Insights from the 2026 Real Estate Gala, hosted by Don Tepman and Bob Knakal.

If there is one thing commercial real estate brokers, investors and developers agreed on at this year’s Real Estate Gala in New York City, it is that retail is running hot. Tight vacancy, limited new development and selective capital are reshaping negotiations, investment strategies and deal timelines in markets across the country.

Here is what industry professionals on the ground are watching most closely.

Vacancy Is Historically Tight, and That Is Shaping Everything

From Texas to South Florida to Minneapolis, retail vacancy remains at levels that continue to catch people off guard. “We’ve never seen rents this high we’ve never seen vacancy this low,” said Don Tepman, Principal and Founder of TownCentre Capital, also known as Strip Mall Guy. 

Crexi’s first‑quarter 2026 marketplace data bears that out. Vacancy on for‑sale retail listings tightened to a record low of 5.4 percent, down from 7.7 percent in the first quarter of 2025, while the average closed‑sale price per square foot rose to $196.08 from $188.82 over the same period, a year‑over‑year gain of roughly 3.8 percent. Buyers are competing hard for a shrinking pool of quality inventory, and there is little new supply arriving to relieve that pressure. Strip‑center development has slowed dramatically in most major markets, and with few new projects in the pipeline, that pressure is unlikely to ease soon.

That supply constraint is reshaping the balance between tenants and landlords. Jaidyn Smith of Friedman Real Estate noted that sellers and landlords now have the clear upper hand, a shift that has been building over the past year. “Tenants have to put their best foot forward and come correct,” she said, referring to the need for stronger preparation and cleaner deal terms. In practice, that means tenants are arriving at the negotiating table more prepared than ever, with market data, legal support and clearly defined requirements.

Second-Generation Space Is King

With construction costs elevated and landlords holding leverage, tenants are going to significant lengths to secure turnkey space. In Texas, commercial construction now often runs roughly the high‑$100s to mid‑$300s per square foot in major markets like Houston, Dallas–Fort Worth and Austin, making it far more expensive to build out a raw shell from scratch.  As a result, spaces that already include functioning HVAC, plumbing and electrical systems are commanding premium interest from cost‑conscious retailers.

Tooba Patoli, a retail leasing and investment sales broker covering Houston, Austin and Dallas, said demand for second‑generation space has surged precisely because of how expensive it has become to build out a raw shell. In her markets, tenants increasingly favor second‑gen boxes that allow them to reuse existing infrastructure and stretch limited tenant improvement dollars, particularly in higher‑cost Austin versus relatively more affordable Houston and Dallas–Fort Worth. “Second gen is king right now,” Patoli said.

Selective Demand Among Restaurant Tenants

Not every retail tenant is navigating this market from a position of strength. Chris Hatch, who develops sites for drive‑through concepts including 7Brew Coffee, pointed to rising minimum wages across Western states as a meaningful pressure point for quick‑service restaurant operators. 

In markets where minimum wages are above $15 an hour, second‑ and third‑tier quick‑service brands are struggling to make the unit economics work. “The top‑quartile companies are not having as much of an issue,” Hatch said, noting that tip‑driven concepts are somewhat insulated from wage pressure. The result is a flight to quality among restaurant tenants, with top‑performing brands securing access to sites that others simply cannot.

Electric Vehicles Are Becoming a Retail Story

The same supply constraints pushing landlords toward stronger tenants are also accelerating experimentation with entirely new retail categories, and one generating strong excitement right now than electric vehicle showrooms. Suzanne Schefcik, a retail investment sales broker at Colliers in Minneapolis, cited Rivian entering a luxury mall in her market and Lucid opening a showroom in Chelsea, NYC as examples of a category that is actively expanding. 

Ken Ashley of Cushman & Wakefield noted separately that the proliferation of EVs and autonomous vehicles may also drive longer‑term changes in how retail and office assets are configured, particularly with respect to parking structures. The showroom model, which requires relatively modest square footage and tends to attract high‑traffic consumer interest, is proving to be an appealing fit for retail landlords with available space.

Big-Box Reuse Is Picking Up

As legacy anchor tenants continue to exit, creative reuse of large‑format spaces is accelerating. Schefcik pointed to former Party City locations and other big‑box vacancies being converted into shooting ranges, pickleball courts and entertainment venues. The trend reflects a broader shift toward experiential retail uses filling the gaps that traditional retailers once occupied, and in many cases, those tenants are proving to be strong performers in tight vacancy environments.

The Investment Sales Market Is at a Standstill for Many

While leasing fundamentals remain strong, the investment sales market tells a more complicated story. Tepman said buyers across the country are struggling to make the numbers work. “The whisper right now for every single buyer in the U.S. is that it is hard to make sense of things to buy,” he said. 

Crexi’s first‑quarter 2026 marketplace data illustrates the gap: average asking price per square foot for retail listings reached $347.17, up from $251.81 a year earlier, while the average closed‑sale price rose far more modestly to $196.08 from $188.82. That widening spread between seller expectations and buyer willingness reflects a market where price discovery is genuinely difficult.

In South Florida, Jonathan Papeika of Colliers observed that many owners are simply opting to refinance rather than sell, given how strong their assets have performed. Cap‑rate compression continues in that market because out‑of‑state capital still wants South Florida exposure, keeping competition intense even when inventory is thin.

Loan Maturities Could Be the Catalyst That Unlocks Inventory

Several brokers flagged maturing CMBS loans as the most likely near‑term trigger for new listings, especially for owners facing higher refinancing costs. As loans originated in different rate environments come due, some owners who were otherwise content to hold may find themselves compelled to act. 

Smith said she tracks loan maturity dates consistently on Crexi as a prospecting strategy, viewing upcoming maturities as one of the clearest signals of potential seller motivation. Schefcik echoed the sentiment, noting that cap‑rate adjustments over the past two years have changed the math for many owners now facing refinance decisions.

Tepman offered a straightforward benchmark for when the broader market psychology might shift. “If vacancy goes to 6.5 percent, 7 percent or 8 percent, that is when some fear comes into the market,” he said. “That is when people start thinking maybe I should get out now.” Until that happens, most indicators suggest that retail’s fundamental supply‑demand imbalance will remain in place through the remainder of 2026 and into next year.

What Comes Next

The consensus among brokers at this year’s gala was not that retail is without risk, but that its fundamentals remain stronger than almost any other major asset class heading into the second half of 2026. Loan maturities, price‑discovery gaps and the gradual normalization of interest rates will each create moments of pressure and, for well‑prepared investors, moments of opportunity. 

The brokers who are winning deals in this environment share a common approach: They arrive at every conversation armed with current data, realistic pricing expectations and a clear understanding of what motivates the person across the table. In a market this tight, preparation is the differentiator, and tools that compress research time and surface ownership and transaction intelligence are quietly becoming as important as any traditional brokerage skill.

Come to the conversation prepared: get all the retail data you need with Crexi.

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