For the data behind the commentary, download the full Q3 2026 U.S. Retail Report.
Balanced Strength Across Regions
National shopping center absorption reached 3.5 msf in Q3, bringing year-to-date (YTD) absorption into positive territory at 1.2 msf. Over the past four quarters, net absorption totaled 5.2 msf, reflecting a gradual recovery in retail space demand.
The West continues to be a bright spot, absorbing 1.4 msf and remaining the only region with positive absorption in every quarter this year. Fourteen of its 22 markets posted positive absorption in Q3, led by Phoenix (+457,000 sf), Inland Empire (+345,000 sf) and Orange County (+275,000 sf). Regional asking rents rose 1.1% YOY.
Construction remains concentrated in the South, which accounted for 52% of national completions YTD. The South was the only region to record an increase in vacancy during the quarter, reflecting new supply, particularly in strip centers. Even so, vacancy remained low at 5.7%, the tightest among the major regions. Knoxville and Nashville posted strong vacancy declines of 70 basis points (bps) quarter-over-quarter (QOQ).
In the South, several secondary markets continue to outperform on rent growth. Charlotte, Baltimore, Raleigh/Durham and San Antonio each recorded annual asking rent growth above 4.0%, outpacing many larger metropolitan markets.
The Northeast absorbed 1.2 msf in Q3, and eight of the 11 markets recorded vacancy declines, including New York City, Boston and Philadelphia, largely due to absorption in neighborhood and power centers.
The Midwest led the major regions in asking rent growth at 3.6%. Columbus (7.2%), Cincinnati (7.1%) and St. Louis (5.6%) ranked in the top five for highest YOY rent growth. Other notable YOY rent growth markets are in the South, led by Palm Beach (9.8%) and Louisville (6.4%).
Consumer Resilience Faces Persisting Headwinds
Consumer fundamentals remained healthy in Q3. Unemployment held at 4.2%, labor force participation rose to 61.8%, and retail sales posted solid gains. However, underlying pressures remain. Inflation continues to outpace wage growth, and the Federal Reserve raised its benchmark rate by 25 bps. If sustained, higher borrowing costs, a cooling job market and pressure on real disposable income could weigh on spending.
Geopolitical risk from the Middle East conflict remains a watchpoint. Higher energy prices have raised costs for gasoline, transportation, food and other goods. Nonetheless, households continue to spend despite higher prices. Our baseline assumes energy prices gradually moderate over the coming quarters, which should help ease pressure on household budgets.
Consumer spending is increasingly bifurcated by income. Higher-income households continue to benefit from elevated equity market valuations, which support spending through the wealth effect. Lower- and middle-income households face a tougher environment as living costs erode purchasing power, favoring grocery, discount and value-oriented retailers over discretionary categories.
For the data behind the commentary, download the full Q3 2026 U.S. Retail Report.
