For the data behind the commentary, download the full Q2 2026 U.S. Retail Report.
Vacancies Hold Steady Across Major Markets
National shopping center absorption turned positive in Q2, totaling 708,000 sf. Year-to-date absorption remains slightly negative at -2.7 msf, but has improved meaningfully from 2025, and leasing activity typically picks up in the second half of the year. The West was the largest contributor to positive absorption, adding 1.3 msf, and was also the only region to post a vacancy decline, easing 10 bps to 5.8%.
The South, historically the region with the lowest availability, saw vacancy rise quarter-over-quarter (QOQ) in 20 of its 34 markets, though only marginally. Atlanta, Washington, Houston, and Dallas/Ft. Worth recorded the largest increases, as years of strong population growth pulled new construction forward, creating temporary lease-up vacancy. Several secondary markets moved the other way – Baltimore, San Antonio, and Norfolk among them – continuing to tighten, a signal of durable rent-growth fundamentals beyond the largest metros. Rents in the South grew 3.3% YOY, the strongest of any region.
Momentum remained favorable across much of the West. Standout markets included Las Vegas (+328,000 sf), Inland Empire (+306,000 sf), and Phoenix (+172,000 sf). The Bay Area’s Q1 rebound faded, however, with its metros collectively giving back -266,000 sf. Regional rent growth was essentially flat QOQ at 0.1%, but up 1.3% YOY. Elsewhere, Cincinnati (+535,000 sf) and Pittsburgh (+131,000 sf) posted notable absorption gains, reflecting broad-based demand across a diverse set of markets.
Development activity also continues to reflect changing consumer preferences. Neighborhood and strip centers accounted for 82% of all new retail deliveries in Q2, while the South represented 87% of completions over the past five years, underscoring continued demand for convenience-oriented retail concepts.
Consumer Resilience Faces Growing Headwinds
Consumer fundamentals remained healthy in Q2. Unemployment held at 4.2%, jobless claims stayed near historic lows, and retail sales posted solid gains. Inflation outpaced wage growth in April for the first time since May 2023 and again in May, a trend that could weigh on spending if sustained.
Geopolitical risk from the Middle East conflict has eased from its peak but remains a watchpoint. Higher energy prices have raised costs for gasoline, transportation, and other goods. Households view these pressures as temporary, continuing to spend despite higher prices. Energy prices should moderate over coming quarters, easing pressure on household budgets ahead of the holidays.
Consumer spending is becoming bifurcated. Higher-income households benefit from a strong market – the S&P 500 gained nearly 10% in Q2 – supporting spending via the wealth effect. Lower- and middle-income households face a tougher environment as living costs erode purchasing power. This favors grocery, discount, and value-oriented retailers over discretionary categories.
The FIFA World Cup has boosted tourism and spending from abroad. Per Bank of America, card spending in the 16 host cities rose 6.3% YOY, driven by a 16.7% rise in visitor spending on hotels, dining, and entertainment.
For the data behind the commentary, download the full Q2 2026 U.S. Retail Report.
