For the data behind the commentary, download the full Q1 2026 U.S. Retail Report.
Vacancies Hold Steady Across Major Markets
Nationally, shopping center absorption came in at -4.6 msf in Q1, reflecting previously planned closures but also severe winter weather. The Midwest—where above-average snowfall and, in some areas, extreme temperatures—recorded the largest vacancy increase, rising 0.3 percentage points; all 14 Midwest markets we track saw vacancies increase. The Northeast region had 7 of 11 markets with rising vacancy, led by Boston, which saw a 0.4 percentage point increase.
The South and West regions were more stable overall, though performance diverged at the market level. For example, the Bay Area continued its streak of improvement, with vacancy in San Francisco (-0.3 ppts) and San Jose declining (-0.6 ppts) as those economies gain traction. Meanwhile, vacancy in Los Angeles rose to a cyclical high of 6.6%.
Nationally, markets with the lowest vacancy rates remain concentrated in the South, including Miami (3.0%), Raleigh/Durham (3.4%), Salt Lake City (3.4%), Nashville (3.5%), and Charleston (3.9%). The right-sizing cycle that began accelerating in 2024 has mostly run its course. The number of retail store closures outpaced openings in 2024-2025 by nearly 6,000 locations, but that trend began to reverse in Q1 with net openings now expected in the year ahead. This will help keep vacancy near historically low levels, even as the market absorbs rent space givebacks.
Consumer Footing Firms, But Headwinds Are Building
Consumer fundamentals entering Q1 2026 were relatively firm. The unemployment rate remains low at 4.3% and jobless claims are near historic lows. Importantly, wage growth continues to outpace inflation which is supporting consumer spending. Total retail sales have also exceeded inflation in early 2026, with real spending up 1.3% YOY, reflecting cautious but still positive consumer activity.
However, risks are rising. Oil prices surpassed $100 per barrel in March following the closure of the Strait of Hormuz, and although a temporary ceasefire should ease pressure, consumers are already feeling the effects at the pump and in their stock portfolios. As of April 1, 2026, the S&P 500 was down 4.4% since the conflict began, a potential hit to wealth-driven discretionary spending if volatility and asset price declines continue. U.S. fertilizer costs have surged 77% since mid-December 2025, with lagging effects on food production and distribution costs that will eventually reach grocery shelves. Airfare CPI has increased 7.1% YOY, furthering pressures on spending for travel. For lower- and middle-income households already trading down, these pressures compound. Discount retailers and value-oriented formats stand to benefit from this bifurcation, but broad-based discretionary retail faces a genuine headwind that is likely to weigh on retail spending in the near term.
There are some offsets. The average tax refund is up 11.1% from the same period last year, amounting to an additional $351 per household. Projections from the Treasury Department suggest this refund boost could reach $1000 once all returns are processed. Whether that flows into discretionary retail or is absorbed by rising essential costs will depend heavily on how quickly geopolitical pressures translate into everyday prices, and critically, how long price disruptions remain.
For the data behind the commentary, download the full Q1 2026 U.S. Retail Report.
