them good isn't magic. They're selective about markets, selective about operators, and obsessive about the logistical details other chains skip in a race to open stores. Ingress and egress. Which side of the road you're on during the evening commute. Whether there's a signal that lets you turn out of the lot. The nitpicky stuff.
The other thing that's changed is the data. The old-school way to figure out your trade area was to pay people to stand in your parking lot and ask shoppers where they lived, or to write down license plates. Today, anonymized mobile location data from companies like Placer will show you in aggregate where your customers live, where they work, and where they went before and after they visited you. That kind of visibility used to belong to national chains only. Now a solo investor can get it.
The One Number I’d Watch for the Next 12 Months
I asked James what single number would tell us in a year whether retail held up. He named absorption.
Absorption is just leasing activity, net. Take all the square footage that got leased up and subtract all the square footage people moved out of. Positive means more space is being occupied than vacated, which means vacancy keeps falling.
It dipped slightly negative in Q1, and Q2 is coming back strong. That's the number I'll be watching, and now you know why.
One more thing James said that's worth sitting with. Everybody in the retail world has spent a decade preaching omnichannel, that you have to be great online and great in store and great at click-and-collect and great at ship-from-store. He thinks that's overhyped. Ulta doesn't have a strong online game and they're killing it. Costco is Costco. Amazon is fantastic online and doesn't need a store. You don't have to win everywhere. You have to pick your battle and win it.
That applies to you too.
Key Takeaways
Retail vacancy is 4.4% nationally. Office is running 15% to 20%. The apocalypse narrative is about dead brands and dead class C and D malls, not the asset class.
Nobody has built meaningful supply since 2009. Replacement costs make new construction impossible in most markets, and constrained supply plus steady demand is why vacancy keeps falling.
The economy is a barbell. Value and luxury are winning. Anything selling to the middle is getting squeezed, and that is a tenant risk, not a real estate risk.
Red flags on a rent roll: inexperienced quick-service restaurant franchisees, home furnishings, jewelry, electronics, and drugstores.
Green flags are boring: haircuts, dry cleaning, tax prep, fitness, and the restaurant that has been there forever.
Unanchored strips are still a small-investor lane, because institutions cannot get to scale in them. But a 9% asking cap rate means nothing until you underwrite it.
Copy Chick-fil-A instead of hiring analysts, and watch net absorption to track the health of the market.
This article is adapted from a conversation on the Tyler Cauble YouTube channel with James Cook, Director of Retail Research for the Americas at JLL. Go follow James. He hosts the Where We Buy podcast and the Everything We Know About Retail YouTube channel. Want a step-by-step path into commercial real estate? Take a look at the CRE Accelerator.
Want me walking you through your actual deals?
Get my step-by-step investment blueprint, the software, and personalized feedback on every deal inside the CRE Accelerator.
Learn About the CRE Accelerator